IRDAI vide Master Circular bearing reference no: IRDAI/PP&GR/CIR/MISC/117/9/2024 dated September 05, 2024, issued Master Circular on Protection of Policyholder’s Interests, 2024 (“ Master Circular 2024 ”) which is second of the two Master Circulars issued under Protection of Policyholders’ Interests, Operations and Allied Matters of insurers Regulations, 2024. The Master Circular 2024 shall apply to all Insurers and Distribution Channels in India.
Major highlights of the Master Circular are as follows:
1. The Master Circular is divided into two sections, wherein Section 1 contains important and relevant information at various stages of an insurance contract for the prospects / policyholders / customers and Section 2 contains broad requirements to be complied with by an insurer.
2. Section I – Information for Prospects/Policyholders/Customers:
a. Prior to Sale
Life Insurers
Health Insurers
Retail General Insurers
Life insurers shall offer suitable products and riders to meet diverse customer needs, accommodating all ages, regions, occupations, and disabilities as per the affordability of the policyholders.
Insurers shall offer a range of products and add-ons that cater to various ages, medical conditions, treatment types, and regions, ensuring no coverage denial in emergencies.
Insurers shall offer a diverse range of clear, customizable products and add-ons for various segments (individuals, farmers, MSMEs) and risks.
Purchase of Life Insurance Policy- Prospects have the option to visit the office or website of the Insurer/ distribution channels.
Advertisements- Insurance companies and distribution channels can advertise their products via various media. Ads shall include the insurer’s name and the product’s UIN.
Prospectus- Insurers shall provide a prospectus for each product, detailing features, benefits, and exclusions, which is available on their website.
Suitability for Life Insurance- Life insurance and annuity products (excluding those from NPS or superannuation funds) involves gathering details about the prospect’s needs, income, affordability, and expected benefits.
Base Product : Every insurer shall offer a base product with essential minimum coverage for each line of business, which shall be displayed on their website for easy comparison with variants or alternatives.
Insurers shall clearly specify the following for Retail General Insurance products:
- Scope of Coverage
- Exclusions and Limitations
- Warranties & Conditions
- Condition of Average/Underinsurance
- Salvage
- Deductible or Excess
- Basis of Settlement
b. At proposal stage-
Life Insurers
Health Insurers
Retail General Insurers
Benefit Illustration (BI) – Prospective policyholders shall review and sign the BI if it meets their needs, with the salesperson also signing it. The signed BI becomes part of the policy document.
Splitting of Policies- Splitting should not lead to additional fees or charges unless explicitly requested from prospect.
Proposal Form- The proposal form requires details such as contact information, bank account details, and nominee information. Age, identity, and address proofs are needed for underwriting and KYC. For immediate annuities from National Pension System, the “Exit Form” serves as the proposal form.
Proposal Form – Prospects shall submit a proposal form in Hindi, English, or a regional language if requested. Proposal form requires personal and medical details, including mobile numbers, addresses, bank account information, and nominee details.
Premium Deposit- Premium payment should occur only after the insurer accepts the proposal, with risk cover beginning upon receipt of the premium. No deposit is needed with the proposal form, except for policies with immediate risk cover based on a health declaration.
Nomination- The policyholder can nominate one or more individuals and specify the claim percentage and may appoint a guardian for minor nominees. Nomination details can be updated at any time during the policy term.
Processing of proposal forms- Upon receiving a proposal form, insurers shall process it efficiently and request any additional details within 7 days.
Issuance of the insurance policy- Upon accepting a proposal and receiving the premium, insurers issue the policy electronically but shall also offer a physical document if requested.
Insurers shall provide the policy document, a copy of the proposal form, a Customer Information Sheet, and any applicable medical reports to the prospect within 15 days of proposal acceptance, at no additional charge.
For Motor Insurance, policyholders can select “Pay as you Drive”/”Pay as you Go” coverage or comprehensive cover with depreciation, including towing and salvage services, with itemized premiums for add-ons. The Insured’s Declared Value is fixed at the start and does not depreciate Non-OEM/Non-OES parts. For Homeowner (Fire) Insurance, coverage includes fire damage to buildings and personal belongings, with optional inclusions or exclusions for perils like earthquakes, floods, and theft. No warranties apply to these policies.
c. At the time of receipt of policy document-
Life Insurers
Health Insurers
Retail General Insurers
Customer Information Sheet (CIS)- The CIS shall include the type of insurance, sum assured, benefits, exclusions, and important details such as the Free Look Period, renewal date, and options for policy revival and loans, claims procedures, policy servicing, and grievance redressal, including Insurance Ombudsman contact details.
Customer Information Sheet (CIS)- The CIS shall include key features, coverage details, claims procedure, and grievance redressal information.
Free Look Period- . During the Free Look period of 30 days, the policyholders can return the policy for cancellation. The insurer shall accept this cancellation request regardless of the reasons. Policyholders will receive a refund of the premium paid, minus a proportionate risk premium, any medical examination costs, and stamp duty. For linked insurance products, refunds are made by repurchasing units at the Net Asset Value (NAV) on the cancellation date.
Free Look Period- During the Free Look period of 30 days, the policyholders can return the policy for cancellation. The insurer shall accept the cancellation request and refund the premium paid, minus a proportionate risk premium for the coverage period, any medical examination expenses, and stamp duty charges.
Lapse and revival of the insurance policy- If premiums are not paid within the grace period, the policy lapses, ending coverage. The policy can be revived by paying overdue premiums with interest or a late fee, and possibly providing a health declaration or undergoing a medical exam, as specified in the policy.
The policyholder has an option to store the soft copy of the policy document in Digi locker.
d. During the currency of the policy-
Life Insurers
Health Insurers
Retail General Insurers
Payment of premium- Premiums shall be paid directly to the insurer or through its authorized distribution channel, which will issue a valid acknowledgment immediately.
Grace Period for payment of premium- 15 days for monthly payments and 30 days for other instalments.
Grace Period for payment of premium- 15 days for monthly payments and 30 days for quarterly, half-yearly, or annual payments.
Service request- Policyholders can request changes to details like address, contact information, and nominee details during the policy term. Insurers shall acknowledge these requests immediately and update them within 7 days. If requests are not addressed, a grievance can be registered.
Loans under life insurance policies- Policyholders can obtain repayable loans against their life insurance policies (excluding pure risk and linked policies) according to the policy terms.
Partial withdrawals under linked life insurance policies- During the first five years (lock-in period) of a linked life insurance policy, partial withdrawals are not allowed. After this period, policyholders can make partial withdrawals from the unit fund as per the policy terms.
Health insurance policies are renewable as long as the product is not withdrawn, and renewal cannot be denied due to past claims. Insurers cannot require fresh underwriting unless there is an increase in the sum insured, in which case underwriting is only needed for the additional coverage.
Life insurance policies cannot be contested on any grounds after three years from the policy issuance, risk commencement, policy revival, or rider start date, whichever is latest. Claims cannot be denied without legally valid evidence.
When migrating policies with the same insurer, policyholders can transfer credits like Sum Insured, No Claim Bonus, and waiting periods to the new policy.
Health insurance policies and claims cannot be contested for non-disclosure or misrepresentation, except in cases of fraud, after the completion of the 60-month Moratorium Period.
The policyholder can cancel an indemnity-based health insurance policy at any time by providing 7 days’ written notice. The insurer shall refund the proportionate premium for the unexpired period if no claims were made for policies up to one year, or for unexpired periods for policies over one year if risk coverage hasn’t started. Any delayed refunds will include interest at the bank rate plus 2 percent, paid automatically by the insurer.
Retail policyholders can cancel their policy at any time without providing a reason, while insurers can cancel only for established fraud with a minimum of 7 days’ notice. Statutory Motor Third Party Liability insurance or other compulsory insurance mandated by law cannot be canceled except in cases of double insurance or total loss.
e. At the time of Claim-
Life Insurers
Health Insurers
Retail General Insurers
On happening of the insured event as specified in the policy document- The policyholder shall notify the insurer of a claim as soon as possible via online, distribution channel, authorized call center, or other specified methods. Claims cannot be rejected or closed due to missing documents or delayed notification.
Turn Around Time (TAT) for settlement of claims-
Death claim, except in cases warranting investigation
15 days from intimation of claim
Death claim warranting investigation
45 days from intimation of claim
Surrender, partial withdrawal
Within 7 days of receipt of request.
Maturity Benefits, Survival benefits, Annuity payouts, Income benefits etc.
On due date.
If a claim is not settled within the specified timelines, the claimant is entitled to interest at the bank rate plus 2 percent from the notification date until payment.
Claims shall be settled within specified timelines. If not, insurers shall pay interest at the bank rate plus 2 percent from the date of claim receipt until payment, automatically.
Surrender of life insurance policies- Surrendering a life insurance policy incurs a penalty and ends coverage. Non-linked policies gain a surrender value, with higher values paid after one year or upon meeting premium conditions. Linked policies pay the unit fund value minus charges, subject to a five-year lock-in.
Claims shall be processed and settled within specified timelines. If not settled on time, the claimant is entitled to interest at the bank rate plus 2 percent from the date of claim intimation to payment.
Group Insurance Policies- For Employer-Employee groups, the employer is the master policyholder, shares policy details with employees, and claims are paid directly to members or beneficiaries. For Non-Employer-Employee groups, individual members are insured, the master policyholder holds the policy, and insurers issue certificates detailing coverage. Premiums should be paid directly by members, and claims are settled either directly to members or, if assigned, to a financial institution for loan balances, with any remaining amount paid to the member or nominee.
Group Insurance Policies- In Employer-Employee policies, the employer is the master policyholder, shares policy details with employees, and claims are paid directly to them. Insurers shall get member details for cashless claims and cannot deny claims due to missing details. In Non-Employer-Employee policies, the individual member is insured, and the master policyholder holds the policy.
Cashless Facility- Insurers shall decide on cashless requests within one hour of receipt; Dedicated Help Desks at hospitals and digital pre-authorizations should be provided.
Settlement of Health Insurance Claims- TPAs can be used by insurers to handle health insurance claims; Claims shall be processed quickly and settled as soon as possible; Required documents should be collected by Insurers or TPAs from hospitals, not the policyholder; Claims cannot be repudiated without approval from the Product Management Committee or its Claims Review Committee; Any claim rejection or partial disallowance must be communicated with detailed reasons; Non-cashless claims should be settled within fifteen days of submission.
Settlement of Claims under Retail General Insurance Policies-
A registered surveyor shall assess losses exceeding Rs. 50,000 for motor insurance and Rs. 1 lakh for other types. The surveyor should be allocated within 24 hours of the claim being reported, and their details, including roles and responsibilities, shall be communicated to the insured immediately.
f. Complaint Mechanism-
Life Insurers
Health Insurers
Retail General Insurers
Lodging of complaint- By visiting their nearest branch; Through letters or email; on insurer’s website; by calling at designated call centre of the insurer; IRDAI’s Bima Bharosa.
Turnaround time for resolution of complaints/ grievance- 14 days
Filing of complaint before Insurance Ombudsman- If the complainant is dissatisfied with the insurer’s resolution, they can escalate the issue to the Insurance Ombudsman for claims up to Rs. 50 lakhs.
The insurer shall comply with the Insurance Ombudsman’s award within 30 days. A penalty of Rs. 5000 per day for each day of delay, plus any additional penal interest. This penalty does not apply if the insurer appeals the award within 30 days, provided they notify the policyholder.
Unclaimed amount- Unclaimed amounts, payable beyond 12 months, can be checked at the Bima Bharosa website or insurer’s site, and claimed following the insurer’s process.
Portability in Health Indemnity Policies- The existing insurer shall provide the required information to the acquiring insurer within 72 hours of the request, and the acquiring insurer shall decide on the proposal within 5 days.
Policyholders shall apply for portability at least 30 days but not more than 60 days before their renewal date, though insurers may accept requests within 15 days of renewal, ensuring no policy gap and no additional charges for the transfer.
- Section 2 – Broad requirements to be complied with by the Insurers: Citizens’ Charter
Insurers shall establish a Citizens’ Charter outlining service standards, including timelines for policy servicing, and widely publicize it to inform customers about product availability, service quality, and grievance redressal.
- Activities prior to Sale of Insurance Policies Prospectus Benefit Illustration for Life insurance products Suitability requirements for Life insurance products Premium Acknowledgement Mis-selling Proposal for Sale of Insurance Policies- Matters to be included in proposal form
Necessary underwriting information, policy servicing details, nominations, bank account details, and contact information, and include relevant provisions of sections 41 and 45 of Insurance Act.
- Processing of the proposal Form/Underwriting-
Insurers shall process proposal forms according to their Board-approved underwriting policies.
- Declaration
Insurers shall include a declaration in the proposal form ensuring that if the prospect is unfamiliar with the language, the form’s details have been explained.
- Proposal Form
Insurers conducting business electronically shall create an e-proposal form akin to the physical one.
- Issuance of Insurance Policies
Insurers shall classify exclusions into standard, policy-specific, and optional-with-additional-premium categories.
- Servicing of Policyholders and Settlement of Claims
Insurers shall implement technology-based systems for efficient policyholder servicing, including online request submissions and status tracking. No claim shall be rejected or closed due to missing documents or delays in intimation, and insurers shall maintain updated claims manuals and SOPs to ensure claims are settled within specified TATs.
- Portability of Health Insurance Policies
The policyholder shall apply for portability 30 to 60 days before renewal, though applications within 15 days of renewal are also considered if there’s no break in coverage. The new insurer provides a Portability Form for the policyholder to authorize data transfer from the current insurer. The current insurer shall provide necessary information within 72 hours, and the new insurer will decide on the proposal within 5 days of receiving this data.
- Compliance with Judicial / Quasi-Judicial Awards etc.
Insurers shall pay Ombudsman awards within 30 days and add 2% interest above the bank rate if there is a delay. Appeals against awards must be filed within 30 days, and non-compliance incurs a ₹5,000 daily penalty plus interest. For judicial orders, compliance is required within the specified timeframe or 45 days if unspecified.
- Other services related aspects
Insurers shall implement biometric systems for life verification in annuity payouts and maintain a website with information on services, FAQs, complaint lodging, and a search tool for distribution channels; offer periodic training to their staff and distribution channels on products, servicing standards, and regulatory changes; adopt technology solutions to streamline onboarding, suitability assessments, policy renewals, servicing, nominations, grievance redressal, and claim settlements.
Source category: IRDAI
Attachments
- /2024/426_2024_09_05_-_IRDAI_Master_Circular_on_Protection_of_Policyholders_interests_2024_(2).pdf
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