Protection of policyholders' interests regulations

What are the protection of policyholders' interests regulations?

The protection of policyholders' interests regulations are the IRDAI rules that set minimum standards for how a policy is sold, issued, serviced and claimed on. The current version is the IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024, dated 20 March 2024 and in force from 1 April 2024. They apply to all insurers, except pure reinsurers, and to all distribution channels.

The regulations are short and set principles. The detailed requirements, such as claim timelines and the format of disclosures, are in a master circular on protection of policyholders' interests dated 5 September 2024. Both replaced the earlier 2017 policyholder protection regulations and several other rules, including those on advertisements, e-policies and outsourcing.

What the 2024 regulations require

The regulations have two parts. Part A deals with policyholders; Part B with insurer operations such as places of business and outsourcing. The main policyholder provisions are:

• Board policy. Each insurer must have a board-approved policy on protecting policyholders, reviewed every year. It must cover correct representation of products, access for persons with disabilities, measures against mis-selling, published turnaround times for services, insurance awareness and fast claim settlement.
• Customer Information Sheet. Every policy must come with a customer information sheet in a set format, explaining key terms simply.
• Electronic policies. Policies are issued in electronic form, with insurers' systems able to work with DigiLocker.
• Free look. Life policies and new individual health policies with a term of one year or more get a 30-day free look period from receipt of the policy document. A refund on cancellation must be paid within 7 days, after deducting only proportionate risk premium, medical examination costs and stamp duty.
• Claims. Required claim documents must be listed in the policy and called for in one go, not piece by piece.
• Grievances. Insurers must run a grievance system linked to IRDAI's Bima Bharosa portal and tell complainants that they can approach the Insurance Ombudsman.
• Advertisements. Every advertisement must be approved by the insurer before release, through an advertisement committee.

Key timelines in the 2024 master circular

If a claim is not paid on time, the insurer must pay interest at 2% above the bank rate, on its own, along with the claim. For general insurance, the master circular says that a surveyor who delays the report beyond 15 days costs the insurer ₹500 per day payable to the claimant, and an insurer that ignores an Ombudsman award beyond 30 days pays ₹5,000 per day to the complainant.

What the policyholder protection rules mean for distribution

The regulations apply to "distribution channels" directly, so agents, corporate agents, brokers and web aggregators carry obligations of their own.

• Fair sale and suitability. The board policy must include measures to prevent mis-selling. In practice insurers push these down as need analysis forms, benefit illustrations, pre-issuance verification calls and sales recordings. A distributor that skips them exposes the insurer and itself.
• Free look is a quality signal. A high free look cancellation rate in a channel, a branch or an individual seller is one of the first signs of mis-selling. Many insurers review free look cancellations alongside 13th month persistency.
• Documents at one go. Because insurers may not ask for claim documents in instalments, agents who help with claims should collect the full list at intimation. This reduces delays that now carry interest.
• Advertising by partners. Any advertisement for a product, including a bank's or aggregator's campaign, needs the insurer's prior approval. Social media posts by agents that describe features or returns fall here too.
• Servicing turnaround. Insurers must publish turnaround times. Distribution teams that handle servicing requests on behalf of customers should track them against these published standards.