The Insurance Regulatory and Development Authority of India (IRDAI) has proposed to increase the free-look period – the time during which policyholders can return insurance policies that they may find unsuitable after purchase – from 15 days to 30 days.
“The free-look period for the policies, obtained through any mode, shall be 30 days from the date of receipt of the policy document,” the draft IRDAI (Protection of Policyholders’ Interests and Allied Matters of Insurers) Regulations 2024 states.
At present, the mandatory free-look period for life insurance policies is 15 days, though it is 30 days in the case of electronic policies and policies sourced through a distance mode. Also, many companies offer a longer free-look of 30 days for all policies. Essentially, the free-look period allows a policyholder who may, after going through the policy documents in detail, feel that the policy was mis-sold to her.
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If the policyholder decides to return the policy, the insurance company has to refund the premiums paid at the time of purchase after deducting the proportionate risk premium, if any, applicable during the free-look period, besides charges linked to medical check-ups, stamp duties and so on.
In addition, the draft rules say that no life insurance policy can be issued unless a nomination is obtained. The IRDAI has also proposed that general and health insurance companies should obtain nomination at the time of issuing fresh policies as also at renewal.
If the draft is finalised in its current form, it will be mandatory to issue most policies only in the electronic form. The IRDAI has said that policies where the sums insured exceed Rs 100 or single or annual premiums are higher than Rs 10 will have to be issued only in the electronic form, irrespective of whether the insurance application was received digitally or not.
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The regulator has also proposed to get insurance companies to collect bank account details of policyholders at the time of issuance to enable electronic transfer of refund and for payments of claims.
All stakeholders, including insurance companies and general public, can send their feedback on the proposals to the regulator by March 4.
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