The insurance bill passed in both houses in March 2015 is expected to have a major impact on the Indian insurance industry. Long awaited and anticipated, this change brought a ton of benefits to both the insurance company and the policyholder. More power for regulators, more protection for policyholders and more foreign investment in the industry are some of the main features of the insurance law.
Here are some key highlights of the bill and how they could affect you:
Increased foreign investment: The new amendment allows up to 49% foreign investment in Indian insurance companies from now on. This increased capital flow is expected to revitalize the entire industry. The national players can now invest in new products and expand their portfolio in many ways.
What does this mean for you: what does this mean for you as a policyholder? Well, at first glance it may not seem important at all, but more foreign participation means more competition, a wider range of products and more professionalism. The increased competition in the market will also reduce malpractices such as miss-selling and misleading policyholders. So in the long run, this move can actually change the entire scenario of the Indian insurance market.
An authorized IRDAI: This act goes a long way in strengthening IRDAI’s fist. This governing body will now be involved in the grassroots level, such as appointing insurance agents and monitoring their suitability, competence and professionalism.
Also, this governing body is now empowered to regulate key areas of insurance companies such as expenses, investments, commissions to be paid to agents, code of conduct etc.
What it means for you: This enhanced IRDAI jurisdiction is sure to put an end to many malpractices that are rampant in the insurance market in India today. So as a policyholder your money is now safer than before.
Consumer Safety: The Indian insurance market has never been more secure than it is from a consumer point of view. If you are concerned about being deceived by the insurance agent, this act will give you peace of mind. In an effort to curtail malpractice, the new amendment imposes fines ranging from INR 1 Crore to INR 25 Crore on any insurance company that indulges in misselling and misrepresentation.
What it means for you: Given this hefty fine, companies are likely to impose strict standards on their agent, which in turn will give you more protection as a consumer.
The bill also makes the payment process easier for each policyholder’s nominees.
Another very important change that the bill introduced is the shortening of the rejection period for each policy. Waiver time is the specific time period within which a policy can be voided in light of misinformation provided by the policyholder. In the new bill, this time has been shortened to 3 years in order to keep consumer interests intact.
Health Insurance: Health insurance in India has never quite achieved the status of a separate business industry. But this insurance bill identified and solved the problem. The amendment defines “Health Insurance Business” in full detail and includes personal accident coverage and travel accident coverage in it.
What does this mean for you: This move will certainly pave the way for many robust insurance products related to health.
Authorized Industry Council: The insurance industry’s two councils, the Life Insurance Council and the General Insurance Council, are now given the status of self-regulatory bodies under this Act. Now these two industry councils have the right to make ordinances for their meeting and elections. The bodies can also levy and collect fees from its members.
What it means for you: The empowerment of these agencies has now opened the avenues for communication between industry stakeholders.
Opening up the business front for reinsurance in India: Due to the new legislative changes, the reinsurance segment has been opened up quite widely. With a foreign investment ceiling of 49%, the foreign investors can now insure part of the insurance company.
What it means for you: A reinsurer takes a major risk factor away from your insurance company. Reinsurance companies are generally more aware of international insurance practices. Opening up reinsurance opportunities will therefore bring in knowledge and expertise from the international players and make insurance companies much more stable.
With all these key points, the Insurance Bill, 2015 was robust and could meet even most expectations.