IRDAI issues Master Circular on Reforms in Life Insurance Business

In a progressive step toward simplifying life insurance and making it easier to understand, the Insurance Regulatory and Development Authority of India (IRDAI) has issued a Master Circular on the Life Insurance business. This circular consolidates and replaces provisions covered under four existing circulars, aiming to enhance transparency and help prospects/policyholders make well-informed decisions.

Key Highlights of the Master Circular:

 Customer Information Sheet (CIS) has been introduced which provides policy-related information in simple and easily understandable language, explaining various policy benefits and terms & conditions so that the policyholders can find a snapshot of the policy in one place.

This forms a part of the policy document. This is in addition to the improved Benefit Illustration of products to be made available to a prospect/policyholder.

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Additional features made available to the policyholders

 Facility of Policy loan is now mandatory in all life insurance savings products enabling policyholders to meet liquidity requirements, if need be  Health riders for covering health-related contingencies/emergencies without recourse to surrendering the policies is possible.  

Facility of partial withdrawal under pension products is now allowed enabling the policyholders to meet their specific financial needs for important life events like higher education or marriage of children; purchase/construction of the residential house/flat; medical expenses, treatment of critical illness

 In case of surrender, reasonableness and value for money are to be ensured for both surrendering policyholders and continuing policyholders.  

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To facilitate financial planning and enhance the flexibility in premium payments insurers are now permitted to offer products with a range of premium payment terms.

The free look period which provides time to review the policy terms and conditions is enhanced to 30 days from 15 days.

Robust systems to be in place for Grievance Redressal. The complainant is to be informed about the escalation mechanism in place to the Insurance Ombudsman if the grievance is not redressed satisfactorily. In case the insurer does not appeal against the award of the Insurance ombudsman and does not implement the same within 30 days, a penalty of Rs. 5000/- per day shall be payable to the complainant.

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