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In a major development, providing misleading information on insurance policies to entice prospective customers is illegal now.
IRDAI has gazetted new regulations - IRDAI Protection of Policyholders, Interests, Operational and Allied Matters of Insurers Regulations 2024 in which it has directed insurance companies and distributors including individual agents, insurance brokers, insurance marketing firms and so on not to mislead policyholders with extraordinary benefits.
IRDAI clarified that no one can make unreasonable claims about the benefits of policies and slice and dice information selectively to entice prospective policyholders.
The insurance regulator has also advised insurers and distributors to use social media handles responsibly. It said, “All insurers and distribution channels shall ensure that static or interactive content posted by them on their social media platform or page complies with the provisions of these regulations and the circulars issued in this regard.”
Also, insurance companies have been directed to oversee all promotional activities carried out by their distributors.
Another important aspect of the new guidelines is that policyholders will be held responsible if they give misleading information to get insurance coverage. In the draft, IRDAI had proposed that the onus of proving that a policyholder has given false information or misleading information to get insurance coverage rests with insurers. However, the insurance regulator has repealed this proposal.
Here are key highlights of the new regulations:
- Free look period to increase from 15 days from the date of issuance to 30 days from the date of issuance
- All insurers will have to explicitly inform policyholders about free look period
- Nomination will be made compulsory for buying life insurance policies
- Insurers can charge up to Rs.100 for changing nomination
- Insurers will have to give policyholders a fair access to choose between direct plan and regular plan
- Ensure that policyholders have all information about products and terms and conditions before selling policies
- Put in place a mechanism to check instances of mis-selling and unfair business practices
- Enhancing investor awareness by educating policyholders about their rights and responsibilities
- Set up a system to expedite claim settlement process and resolve grievances
- Agents and intermediaries having website will have to give hyperlink of insurance companies associated with them
- Insurance policies cannot be sold without prospectus. The prospectus will have to explain benefits, features, terms and conditions, benefit illustration and so on
- Insurers will have to collect banks details of policyholders at the proposal stage
- Set up a mechanism to reduce unclaimed amount
- Distributors will have to ensure that their advertisements should include names of insurers they are associated with
- Insurers and distributors cannot hide terms and conditions
- They cannot promise extraordinary benefits
- They cannot fabricate facts, features and figures
The new guidelines come into effect from April 1, 2024.
