IRDA makes loan on life policies mandatory
The new rules, which will be applicable from October 2024, are likely to benefit the policy holders and clarify several sore points
The Insurance Regulatory and Development Authority of India (IRDAI) has mandated insurance companies to offer loans on policies across all life insurance savings products, facilitating policyholders in meeting liquidity needs. Effective from September 30, 2024, the master circular for life insurance companies stipulates that policy loans must be available in all non-linked savings products with surrender value. However, loans are not permitted under Unit Linked Insurance Products (ULIPs).
Furthermore, the circular emphasizes customer protection, requiring insurers to comply with Insurance Ombudsman awards within 30 days or face penalties. Additionally, policyholders are granted the option of partial withdrawal under pension products for specific financial needs such as education, housing, medical expenses, etc.
In case of surrenders, Irdai expects reasonableness and value for money to be ensured for both surrendering policyholders and continuing policyholders.
This circular is viewed as a significant reform prioritizing policyholders’ interests. It encourages innovation and enhances customer experience. Insurers are allowed to introduce products with varying premium payment terms to facilitate financial planning among consumers.
Regarding product review, IRDAI extends the free look period to 30 days and emphasizes fair pricing, non-discrimination, and transparency. Insurers are urged to improve persistency, prevent mis-selling, and provide clear policy-related information to enhance customer satisfaction and confidence.
A customer information sheet has also been introduced that provides policy-related information in simple terms. “Underlying principles of simplification and transparency in insurance enables a well-informed decision by a prospect/policyholder. It minimises policyholder grievances; enhances customer satisfaction and confidence. It goes a long way to improve insurance penetration while also providing an inclusive, equitable, and diversified insurance for all,” it added.
In summary, the circular aims to simplify insurance processes, ensure transparency, and empower policyholders to make informed decisions, ultimately promoting inclusive and equitable insurance access for all.
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