Policyholders Can Cancel Insurance Policy at Any Time by Informing Insurer and Get a Refund of Balance Policy Period: IRDAI
Moneylife Digital Team 14 June 2024
The insurance regulatory and development authority of India (IRDAI) has announced several changes in insurance policies, including allowing policyholders to cancel the policy and get a refund for the remaining period and mandatorily asking insurers to provide loans on insurance products. IRDAI also clarified that general insurance companies cannot reject claims for want of documents.
 
Earlier this week, the regulator released a master circular which consolidates all regulations with regards to life insurance policies and repealing 13 circulars related to general insurance. 
 
IRDAI says, "In case the policyholder cancels the policy, she is not required to give reasons for cancellation. The insurer can cancel the policy only on the grounds of established fraud by giving minimum notice of seven days to the retail policyholder."
 
If the customer cancels the policy, the insurer should refund the proportion premium for the unexpired policy period if the policy term is up to one year and no claim is made during the policy period, the regulator says.   
 
For life insurance policies, the free look period, which provides time to review the policy terms and conditions, has now increased to 30 days instead of 15 days earlier. The facility of a policy loan is now mandatory in all life insurance savings products.
 
IRDAI also clarified that general insurance companies cannot reject claims for want of documents, and they should obtain all necessary documents while underwriting the proposal only.
 
It says, "The policyholder may be asked to submit only those documents that are directly related to the claim settlement such as claim form, driving license, permit, fitness, first information report (FIR), untraced report, fire brigade report, post mortem report, books of accounts, stock register, wage register and repair bills, only in cases where cashless is not available, wherever applicable."
 
"Under no circumstances can the insurer cancel statutory motor third party liability insurance or any other compulsory insurance mandated by law except in case of double insurance or total loss," IRDAI says.
 
The insurance regulator also directed insurers to provide a customer information sheet (CIS) that explains, in simple words, the basic features of a policy, including the type of insurance, sum assured, benefits, exclusion, if any, free look period, revival of policy, policy loan and any other options. 
 
"The CIS contain information regarding the claims procedure, policy servicing and grievance redressal mechanism, including contact details of the insurance ombudsman of appropriate jurisdiction. Acknowledgment in physical or digital will have to be obtained from the customer. On request, CIS will be made available in local language," IRDAI says.
 
Here are additional options now available for policyholders
Facility of policy loan is now mandatory in all life insurance savings products, enabling policyholders to meet liquidity requirements, if need be.
 
Health riders for covering health-related contingencies or emergencies without recourse to surrendering the policies is possible.
 
Facility of partial withdrawal under pension products is now allowed, enabling the policyholders to meet their specific financial needs for important life events like higher education or marriage of children; purchase/construction of the residential house or flat; medical expenses, treatment of critical illness.
 
In case of surrenders, reasonableness and value for money to be ensured for both surrendering policyholders and continuing policyholders.
 
To facilitate financial planning and enhance the flexibility in premium payments insurers are now permitted to offer products with range of premium payment term.
 
Variety of products and product features are now possible like:
o annuity products to have a pay-out option with payment linked to publicly available benchmark;
o fund-based products for non-employer-employee groups;
o index-linked products.
 
Free look period, which provides time to review the policy terms and conditions, is enhanced to 30 days from 15 days.
 
Robust systems to be in place for grievance redressal. Complainant to be informed about the escalation mechanism in place to insurance ombudsman, if the grievance is not redressed satisfactorily. In case the insurer does not appeal against the award of insurance ombudsman and does not implement the same within 30 days, a penalty of Rs5,000 per day shall be payable to the complainant.
 
According to IRDAI, underlying principles of simplification and transparency in insurance enable a prospect or policyholder to make a well-informed decision. "It minimises policyholder grievances and enhances customer satisfaction and confidence. It goes a long way to improve insurance penetration while also providing an inclusive, equitable and diversified insurance for all."
 
In March this year, IRDAI approved eight principle-based consolidated regulations, including setting up the insurance e-marketplace Bima Sugam for buying, selling and servicing insurance policies and settling claims.
 
Six of these regulations are the outcome of consolidation and streamlining of 34 existing regulations, while two new regulations have been approved—one for the much-awaited Bima Sugam, and the other to cover the corporate governance aspect of insurers. Most importantly, for now, the surrender values for non-linked and linked life insurance products have been left broadly unchanged, thus continuing the progressive hike in surrender values with increasing persistent years of the policy.
 
The IRDAI (Insurance Products) Regulations, 2024, are largely maintaining the status quo regarding the surrender values of non-linked or linked life insurance products and is a big departure from the exposure draft of December 2023. (Read: IRDAI Approves 8 Principle-based Consolidated Regulations, including Setting Up Bima Sugam e-Marketplace)
Comments
r_ashok41
4 weeks ago
service is so bad that only till you take the policy they are bothered or call you for renewing otherwise if one goes to the office no one cares is what i have seen
baner584
4 weeks ago
Hope they follow these rules, it shouldn't be only on papers
r_ashok41
1 month ago
Good initiative since all these life insurance companies were taking people for a ride.
yasminkapadia00
Replied to r_ashok41 comment 1 month ago
Agree with you .. they have raised the premiums phenomenally with not much clarification .. in fact they are averse to responding in writing .
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