Aiming Insurance For All By 2047, IRDAI Shakes Up Industry With Bold Proposals, Check Top Points

Insurance regulator Insurance Regulatory and Development Authority of India has proposed to increase the “free look” period for the return of the policy to 30 days and make nomination mandatory for life policies.

Also Read: Life Insurance Gains Momentum In Urban India, Report Highlights Shift In Awareness

Currently, a policyholder can examine the insurance policy and opt out if not satisfied with any of the terms and conditions mentioned in the policy within the “free look” period of 15 days (30 days in case of electronic policies) from the date of receipt of policy document, by stating the reasons for the objection.

In a draft Insurance Regulatory and Development Authority of India (Protection of Policyholders’ Interests and Allied Matters of Insurers) Regulations, 2024, IRDAI proposed consolidating several provisions of the different laws related to insurance.

On protection of interest of policyholders, the draft said, “The free-look period for the policies, obtained through any mode, shall be 30 days from the date of receipt of the policy document”.

Further, no life insurance policy should be issued unless a nomination is obtained, said the draft regulation of the IRDAI.

“Nomination provisions relating to general, wherever applicable, and health insurance policies (have been) introduced,” it said.

Sanjiv Bajaj, joint chairman & MD, BajajCapital, said, “The laudable initiative by IRDAI to extend the free look period to 30 days is a commendable step forward, enhancing consumer empowerment and fortifying the Indian insurance sector. This extension offers customers an extended duration to thoroughly review policy terms and conditions, thereby reducing the likelihood of mis-selling and fostering a culture of informed decision-making.”

“By affording individuals more time to assess their policies, it can help minimise instances of regretful purchases and potentially decrease the number of policy cancellations, ultimately leading to higher satisfaction levels among policyholders.”

From an industry perspective, Bajaj highlighted that the initiative underscores a commitment to transparency, which could lead to a reduction in associated compliance costs.

“By building stronger relationships with customers based on trust and empowerment, insurers may witness increased renewal rates and greater brand loyalty, consequently enhancing the overall reputation of the industry and attracting new customers. This collaborative approach contributes to the development of a resilient insurance ecosystem where consumers feel empowered and the industry operates with transparency, resulting in mutual benefits for all stakeholders,” Bajaj added.

Claim Payments

To enable electronic transfer of refunds and for payments of claims, the draft said the insurer should collect details of the bank accounts of the insured at the proposal stage itself.

To promote ease of doing business, IRDAI also proposed to dispense the requirement of filing of advertisements by insurers with the authority.

The draft further said an insurer having specified solvency ratio, profitability in three years out of five and having a satisfactory track record can now open a foreign branch.

The draft follows recommendations of the Regulations Review Committee (RRC) comprising members of insurance councils.

Bima Sugam

IRDAI has proposed to establish an online insurance marketplace, Bima Sugam, a one-stop solution to enhance the availability, accessibility, and affordability of a product.

A digital public infrastructure called ‘Bima Sugam — Insurance Electronic Marketplace’ is proposed to be established to empower and protect the interest of policyholders, IRDAI said.

The aim behind setting up the marketplace is to increase penetration of insurance in India and to enhance availability, accessibility, and affordability, it added.

Tarun Chugh, MD & CEO, Bajaj Allianz Life Insurance, said, “The draft regulations for Bima Sugam is a big step towards bringing this transformative initiative to fruition. The regulations focus on making insurance easy to access and affordable for everyone. It’s towards streamlining the entire insurance value chain, from policy issuance to claim settlement, thereby promoting transparency and collaboration at every stage. These initiatives will play a huge role in driving the penetration of insurance and enabling us to achieve the vision of Insurance For All by 2047.”

Chugh added that the guidelines will enable the industry to also build collaborative ecosystems for the benefit of customers.

Bima Sugam, it said will be a one-stop solution for all insurance stakeholders, vis-a-vis customers, insurers, intermediaries or insurance intermediaries, and insurance agents.

It would promote transparency, efficiency, collaboration across the entire insurance value chain, technological innovation in the sector, universalise and democratise insurance and achieves the vision of ‘Insurance for all by 2047’.

The draft said Bima Sugam would be a not-for-profit company.

“The company shall establish, facilitate, develop, operate, and maintain the marketplace for providing various services to the insurance stakeholders,” the draft said, listing out the regulatory framework for the establishment, governance, functioning of Bima Sugam.

Shareholding of the company would be widely held amongst life, general and health insurers and no single entity having a controlling stake. Shareholders will contribute to capital as and when required.

IRDAI has invited comments by March 4.