End auto renew add-on: IRDAI
General insurance products that have a coverage period more than one year are considered as long term products.
Chennai: Insurance regulator IRDAI has asked general insurers to withdraw add-ons that convert an annual policy to long-term cover with a prorated premium for a specified period.
IRDAI has asked them to withdraw such clauses with immediate effect and to inform the authority about it. However, the existing policies issued with the above clause are allowed to remain in force till their respective expiry dates.
The regulator has been observing that some insurers offer ‘Automatic Extension of Period Clause’ as an add-on to annual policies such as standard fire, special perils, industrial all risks and insurance cover for office, home and shops.
The clause provides policyholder an option to extend the base policy cover by a specified period and additional prorata premium is being charged for the same. The terms, conditions and exclusions for the add-on cover and the base cover are noted to be the same.
The period of cover under the base annual policy is 365 days whereas the period of cover under the add-on cover is opted for by the insured. The premium applicable for the add-on cover is the base policy rate pro-rated for the opted period.
General insurance products that have a coverage period more than one year are considered as long term products.
As per erstwhile All India Fire Tariff, policies for a period exceeding 12 months shall not be issued except for dwellings. Hence IRDAI has been mandated that the standard products shall not be changed and no changes shall be made to General Rules and Regulations of the Tariff that has an impact on policy terms, conditions, wordings, clauses and endorsements, until further orders.
An Add on to basic policy shall not change the fundamental nature of the basic product and has to be consistent with basic principles of insurance, it added.