Free Look

Way back in 2002,the Insurance Regulatory and Development Authority had come out with the concept of free-look period which allowed a customer buying a new life insurance cover to review the policy within 15 days from the receipt of the document.

Way back in 2002,the Insurance Regulatory and Development Authority (Irda) had come out with the concept of free-look period which allowed a customer buying a new life insurance cover to review the policy within 15 days from the receipt of the document. The facility was later extended to health insurance two year ago. It was primarily done to ensure that the policyholder did not get shortchanged from what she was initially promised and bring in transparency in the way insurance was sold in the country.

If a new customer feels that the policy does not include all the clauses promised when it was sold either by the agent or by the company,the insured can return the policy within two weeks and the insurer will have to return the premium paid,after deducting proportionate risk premium for the period of cover and certain other costs pertaining to stamp duty and medical examination of the proposer. For a unit-linked policy,in addition to the deductions,the insurer is also be entitled to repurchase the unit at the price of the units on the date of cancellation,with the risk of fluctuation in the value of NAV being borne by the policyholder.

But with growing competition,insurance agents are often depriving new customers of this facility by either holding on to the policy themselves or conniving with courier personnel to return the policy to the company after the 15-day deadline. This defeats the very purpose of the free-look facility,which was done with the objective of ensuring transparency, says Arvind Kumar,a corporate agent of a private sector life insurer.

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However,the Irda (protection of policyholders interest) Regulations,2002 does not specify any penalty for errant agents. Analysts say that once a customer has paid the money for the insurance cover,she should call up the helpline number to find out the the date of dispatch of the policy. And if the policyholder wants to cancel the policy during the free-look period,she should fill the free-look period cancellation form and send it to the insurance company or the branch of the insurance company along with the original policy document.

According to analysts,insurance companies should send the policy documents to the customer directly and even call up the customer to ensure delivery of the document. They say by sending it through agents,insurers unnecessarily stretch the process. One could also send the policy paper in an electronic form so that a customer can look into the clauses and if there are any discrepancy,they can be informed to the insurance company immediately, says Kumar.

Deepak Sood,managing director and chief executive officer of Future Generali Life India Insurance,says that the companys customer care department calls up every customer after the policy is dispatched to ensure that they understand the fine print and are fully satisfied with the policy details.

New customers must ensure that the coverage amount,policy specifications,obligations of the insurance company and other riders are clearly mentioned in the document. In case of a health insurance policy,it is most important to ensure that the exclusions of certain ailments are checked properly.

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To cancel or to do some changes in the policy,only written requests or email will be accepted by the insurance company and the documentary proof will useful in case of any dispute at any point of time and the customer has to ensure that he has the receipts of the courier and ensure that the document reach the insurance company within 15 days of the receipt of the document.

Analysts say getting back the premium after some deduction is still a better option than carrying on with a policy that does not meet the very objective of the insurance and paying the renewals become a additional burden.