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IRDAI Makes Policy Loan Mandatory and introduces Changes in Life Insurance Policies


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The Insurance Regulatory and Development Authority of India (Irdai) has announced that the facility of policy loan is now mandatory in all life insurance savings products. This means that policyholders will have the option to take out a loan against their life insurance policy to meet their liquidity requirements. This move aims to provide greater flexibility and financial assistance to policyholders when they need it.

Changes in Policy Terms and Conditions

Irdai has also made changes to the policy terms and conditions. The free look period, which allows policyholders to review the policy and its terms, has been extended from 15 days to 30 days. This gives policyholders more time to assess the policy and make an informed decision. These changes are part of Irdai’s efforts to protect the interests of policyholders and ensure a better customer experience.

Partial Withdrawal for Pension Products

Under the new master circular, policyholders of pension products will have the option of partial withdrawal. This means that they can withdraw a portion of their policy funds to meet specific financial needs such as higher education expenses, marriage expenses, purchasing a house or flat, medical expenses, and treatment of critical illnesses. This feature provides policyholders with greater flexibility in managing their finances during important life events.

Surrender of Policies and Grievance Redressal

When it comes to surrendering policies, Irdai emphasizes the importance of ensuring reasonableness and value for money for both surrendering policyholders and continuing policyholders. This ensures that policyholders are treated fairly and receive appropriate compensation if they choose to surrender their policies.

Irdai also emphasizes the need for robust systems for grievance redressal. This means that insurance companies should have effective mechanisms in place to address and resolve policyholders’ complaints. To enforce compliance, Irdai has stated that if an insurer fails to appeal against the decision of an insurance ombudsman and does not implement the decision within 30 days, they will be liable to pay a penalty of Rs 5,000 per day to the complainant.

Improving Persistency and Avoiding Mis-selling

Insurance companies have been directed to implement measures to improve persistency, curb mis-selling, and protect policyholders from financial losses. These measures aim to enhance the long-term benefits for policyholders and ensure that they receive the intended value from their insurance policies.

Overall, these reforms by Irdai are intended to create a favorable environment for innovation, enhance customer experience and satisfaction, and safeguard the interests of policyholders in the life insurance sector.

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