IRDAI prohibits insurers from collecting premium before policy approval

The Insurance Regulatory and Development Authority of India (IRDAI) has introduced new regulations that change how premiums are collected for both life and health insurance policies, particularly those requiring medical examinations. Under the new rules, insurers are no longer allowed to collect the initial premium along with the proposal form unless the policy can be issued immediately based on a declaration of good health.

The regulator's move will prevent customer money from sitting idle with insurance companies until a policy is issued, or to avoid complications with refunding premiums if the proposal is rejected or additional requirements are not met.

For policies requiring medical checks, insurers will now review and accept the proposal before collecting the premium. As a result, distributors will need to visit customers twice - first to collect necessary documents and then to collect the premium after insurer approval.


Also, the regulator has mandated more transparency for both life and general insurers as they are now required to provide a customer information sheet containing the key features, benefits, and exclusions of policies at various stages of the insurance process. The CIS and proposal forms need to made be available in regional languages if requested.

Another change is that life and health insurance policies will now include a 30-day free look period, which will allow policyholders to review and potentially cancel within this time frame without losing their premium.