Policyholder Protection, Grievance Redressal and Ethical Sales Practices
What this domain tests
This domain tests how policyholders are protected after the sale: disclosure, free look, complaint handling, the Insurance Ombudsman, and ethical conduct at the point of sale.
Core protections and channels
- Disclosure and documents: the insurer must issue the policy with terms, exclusions and claim procedure. The free-look period is 30 days under the 2024 PPI regulations, allowing cancellation if no claim has been made.
- Insurer grievance redressal: every insurer must have a Grievance Redressal Officer. Complaints should be acknowledged and resolved within prescribed timelines; if there is no satisfactory reply within 30 days, the policyholder can escalate.
- Insurance Ombudsman: a free alternative remedy under the Insurance Ombudsman Rules, 2017, with an award limit of 30 lakh. It handles claim disputes, premium issues, policy terms and service complaints. If the complainant accepts the award within 30 days, it binds the insurer; otherwise the complainant may approach a court or consumer forum.
- IGMS/Bima Bharosa: online tracking of grievances.
- Ethical sales: suitability, clear disclosure of commission, no rebating (Section 41 of the Insurance Act), no misrepresentation, proper KYC and no blank proposal forms.
Worked example
A POSP sells a health policy to a 62-year-old but does not disclose the customer's diabetes in the proposal. The insurer later rejects a claim for non-disclosure. Analysis: diabetes is a material fact. The insurer may avoid the policy, and the POSP breached utmost good faith and ethical duty. Signing the form does not transfer responsibility if the POSP filled it incorrectly. The customer may complain to the insurer's GRO and then the Ombudsman, but non-disclosure is a valid defence. The correct sale would have disclosed the condition and explained the waiting period.
Traps that cost marks
- Treating the Ombudsman as a court or as IRDAI itself.
- Forgetting the 30 lakh award limit.
- Thinking free look applies after a claim.
- Believing rebating is a normal sales incentive; it is prohibited.
- Saying IRDAI approval guarantees claim payment.