Mumbai: The government on Monday asked private insurance companies to increase the free look period for policyholders from one month to one year.
M. Nagaraju, Secretary of the Department of Financial Services (DFS), shared this update during a post-Budget press conference in Mumbai.
The free look period is the time given to policyholders to cancel their insurance policy without any surrender charges.
If a policyholder decides to return the policy within this period, the insurer must refund the first premium paid.
Last year, the Insurance Regulatory and Development Authority of India (IRDAI) had extended this period from 15 days to 30 days.
Now, the government wants insurance companies to increase it further to one year to offer more protection to customers.
“The government has introduced and encourages insurance companies to increase the look-out (free look) period of insurance policies to one year from one month,” Nagaraju said.
He added that the insurer will refund the first premium paid if the policyholder returns the policy within the period.
This step is part of the government’s efforts to reduce the mis-selling of insurance policies.
“Public sector companies have been asked to introduce ‘call back’ in insurance policies, i.e., once the product is sold, a call back is sent to the customer to understand whether he/she is happy with the product or if they want to surrender,” Nagaraju stated.
He continued that we have also asked private sector companies to do the same so that mis-selling is not there.
Many customers have complained about being misled or forced into buying policies they did not need.
However, recent data suggests an improvement in the situation. According to IRDAI’s annual report for FY24, complaints related to unfair business practices against life insurers fell to 23,335 from 26,107 in the previous year.
The share of such complaints in total grievances also declined from 21 per cent in FY23 to 19.3 per cent in FY24.
Meanwhile, discussions on the Insurance Amendment Bill are also progressing. Nagaraju mentioned that internal consultations have been completed, and the bill will include details on investments and foreign direct investment (FDI) rules.
A key reform under this bill is the introduction of a composite insurance license, which will allow insurers to offer multiple types of policies under a single license.
(IANS)
