Highlights of Insurance Laws Amendment Bill 2015
Dated March 13, 2015, the amendments to Insurance Laws have been made. In the core, it mainly facilitates enhancement of foreign investment threshold in any of the insurance companies from 26 per cent to now 49 per cent.
The amendment still safeguards the Indian Interest by securing at least 51 per cent for Indian ownership and control. The Insurance Regulatory and Development Authority of India (IRDAI) have full flexibility in discharge of its day to day function and have rather been made more efficient among others.
The new insurance law would replace the Insurance Laws Ordinance, which was passed in 2014 and would curtail the redundant and archaic provisions in the legislations. It would also incorporate various provisions in order to provide IRDAI with complete flexibility so that it can discharge its crucial functions more efficiently and effectively.
Capital Availability (Insurance Laws Amendment Bill)
The amendment has been made in wake of gaining more capital for the insurance needs of citizens. Through more capital, the insurance companies would have a larger capital to reach those sections of population which has been untouched yet. Capital availability would increase distribution of insurance services deeper into the target market.
With more foreign investment in insurance sector, the government hopes that it would bring efficient service delivery with the help of improved distribution technology and more purified customer service standards.
Consumer Welfare (Insurance Laws Amendment Bill)
Mis-selling has been a grave concern in insurance industry, whether it is through misconduct or multi level marketing in insurance sector. The amendments would serve as a medium to safeguard the interest of consumers the serve them through provisions like penalties on intermediaries.
The amendment law further comes up with provisions which would levy stricter penalties for different violations like misrepresentation or mis-selling and the penalties could range between Rs 1 Crore to Rs 25 Crore on agents or insurance companies.
The amendment further safeguards the interest of policy holder by putting a cap of three years within which a policy could be repudiated on certain grounds, whatsoever by the insurance companies. After three years no policy could be questions on any ground.
The insurer, as per the new amendment would be discharged or any legal liability after the payment to the nominee of the policy holder is done. This would certainly facilitate an easier process of payment to the nominees.
The amendment also directs all insurance companies to mandatorily underwrite all third party motor vehicle insurance. Social and Rural sector obligations for the insurers would be retained in the new amended laws.
IRDAI to be more empowered now (Insurance Laws Amendment Bill)
One this is quite obvious out of the new insurance laws amendment bill that IRDAI now would be more empowered and would take responsibility for appointing insurance agents and thereby regulate their qualifications, eligibility and look into other aspects.
The IRADAI would now have key role in keeping an eye on various insurance company operations like investments, solvency, commissions and expenses and would not formulate regulations for smooth payment of commission and maintain the control of management expenses.
Most remarkably in this aspect, any property in India can be insured by any foreign insurer through a prior permission of IRDAI. This certainly broadens the responsibility and score of IRDAI. Earlier, any insurer in order to insure a property in India had to take permissions from the Government of India.
Health Insurance (Insurance Laws Amendment Bill)
As per the Amendment Act, Health Insurance Business would not include personal accident and travel covers as well and the amendment act discourages petty players who are non serious and retains capital requirements for any health insurer to be above Rs 100 Crore. This way, health insurance would grow as a separate vertical.
A vision to promote Reinsurance Business in India (Insurance Laws Amendment Bill)
Now foreign insurance companies can establish their branches in India and enter into reinsurance business. These companies would act as a risk cover to the existing insurance companies in India. Furthermore, it allows Lloyds and its members to fully operate across the country and set up branches to enter into reinsurance business or act as an investor to the Indian Insurance Companies with a cap of 49 per cent stake.
Industry Councils to be strengthened (Insurance Laws Amendment Bill)
The General Insurance Council and Life Insurance Council would now work as a self regulatory body and are empowered to frame meetings and bye-laws for elections, collect and levy fees, etc. from their members. Representation from Insurance cooperative societies and self-help groups are also included in the insurance council to expand the horizon and base of these councils.
Last but not the least, while increasing power, scope and authority of IRDAI, the Amendment Act however empowers insurers or insurance intermediaries to appeal to the SAT (Securities Appellate Tribunal) in case of grievances.