What action must an insurer take when a policy is returned under the free look provision?

The free look provision allows policyholders a specific period to review their insurance policy and decide whether they want to continue with it. If the policyholder returns the policy during this free look period, the insurer typically has specific obligations.

The correct action for the insurer is to refund all premiums paid to the policyholder. This is a standard practice to ensure customer satisfaction and confidence in the insurance process. The idea behind the free look provision is to provide an assurance to consumers that they have the opportunity to change their minds without any financial repercussions, which includes the full return of premiums.

In contrast, while handling the transaction promptly is important, it does not specifically address the insurer's obligation to refund premiums. Cancelling the policy and reimbursing the agent for lost commissions are procedural actions that do not directly fulfill the primary task of refunding the policyholder, which is the primary focus during the free look period. Thus, the correct action under the free look provision emphasizes the insurer's responsibility to return all paid premiums without conditions.