Some Good news for insurance policyholders! The Insurance Regulatory and Development Authority of India (IRDAI) is considering a proposal to extend the free-look period for insurance policies from 15 to 30 days. This period allows policyholders to cancel newly purchased insurance policies without facing any surrender charges. Let’s explore the details of this proposed change and its potential impact.
Currently, insurance companies provide a mandatory 15-day free-look period for both life and general insurance policies. However, if the policy is obtained electronically or through distance mode, this period already extends to 30 days. The new proposal aims to standardize the free-look period at 30 days for all policies, as outlined in the exposure draft titled “Insurance Regulatory and Development Authority of India (Protection of Policyholders’ Interests and Allied Matters of Insurers) Regulations, 2024.”
Extending the free-look period brings several benefits for policyholders. It offers more time to thoroughly review policy documents, empowering individuals to make informed decisions. This longer duration allows for a comprehensive understanding of terms and conditions, helping policyholders identify any unclear or unfavourable clauses.
During the extended free-look period, policyholders can cancel the policy without incurring surrender charges. The insurance company is obligated to refund the first premium, deducting only specific charges if the policy is surrendered within this timeframe. This provision ensures financial flexibility for policyholders who may wish to reconsider their insurance purchase.
Experts have welcomed the proposed extension as a customer-friendly strategy that fosters an informed decision-making culture. They believe it will reduce the possibility of mis-selling, resulting in greater policyholder satisfaction levels.
From an industry perspective, this proposed change demonstrates a commitment to transparency and customer-centricity. It is expected to reduce compliance costs for insurers, fostering stronger relationships with customers based on trust and empowerment. This could lead to increased renewal rates, greater brand loyalty, and an enhanced reputation for the insurance industry, attracting new customers in the process.
