The Insurance Regulatory and Development Authority of India (IRDAI) has proposed increasing the free-look period from 15 days to 30 days. A free-look period is a window within which you can cancel an insurance policy that you have just purchased by not paying any surrender charges.
Let’s look at what the insurance regulator has proposed and how it is going to impact you.
What is the free-look period currently?
At present, insurance companies have to offer a mandatory free-look period of 15 days for life and general insurance policies. If it is an electronic policy or a policy sourced through distance mode, the free-look period is 30 days.Do keep in mind that though it is not mandatory, the law gives insurance companies the option to extend the free-look period till 30 days even now.
Free-look period rule change: What IRDAI has proposed?
In an exposure draft titled “Insurance Regulatory and Development Authority of India (Protection of Policyholders’ Interests and Allied Matters of Insurers) Regulations, 2024”, the regular has said, “The free look period for the policies, obtained through any mode, shall be 30 days from the date of receipt of the policy document.”
Change in free-look period: How is it going to help policyholders?
A free-look period gives you sufficient time to go through the details of your policy documents — life or general insurance. This is important as you might pay and join a policy but later realise that some clauses are detrimental to your interest or not clear. In such cases, the free-look period gives you time to either terminate the policy or get the doubts cleared from your insurer.If you cancel the policy within the stipulated free-look period, you do not have to pay any surrender charges. Further, the insurance company will also refund your first insurance premium (after deducting certain charges) if you refund your policy within the free-look period. The proposal to extend the free-look period is a customer-friendly initiative, say experts. “This extension offers customers an extended duration to thoroughly review policy terms and conditions, thereby reducing the likelihood of mis-selling and fostering a culture of informed decision-making. By affording individuals more time to assess their policies, it can help minimise instances of regretful purchases and potentially decrease the number of policy cancellations, ultimately leading to higher satisfaction levels among policyholders,” says Sanjiv Bajaj, Joint Chairman & MD of Bajaj Capital. Apaar Kasliwal, Executive Director at PolicyBoss.com suggests that along with the free-look period, insurers should also give customers access to have a helpline to an advisory panel. “This can help customers get suitable solutions for their queries and clarify their doubts. This will help customers understand the policy dynamics directly from the insurers and in case there is a mismatch in the expectations and a policy offering, the same can be attended to satisfactorily.”
Talking on its impact on the insurance industry, Bajaj said, “From an industry perspective, the initiative underscores a commitment to transparency, which could lead to a reduction in associated compliance costs. Moreover, by building stronger relationships with customers based on trust and empowerment, insurers may witness increased renewal rates and greater brand loyalty, consequently enhancing the overall reputation of the industry and attracting new customers.”