New Policy Cancellation Rules Give More Power to Insurers
In a move that provides more options and flexibility to insurance customers, the Insurance Regulatory Development Authority of India (IRDAI) has introduced guidelines allowing policyholders to cancel their policies at any time and get a refund for the remaining coverage period. As per the new rules, customers will no longer need to cite a reason for cancelling a policy. They simply need to inform the insurer about their decision to cancel.
The insurers, on the other hand, can only cancel a policy due to proven fraud after giving a 7 day notice to the policyholder. Every insurance company must also have a basic product designated for each line of business that clearly outlines the minimum required coverage. If a customer chooses to cancel a policy within one year where no claims have been filed, the insurer must provide a proportional refund for the unused part of the coverage term. A full refund is applicable for multi-year policies where the risk coverage for future years is yet to begin.
Experts believe these changes empower customers and increase transparency in the sector. Customers can now drop policies with ease while insurers will have to thoroughly scrutinize proposals to avoid rejections due to lack of documents later on. The new rules also specify strict timelines for claim processing and surveys to enhance efficiency. Motor insurance customers will get options like usage-based covers along with comprehensive policies covering depreciation costs. Any claim above Rs.50,000 for motor or Rs.1 lakh for other segments requires a mandatory survey.
