IRDAI permits policyholders to cancel their policies and receive refunds

0
59
Irdai
irdai

IRDAI Permits Policyholders to Cancel Policies Anytime and Receive Refunds

In a move to enhance flexibility and freedom for policyholders, the Insurance Regulatory and Development Authority of India (IRDAI) has announced that retail policyholders can now cancel an insurance policy at any point during its term and receive a refund for the unused portion by informing the insurer.

“Policyholders do not need to provide reasons for cancellation. Insurers can only cancel policies on grounds of established fraud, with a minimum notice of seven days to the policyholder,” IRDAI stated on Tuesday while introducing a series of sector reforms. Each insurer must offer a base product that provides the necessary minimum coverage in each line of business, the authority added.

If a customer cancels a policy with a term of up to one year and has made no claims, the insurer should refund the proportionate premium for the remaining period. For policies exceeding one year, the refund should cover the unexpired term where risk coverage has not yet commenced, as detailed in a master circular. Additionally, no claim should be rejected due to insufficient documentation; all required documents should be collected during the underwriting process. Policyholders need only submit documents directly related to claim settlement, such as claim forms, driving licenses, FIRs, fire brigade reports, post-mortem reports, and relevant bills, where applicable.

“Statutory Motor Third Party Liability insurance or other legally mandated insurance cannot be canceled except in cases of double insurance or total loss,” IRDAI emphasized. Every retail customer should receive a Customer Information Sheet (CIS) with their policy, summarizing the basic features, coverage scope, add-ons, exclusions, and claims procedures in simple terms.

For motor insurance, customers should have options like Pay as you Drive/Pay as you Go/Pay as you Use coverage and comprehensive coverage that includes depreciation. The insured’s declared value (IDV) of the vehicle will be the ‘Sum Insured,’ fixed at the start of each policy period.

Losses exceeding Rs 50,000 for motor insurance and Rs 1 lakh for other insurance types must be assessed by a registered surveyor and loss assessor, IRDAI said.

Commenting on the new guidelines, Narendra Bharindwal, Vice President of the Insurance Brokers Association of India, remarked that ensuring no claims are rejected due to insufficient documentation shifts the burden of proof onto insurers during underwriting. “This change simplifies the claims process for policyholders, reducing administrative hurdles and speeding up settlements, thereby enhancing customer experience,” he said. “Strict timelines for claim settlements and surveyor reports are vital for improving efficiency and customer satisfaction. By holding insurers accountable for timely processing, policyholders will receive settlements promptly, reinforcing the insurance industry’s reliability,” Bharindwal added.

LEAVE A REPLY

Please enter your comment!
Please enter your name here