IRDAI’s New Directives Aim to Improve Life Insurance Policy Benefits
In an effort to make life insurance policies more accessible to policyholders, the Insurance Regulatory and Development Authority of India (IRDAI) has implemented several changes to the regulations.
The IRDAI has issued new directives requiring insurance companies to offer mandatory loans on life insurance savings policies if requested by the policyholder, aiming to provide financial flexibility.
The cooling-off period for policy returns, previously set at 15 days, has now been extended to 30 days. These changes were announced in a Master Circular issued on Wednesday, reflecting similar circulars previously released for general and health insurance policies.
The IRDAI stated that these regulations are designed to protect policyholders’ interests and encourage innovation in insurance policies. Highlights of the Master Circular include:
Inclusivity in Policy Design: Life insurance schemes must be accessible to individuals of all ages, regions, and those with disabilities. Policyholders should be able to select riders according to their needs.
Comprehensive Information: A ‘Customer Information Sheet’ must be provided, detailing the policy type, coverage amount, benefits, exclusions, and claim procedures.
Clear Benefit Explanation: Benefits offered by the policy should be clearly explained and mutually agreed upon, with signatures from both the insurer and the policyholder.
Payout Clarity: The amount payable after the policy term and the compensation in case of the policyholder’s death must be explicitly stated.
Grace Period for Premiums: An additional 30-day period will be provided for premium payments in case of delayed payments. For monthly premium policies, this period will be 15 days.
Partial Withdrawals: Policyholders with pension policies can make partial withdrawals for significant events such as children’s education, marriage, home purchase, medical expenses, and severe illness treatment.
Fair Value Payment: Upon policy surrender, policyholders should receive a reasonable value.
Grievance Redressal: A robust system for addressing policyholders’ complaints must be established.
Implementation of Ombudsman Awards: If an insurance company does not appeal against an award given by the insurance ombudsman, it must be implemented within 30 days. Failure to do so will result in a daily penalty of Rs. 5,000 payable to the complainant.
Avoidance of Fraudulent Policies: Insurance companies are advised against engaging in fraudulent practices or adopting policies that financially harm policyholders.
Nominee Designation: There should be an option to name a nominee for compensation in the event of the policyholder’s death, with the flexibility to change the nominee at any time.
