Government Requests Insurers to Extend Free Look Period to One Year to Curb Mis-Selling
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Synopsis
On February 17, the government announced an initiative requesting private insurers to extend the free look period for policyholders from one month to one year, aiming to enhance customer protection and reduce mis-selling of policies.
Key Takeaways
- The free look period will be extended to one year.
- Policyholders can cancel without surrender charges.
- Insurance firms are urged to implement callback systems.
- Recent data shows a decrease in mis-selling complaints.
- The Insurance Amendment Bill is progressing with reforms.
Mumbai, Feb 17 (NationPress) The government has urged private insurance firms to extend the free look period for policyholders from one month to one year.
M. Nagaraju, Secretary of the Department of Financial Services (DFS), announced this development during a post-Budget press briefing in Mumbai.
The free look period allows policyholders to cancel their insurance policy without incurring any surrender fees.
If a policyholder opts to return the policy during this timeframe, the insurer is obligated to refund the initial premium paid.
Previously, the Insurance Regulatory and Development Authority of India (IRDAI) had expanded this duration from 15 days to 30 days.
Now, the government seeks to further enhance this timeframe to one year for greater customer protection.
“The government has initiated and supports insurance providers in extending the free look period of insurance policies to one year from the current one month,” stated Nagaraju.
He emphasized that the insurer will return the first premium if the policyholder decides to return the policy within this period.
This initiative is part of the government's strategy to combat mis-selling of insurance policies.
“Public sector companies have been instructed to implement a 'call back' feature in insurance policies, meaning that after a product is sold, a follow-up call will be made to the customer to ascertain their satisfaction with the product or if they wish to surrender it,” Nagaraju explained.
He added that private sector firms have also been encouraged to adopt similar practices to prevent mis-selling.
Many customers have expressed dissatisfaction over being misled or pressured into purchasing unnecessary policies.
However, recent statistics indicate progress. According to IRDAI’s annual report for FY24, complaints regarding unfair business practices against life insurers decreased to 23,335 from 26,107 the previous year.
The proportion of such complaints in overall grievances also fell from 21 percent in FY23 to 19.3 percent in FY24.
Meanwhile, discussions concerning the Insurance Amendment Bill are advancing. Nagaraju mentioned that internal consultations are finalized, and the bill will address investment and foreign direct investment (FDI) regulations.
A significant reform proposed in this bill is the establishment of a composite insurance license, which would enable insurers to provide various types of policies under a single license.
