The Insurance Regulatory and Development Authority of India (IRDAI) has issued a master circular aimed at enhancing the rights and protections for life and health insurance policyholders. Released on 5th September 2024 circular has regulations prior to sale, policy proposal, Issuance of policies, documents receive, claim settlements, customer information sheets, and the overall treatment of policyholders by insurers.

The Press release master circular stated that, IRDAI as part of steps towards reinforcing empowerment of policyholders has issued Master Circular on Protection of Policyholders' Interests under the IRDAI (Protection of Policyholders' Interests, Operations, and Allied Matters of Insurers) Regulations, 2024 replacing 30 circulars.

The circular further said, this consolidates policyholder entitlements into a single reference document and emphasizes measures towards providing seamless, faster and hassle-free claims settlement experience to a policyholder and enhance service standards, to foster a climate of trust and transparency within the insurance sector.

The Circular is divided into two sections. i) Section One: A policyholder/prospect who wishes to know a brief of important and relevant information at various stages of an insurance contract, may visit this section. ii) Section Two: specifically focusses on broad requirements to be complied with by an insurer under the Regulations.

Summary of the Master Circular:

1. Essential Information at various stages of insurance contract: The Circular provides a summary of essential information at various stages of an insurance contract. This includes guidance for prospects, policyholders and customers prior to sale, at the proposal stage, upon receiving policy documents, during the policy's term, and at the time of claim for all insurance segments (Life, General, and Health).

2. Customer Information Sheet (CIS): Insurers are mandated to provide a CIS for all insurance segments, detailing key policy features, benefits, and exclusions.

3. Regional Language Access: Proposal form and CIS must be made available in regional language upon request of the prospect/policyholder.

4. Free Look Period: 30-day Free Look period applies to both Life and Health insurance policies, allowing policyholders to review the policy terms and conditions.

5. Premium /Proposal Deposit: No premium / proposal deposit is required to be paid to the life /health insurer along with the proposal form except in case of policies where risk cover commences immediately on receipt of premium.

6. Verification Tool: Insurers must offer a search tool on their website enabling verification of authorised distribution channels who can sell their insurance products.

7. Assessment of suitability for life insurance is required to be done in case of savings related life insurance products and annuity products, except those annuities purchased from proceeds of NPS and from employer offered superannuation fund.

8. Nominee Details: Proposal forms to collect nominee details including bank account details, to facilitate prompt settlement of claims in the event of the policyholderÆs death.

9. Digilocker Integration: Insurers to enable their IT systems to interact with Digilocker allowing policyholders to use this service effectively.

10. Citizens' Charter: Each insurer must establish a Citizens' Charter specifying service standards.

11. Turnaround Times specified: Turnaround times are specified for policy processing and claim settlements.

12. Search and access unclaimed amounts: A claimant / policyholder can search for unclaimed amounts at Bima Bharosa website of IRDAI or from the website of the concerned insurer.

By implementing these measures, IRDAI continues to prioritize the interests of policyholders, advance transparency and efficiency of the insurance sector.

Key points from the circular

Customised benefit illustrations: Insurers must provide a tailored benefit illustration at the point of sale, detailing specific benefits based on the customer's profile (age, premium amount, etc.). This will ensure that policyholders understand their coverage options clearly.

Streamlined proposal processing: Insurers are required to process proposal forms efficiently, aiming for a decision within seven days of receiving all necessary information. This includes communicating acceptance or rejection promptly, along with reasons for any non-acceptance.

Electronic policy issuance: Upon acceptance of a proposal and receipt of premium, policies will be issued electronically, with the option for physical documents if requested.

Customer information sheet (CIS): It is a statement provided by the insurer along with the policy document that provides in simple words, important information and basic features of the policy issued at one place. The CIS must be provided in the format specified in 'Schedule D' of the Insurance Act for life insurance policies.

Key information in a CIS

Type of insurance - specifies whether the policy is term life, whole life, or other insurance type.

Sum assured - indicates the amount payable to the beneficiary in the event of a claim.

Benefits - Provides a comprehensive description of the coverage and advantages offered by the policy.

Summary of Exclusions - lists the conditions or scenarios that are not covered by the policy.

Important Details Includes - free look period, renewal date, options for policy revival and loans, and other pertinent details.

Claims Procedure - outlines the steps required to file a claim.

Policy Servicing - offers details on customer support and assistance services.

Grievance redressal Mechanism - describes the process for filing complaints and provides contact information for the Insurance Ombudsman.

CIS and proposal forms must be made available in regional languages upon request to support inclusivity.

Free look period: Policyholders will have a 30 days free look period to review their policy terms. If unsatisfied, they can return the policy for a refund, ensuring they have the opportunity to reconsider their purchase without penalties

Improved grievance redressal mechanisms: Insurers are mandated to establish effective grievance redressal systems, ensuring that policyholders can easily resolve issues and receive support when needed.

Mandatory nomination and updates: The proposal form will require details of nominees, ensuring that claims can be processed smoothly in the event of a policyholder's death. Policyholders are also encouraged to keep their information updated to facilitate efficient service .

Search tool: Insurers are required to offer a search tool on their websites that allows users to verify authorised sales channels.

Premium /proposal deposit: No premium / proposal deposit is required to be paid to the life /health insurer along with the proposal form except in case of policies where risk cover commences immediately on receipt of premium.

Life Insurers are required to make suitable products/riders available to provide wider choice to the policyholders/ prospects catering to

a. the needs of the customers suitably;

b. All ages;

c. all regions, all occupational categories, persons with disabilities and any other categories;

d. the policyholders/prospects as per their affordability;

Note: The above does not imply that the insurer shall have one product to cater to all of the above.