IRDAI has directed general insurers to withdraw the automatic extension in period clause, which is offered as an add-on with annual policy covers by general insurers, as this violates the rules of All-India Fire Tariff and is non-compliant with guidelines on product filing procedures for general insurance products.
IRDAI has observed that some insurers are offering ‘Automatic Extension of Period Clause’ as an add-on to annual policies such as Standard Fire Special Perils, Industrial All Risks, Office Package, Home Package, Shop Package. The regulator, however, has allowed the existing policies to remain in force, which have been issued under the same clause until their expiry.
An automatic extension period clause allows policyholders to extend the base policy cover by a specified period and the insurer charges a pro-rata premium for that extended period. But the terms, conditions and exclusions for an add-on cover is same as the base cover.
General insurance products are normally one-year products. So, policyholders have to renew their covers every year and the rates keep changing every year.