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IRDAI Makes Policy Loans Mandatory, Extends Free Look Period for Life Insurance Products

The Insurance Regulatory and Development Authority of India (IRDAI) announced a series of reforms for life insurance policyholders on Wednesday. In a major shift, IRDAI has mandated that all life insurance savings products now offer policy loans, providing policyholders with greater access to liquidity during times of need.

This move is part of a wider effort by IRDAI to prioritize policyholder interests. The regulator also extended the free look period, which allows policyholders to review their policy terms and conditions, from 15 days to 30 days.

“This is a significant step towards a more policyholder-centric insurance industry,” said IRDAI in a statement. “These reforms aim to create a more conducive environment for innovation, while enhancing customer experience and satisfaction.”

The new master circular also includes:

  • Partial Withdrawals for Pension Products: Policyholders can now make partial withdrawals from their pension products to address specific financial needs, such as education expenses, homeownership, medical bills, or critical illness treatment.

  • Surrender Value Transparency: IRDAI emphasizes ensuring fair and transparent surrender value for both surrendering and continuing policyholders.

  • Robust Grievance Redressal: The regulator mandates robust systems for addressing policyholder grievances. If an insurer fails to implement an insurance ombudsman’s award within 30 days, a penalty of ₹5,000 per day will be imposed.

  • Curbing Mis-selling: Insurance companies are required to implement mechanisms to improve policy persistence, prevent mis-selling practices, and ultimately enhance long-term benefits for policyholders.

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