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The Insurance Bill passed in March 2015 in both the houses is expected to have a deep impact on the Indian Insurance industry. Much anticipated and awaited, this amendment offered a bunch of benefits to both the Insurance Company and the policy holder. Increased power to regulatory bodies, more protection to policy holders and increased level of foreign investment in the sector are some of the key features of the Insurance Bill.
Listed here are some major highlights of the bill and how they can affect you:
Increased Foreign Investment: The new amendment allows up to 49% foreign investment in Indian Insurance companies from now onward. This increased capital flow is expected to revitalise the industry all together. The national players now will be able to invest in new products and expand their portfolio manifold.
What does this mean to you: how is this going to effect you as a policy holder? Well, at a glance it may seem of no significance at all, but increased foreign participation means, increased competition, wider product range and more professionalism. The increased competition in the market will also reduce malpractices such as miss-selling and misleading the policy holders. So, in long run this move can actually change the entire scenario of Indian Insurance market.
An Empowered IRDAI: This act goes a long way in strengthening the fist of IRDAI. This governing body will now onward be involved in the grass root level, such as appointing insurance agents and monitor their eligibility, capability and professionalism.
Also this governing body is now empowered to regulate the key areas of Insurance Companies such as expenses, investments, commissions payable to agents, code of conduct etc.
What does this mean to you: This enhanced power to IRDAI is sure to curtail many malpractices that are rampant today in Insurance market in India. So, as a policy holder your money will now be safer than before.
Consumer safety: Indian Insurance market was never as safe as it is now from consumers point of view. If you are worried about being misled by the insurance agent, then this act will give you peace of mind. In an effort to curtail the malpractices, the new amendment levies penalty ranging from INR 1 Crore to INR 25 Crore on any Insurance Company that indulges in mis-selling and misrepresentation.
What does this mean to you: In view of this high penalty, companies are likely to enforce stringent norms for their agent, which will in turn give you more protection as a consumer.
The Bill will also make the payment process easier for the nominees of any policy holder.
Another very significant amendment that the Bill brought is the shortening of repudiation time period for any policy. Repudiation time is the particular time period within which a policy can be declared null and void in light of wrong information furnished by the policy holder. The new bill has shortened this time to 3 years, to keep the consumer interest intact.
Health Insurance: Health insurance in India never quite received the status of a separate business vertical. But this Insurance Bill identified and addressed the problem. The amendment defines "Health Insurance Business" in full details and includes personal accidental coverage and accidental coverage while traveling in it.
What does this mean to you: This move will definitely forge a path for many robust insurance products related to health.
Empowered Industry Council: The two Insurance industry councils The Life Insurance Council and General Insurance Council are now given the status of self-regulatory bodies under this Act. Now, these two industry councils are entitled to frame bye-laws for their meeting and elections. Also the bodies can levy fees and collect them from its members.
What does this mean to you: Empowerment of these bodies has now opened up the ways of communication between the stakeholders of the industry.
Opening up the Reinsurance business front in India : The new amendments in the law have opened up the reinsurance segment quite broadly. With 49% foreign investment cap, the foreign investors can now insure a portion of the Insurance Company.
What does this mean to you: A re-insurer takes away a major risk factor from your insurance company. Re-insurance companies are generally more knowledgeable about international insurance practices. Thus opening up the re-insurance possibilities will bring in knowledge and expertise from the international players as well as make the insurance companies much more stable.
With all this key points, the Insurance Bill, 2015 was robust and actually could stand up to most of the expectations.