IRDAI Issues Master Circular on Policyholders’ Rights: Key Claim Settlement Rules and Guidelines

New regulations streamline claims settlement, mandate electronic policies, and enhance transparency for life and health insurance policyholders.

In a significant move to protect the rights of insurance policyholders, the Insurance Regulatory and Development Authority of India (IRDAI) has released the “Master Circular on Protection of Policyholders’ Interests 2024.” This comprehensive document consolidates and enhances policyholder entitlements, aiming to simplify claims settlement and improve service standards across the insurance sector.

The master circular highlights several key reforms designed to provide a faster, smoother experience for policyholders:

1. Mandatory Electronic Policies:

All insurance policies must now be issued in electronic format, allowing customers to receive digitally signed e-policies. However, policyholders can request physical copies if they prefer. If physical documents are desired, they must be indicated at the proposal stage.

2. Key Documents for Life Insurance Policies:

Insurers must issue life insurance policies within 15 days of receiving the proposal form. Policyholders are entitled to receive essential documents, including the policy document, covering letter, proposal form, benefit illustration, Customer Information Sheet (CIS) and other relevant materials depending on the product.

3. Customer Information Sheet (CIS) Requirements:

The CIS, a mandatory document for all insurance policies, provides a clear summary of key features such as policy type, sum assured, benefits, exclusions and claims procedures. For life insurance, it ensures consistency by adhering to guidelines in ‘Schedule D’ of the Insurance Act.

Key information included in a CIS:

Type of insurance: Whether it’s term life, whole life, or another type of coverage.

Sum assured: The amount that will be paid to the beneficiary in case of a claim.

Benefits: A detailed explanation of the coverage provided by the policy.

Exclusions: A list of events or situations that are not covered by the policy.

Important details: Information about the free look period, policy renewal date, options like policy revival and loans, and other relevant details.

Claims procedure: Instructions on how to file a claim.

Policy servicing: Information about customer support and assistance.

Grievance redressal: Details on how to file a complaint and the contact information of the Insurance Ombudsman

4. Claim Settlement Time Limits:

The IRDAI has set specific timelines for settling life insurance claims:

•    – Death claims without investigation must be settled within 15 days.
•    – For claims requiring investigation, settlement should occur within 45 days.
•    – Surrender or partial withdrawal requests must be processed within 7 days.
•    – Maturity benefits, annuities and other payouts should be delivered on their due dates.

If these timelines are not met, insurers must pay interest at the bank rate plus 2% from the date of receipt until the claim is settled. This interest must be paid automatically by the insurer.

5. Health Insurance Settlement Rules:

Health insurers are required to decide on cashless claim requests within one hour and authorize final discharge within three hours. Any delays beyond this time frame will result in the insurer bearing the additional hospital costs. In cases of death during treatment, insurers must immediately process claims and ensure the release of the deceased’s remains without delay.

6. 30-Day Free Look Period:

A free look period of 30 days is applicable for both life and health insurance policies, allowing policyholders to review and reconsider the policy terms. No premium proposal deposit is required unless immediate risk coverage is involved.

7. Other Notable Provisions:

•    – Insurers must provide access to a search tool on their websites to verify authorized sales channels.
•    – CIS and proposal forms must be available in regional languages upon request to promote inclusivity.

8. Nomination must

While filling out the proposal form, the prospect is required to provide the details of the nominee. Nomination is mandatory to facilitate payment of the claim amount in case of death of life assured. The policyholder may nominate one or more persons and specify the percentage of claim amount payable to each nominee

9. Multiple health insurance policies

Policyholders with multiple health insurance policies from different insurers now have more flexibility in filing claims. The individuals can choose to file claims under any of their policies. The insurer chosen by the policyholder will be the primary insurer. If the coverage under the chosen policy is insufficient to cover the full claim amount, the primary insurer will coordinate with other insurers to ensure that the balance is settled without causing any inconvenience to the policyholder.

This provision aims to simplify the claim settlement process for policyholders and ensure that they receive the maximum benefits available under their policies