Policyholders can cancel insurance and receive a reimbursement through IRDAI

The Insurance Regulatory and Development Authority of India (IRDAI) has announced that retail consumers can terminate an insurance policy at any point throughout the term by notifying the insurer and receiving a return for the remaining policy duration, hence offering more flexibility and freedom to policyholders. The insurer may only terminate the policy in cases of proven fraud, and only after providing the retail policyholder with a minimum of seven days' notice.

“In case the policyholder cancels the policy, he/ she is not required to give reasons for cancellation. The insurer can cancel the policy only on the grounds of established fraud, by giving minimum notice of 7 days to the retail policyholder,” IRDAI said on Tuesday while announcing a host of reforms in the sector. Every insurer should have a retail product which is identified and designated as a base product defining the necessary minimum coverage in each line of business.

If the customer cancels the policy, the insurer should refund proportion premium for unexpired policy period, if the term of the policy is up to one year and there is no claim made during the policy period, it said. The refund premium for the unexpired policy period should be made in respect of policy with the term more than one year and the risk coverage for such policy years has not commenced, it said in a master circular.

The regulator said no claim should be rejected for want of documents. All the required documents should be called at the time of underwriting the proposal. “The customer may be asked to submit only those documents that are directly related to the claim settlement such as claim form, driving license, permit, fitness, FIR, untraced report, fire brigade report, post mortem report, books of accounts, stock register, wage register and repair bills (only in cases where cashless is not available), wherever applicable. Under no circumstances can the insurer cancel statutory Motor Third Party Liability insurance or any other compulsory insurance mandated by law except in case of double insurance or total loss,” IRDAI said.

The regulator said every retail customer should be given a Customer Information Sheet (CIS) with every policy explaining in simple words, basic features of a policy at one place. It should contain in brief the scope of coverage, add-ons, basis of sum insured, sum insured, exclusions, deductibles, special conditions & warranties, endorsements, information regarding the claim procedure, claims intimation and processing,

IRDAI said motor insurance customers should be given the options as first choice under motor insurance. These include Pay as you Drive/ Pay as you Go/ Pay as you Use insurance cover and comprehensive cover that includes coverage for depreciation. The insured’s declared value (IDV) of the vehicle will be deemed to be the ‘Sum Insured’ and it will be fixed at the commencement of each policy period for each insured vehicle.

“Any loss that is reported under a general insurance product that exceeds Rs 50,000 or more (in the case of motor insurance) and Rs 1 lakh or more (in the case of other than motor insurance) needs to be mandatorily surveyed by a registered surveyor and loss assessor,” IRDAI said.