Recently Insurance Bill was passed in both the houses of the parliament. The expectation has risen since then that the services for the consumers will improve and there will be much more accountability. Considering the wide spread miss selling in this segment and the role of intermediaries it will be interesting to see to what extent the insurance bill meet the expectations.
But let’s analyze what’s there in the bill and how does it impact you as an insurance policy holder:
Increase In FDI
Insurance is a capital intensive industry. The insurance companies have to pour in huge amount of money to sustain the business. The industry was quite for sometime raising issues of needing more funds and the restriction of foreign ventures up to 26% was a major hindrance. On above the new regulations created more problems for these companies. The foreign partners have almost exhausted their limit and the Indian counterparts on other hand were not in a situation to invest more. This situation has been addressed in the insurance bill and is probably the most wanted factor. The FDI in insurance has been raised from 26% to 49% which will bring a good amount of capital to these companies. The foreign partners will be able to take more control thus generating interest to bring in innovation in the insurance industry. It will be seen in the due course how management control works with this increased limit but it is a welcome move to all.
Laws to Curb Misseling
There have been new laws inducted to curb misselling which is the biggest reason of consumers dissatisfaction. Uptil now the fine on individual agent or companies was paltry. This has been changed wherein the fine on individual agent has been increased to R 10000 for misseling any insurance product or misrepresentation.. For insurance companies the fine can be upto R 1 crore or higher which will include violations like misseling or misrepresentations by the insurance agent or company. This is a welcome step considering the previous fine hardly forced any intermediary or company to take up the accountability. Now companies will show more interest to bring in the act of their agents under the preview of strict compliance as they can be held liable for their agent misconduct.
The second rule has come in for repudiation of insurance policy. Now this can be done by insurance company within three years of commencement of the policy. After three years no insurance policy can be called for question on any ground. This will also ensure companies take precautionary measures while issuing the policy and will also remove much hassles faced by policyholders years after when their policy is in force. The biggest benefit will be the increase in the claim settlement.
More Powers To The Regulator
IRDA has been given more powers to deal with insurance companies and intermediaries. There will be more strict regulation on following with code of conduct and many other provisions serving the policyholders interest. The scope of the powers have also been increased by expanding the intermediary list which will ensure more and more of them working as an agent or representative of any insurance company will come under the compliance of IRDA. This is certainly a welcome move provided IRDA does take the necessary steps.
The other important power given to IRDA is deciding on the agent commission structure. The decision to structure agents’ commissions has now been vest with IRDA. So the regulator will now decide the commission’s structure which is a welcome move and may bring standard payouts across the industry which we will see in the course of time.
Health Insurance Vertical
This is a good move. Health insurance has been made a separate vertical and travel and accidental insurance business is now included in the definition. This separation of vertical will go long way in promoting health insurance business. Also, the non-serious players have been discouraged by retaining the minimum capital requirement of R 100 crore for health insurance business. Given the need the separate vertical will ensure health insurance business will see more funds coming in from the promoters.
Some More Changes
There are few other changes which may not benefit you directly but will help in improving the solvency of insurance companies. The reinsurance business has been promoted by allowing foreign reinsurers to set up branches in India and the definition has been amended. The reinsurance business is a large scale business and helps in mitigating the risk of insurance companies from large scale losses like earthquake, flood etc.. This will empower companies to go for reinsurance and bring more solvencies to their insurance business.
The insurance bill has paved way for many changes.The inflow of capital will rise and there will be standardization going forward. The consumer interest will get protected through increase penalties and more stringent checkouts by the company while issuing the policy. In the short term the company may see an increase in the cost while the consumer may see more procedure is followed but in the long run it will benefit. So you can expect improvement in services, more innovation if the foreign partner gets the majority say in the business and more health insurance products as the business gets a new lifeline. But do remember the objective of insurance is always to protect your family and so keep following it.
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