Irdai proposes 30 days 'free look' period for policies from date of receipt

The Insurance Regulatory and Development Authority of India (Irdai), on Wednesday, proposed 30 days 'free look' period for policies sold physically or through digital channels from the date of receipt of the policy document.

A 'free look' period is the length of time during which a policyholder can cancel the policy without paying for surrender charges. Also, the insurer will refund the first premium paid if the policyholder returns the policy within the period.

At present, for physical policies, the 'free look' period is 15 days while for policies sold online, it can be up to 30 days.

In a draft circular released on Wednesday, the insurance regulator has consolidated several existing rules into a new regulation based on the recommendations from the Regulations Review Committee (RRC). ‘The draft on IRDAI (Protection of Policyholders’ Interests and Allied Matters of Insurers) Regulations, 2024’ includes provisions on protecting policyholders’ interests while also considering the operation and allied matters of the insurance companies.

As a measure that protects the interest of the policyholders, the insurance regulator has suggested mandatory collection of information about the policyholder or nominee at the proposal stage itself to enable electronic transfer of refund of premium.

In case of life insurance, no policy will be issued unless the insurer obtains nomination which will be registered free of cost.

Iradi has also suggested the companies come up with a board-approved policy for electronic forms. The policies with the sum insured exceeding Rs 100 or those under which the single or annual premium is not less than Rs 10 will be made available to the customer in electronic form as well, irrespective of whether the policy was received in electronic or physical form.

Meanwhile, the regulator has also revised conditions on opening of new places of business.

Insurance companies that have a minimum control level of solvency in the preceding three financial years and those that have been operating for five years with expenses of management (EOM) within the limits specified under the regulations in the preceding fiscal year and are working in lines with their business plan submitted through R1 and R2 applications can open new place of business without prior approval from the regulator.

Further, companies that have a specified solvency ratio, profitability in 3 out of 5 years of business, and a satisfactory track record can open foreign branches including offices at the International Financial Services Centres Authority (IFSCA) with the regulator also dispensing with the returns specified for foreign branches.

Also, Irdai has suggested insurance companies make necessary disclosures on outsourcing, in its annual report.

Feedback on these proposed norms can be submitted by March 4, 2024.