The guidelines mean to enable full disclosure and provide transparent information to the policyholder to avoid a possible misconception
In order to secure the interest of customers, Irda made it compulsory for agents to furnish complete details in transparent manner before convincing policyholders to switch to another life insurance firm. Tightening of replacement norms would aid in retaining the life insurance policy.
With the creation of such norms, IRDA aims to protect the long-term interests of life insurance policyholders and to prevent intermediaries forcing lapsing, surrendering or making paid-up of an existing life insurance policy with the goal of canvassing or soliciting a new life insurance policy on the same life.
Insurance providers have also been asked to include an agreement in the proposal form, encouraging the customer not to surrender an existing contract for a new one.
A policyholder who is not properly informed by the current life insurance company has the liberty to exercise the restoration of the existing policy within seven days from the receipt of the new one.
The policy that is substituted is entitled to all such benefits that is otherwise eligible for the previously held policy. A policyholder who has exercised the restitution of the replaced policy is entitled to receive total refund of premiums, without any recoveries, on returning the new policy at his option.
The guidelines mean to enable full disclosure and provide transparent information to the policyholder to avoid a possible misconception as to the factual position of financial consequences of substituting an existing life insurance policy.
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