IRDAI proposes extended free look in period to enhance policyholders interest

In a step towards enhancing the protection of insurance policyholders, the Insurance Regulatory and Development Authority of India (IRDAI) has proposed changes including extending the free look period to 30 days for both life and health insurance policies up from 15 days for policies sold physically.

The free look period allows policyholders to review their insurance policies and cancel them within a specified period without incurring surrender charges. During this period, the insurance company refunds the first premium paid by the policyholder upon policy return.

At present, 30 day free look in period is only applicable to policies sold in electronic mode or through distance marketing, while physical policy sold has a 15-day free look period.

“The extension to 30 days across all categories of policyholders allows for more time to review policies thoroughly,” said a insurance executive.

The draft regulations- ‘Insurance Regulatory and Development Authority of India (Protection of Policyholders’ Interests and Allied Matters of Insurers) Regulations, 2024,’ is brought to consolidate eight different regulations in order to reduce compliance burdens and protect the interests of policyholders.. These regulations proposes relaxing several norms relating receipt of premium, nomination, assignment of policies, insurance advertisements, and the opening of branches.

The regulator has proposed that life insurance policies cannot be issued without obtaining a nomination, and nomination provisions would be introduced for general and health insurance policies where applicable.The proposed regulations also talks about changes for insurers. Filing advertisements with the authority would no longer be required, and insurers meeting specified criteria would not need prior approval for certain activities. Moreover, insurers meeting specific solvency and profitability criteria would be permitted to open foreign branches, including offices at the International Financial Services Centre Authority (IFSCA). Reporting requirements for outsourcing would also be dispensed with, with insurers instead required to make necessary disclosures in their annual reports.Processing times for certain customer transactions have been reduced to just 7 days. For instance, the time taken to convey underwriting decisions on policies has been decreased from 15 days to 7 days, thereby reducing wait times for customers.

Also refund of premiums paid along with proposal if the proposal is declined, has been proposed to be reduced from 15 days to 7 days.

Separately, the insurance regulator released draft regulations for a digital marketplace called Bima Sugam – Insurance Electronic Marketplace on February 13. The platform aims to bring together insurers, policyholders, and intermediaries, facilitating the sale, purchase, and servicing of life, health, and general insurance policies, along with claim settlement and grievance redressal. Policyholders will get access the platform without any fee. Operated as a not-for-profit company under the Companies Act, 2013, it will have widely held shareholding among insurers, ensuring no single entity has controlling stake. Shareholders will contribute capital as needed, fostering seamless integration and interoperability.

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