Critical examination of Insurance Laws (Amendment) Bill

Critical examination of Insurance Laws (Amendment) Bill

Question - Allowance of FDI in the Insurance Sector is a boon for this industry. Critically examine the Insurance Laws (Amendment) Bill which has recently been passed by the RS.

Benefits of the Approved Bill/Act

• The amendment is aimed at providing IRDA/Insurance Regulatory Development Authority with the ability to discharge its functions with effectiveness and efficiency

• It will deepen the reform process underway in the insurance sector

• The following Acts will be amended through this:
- Insurance Act 1938
- General Insurance Business (Nationalisation) Act 1972
- Insurance Regulatory and Development Authority Act 1999

• Bill also raises insurance limit for FDI to 49% and permits the entry of foreign re-insurers

• Provides permanent registration for insurance companies

• Permits Life Insurance Policy Holder to name a beneficiary

• Bill will aim to amend clause 45 to the degree that there can be no repudiation of any claim following three years of policy issuance under any scenario

• Bill will also open more channels for distribution

• Premiums will be collected in instalments for more products

• Policyholder’s complaints will be more effectively handled through a grievance redressal authority with the powers akin to a civil court composed of judicial or technical members

• Bill will also stress on electronic issuance of policies for improving claims payout

• Electronic issuance and demat will prevent fraud/ forgery

Drawbacks

• Bill says onus to prove wrong statement will lie with the policyholder and not the insurance firm

• Move will impact policy holders when track record of insurers may not be good

• Insurance policy cannot be questioned on any ground after three years

Facts and Stats

• The Insurance Laws (Amendment) Bill 2015 was recently approved by the Rajya Sabha. This Bill replaced an ordinance promulgated in 2013.

• The Bill was passed through voice vote

• It was introduced in the RS in the year 2008

• The Bill also makes provision for appeals against decisions by IRDA to lie with Securities Appellate Tribunal established by the 1992 SEBI Act

• No claim can be repudiated following three years

• Policyholder can transfer/assign life insurance policy in whole or part to a third party

• In conjunction with existing channels such as agents and bancassurance, Bull paves the way for additional channels of distribution

• Bill provides for flexibility of premiums

• It also strengthens grievance redressal

• Electronic issuance of policies to aid claims processing

• Cap on agent’s commission, additional renumeration as per the Bill