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Sunday, December 14, 2014

Four ways policyholders will benefit from Insurance Bill

The Cabinet, headed by Prime Minister Narendra Modi, has approved incorporation of amendments suggested by a Parliamentary select panel in the Insurance Laws (Amendment) Bill, 2008 that proposes to raise the foreign investment cap in insurance companies from 26% to 49%. The Rajya Sabha is likely to take up the Bill for consideration and passage next week. Though the increase is composite, meaning, the 49% would be inclusive of all forms of foreign direct investment and foreign portfolio investments, insurers are eager that the long-awaited amendment is one step closer of getting passed and that they'll be able to get fresh investment for the sector.

"The industry was not expecting a composite hike and the foreigner partner were expecting that they will be able to increase their stake up to 49%. So, that's a slight dampener. But we are happy that the long-standing demand is finally being met, in some form," says Sanjay Tripathy, Sr. VP and Head Marketing, Product, Digital & E-Commerce, HDFC Life.

"It is almost certain that all the existing players will need to infuse substantial capital in order to grow and penetrate into uncovered areas more so health insurance players. This will also be helpful to the country where more players will come into operation thereby increasing the competition and better service," added 
V. Jagannathan, Chairman-cum-Managing Director, Star Health and Allied Insurance.

Apart from the increase in foreign investment cap, there are 110 clauses more in the Insurance Laws (Amendment) Bill, 2008.

Here are some amendments that benefit you as a policyholder:

1. No Claims to be Rejection after 3 years: To protect the interest of the policyholders better, the period during which a policy can be repudiated on any ground, including misstatement of facts, has been confined to three years from the commencement of the policy or renewal/ revival or date of rider, whichever is later. So, no policy can be called in question on ground of misstatement after three years.

The original Bill had proposed a timeframe of five years, from the existing two year period. "As an insurer, this means, the policy acceptance stage would be even more critical for us now. Since post three years no claims can be rejected, we will have to put a few more checks and balances and stringent analytics to control fraud at the policy issuance stage," says Tripathy of HDFC Life.

2. Steep penalties to curb mis-selling: Under a new section introduced in the amendments, insurers will now be responsible for all acts and omissions of its agents, including for any violation of code of conduct and are liable to a heavy penalty of up to Rs 1 crore. The amendments also propose a fine of Rs 5 lakh has been in case agents offer kickbacks to the buyer of the policy, a common industry practice.

3. Insurers to maintain electronic records: To increase transparency, the amendments propose that the insurance company maintains a record of policies and claims in electronic mode and display the same on its website.

4. Bigger Agent force to increase penetration: Currently, the licensing of agents is done by IRDA. But going forward, appointment of agents is proposed to be done by insurance companies subject to the agents meeting the qualifications, passing of examinations etc. as specified by the authority. However, 
IRDA will still be empowered to take action against agents under Section 42(4) of the Insurance Act, 1938 and protect the policy-holders interests.

This provision is basically to ease the process of hiring agents and expand their network—an attempt to increase insurance penetration in the country. "Though this will help us recruit faster, because of the steep penalties we also have to ensure we recruit the right people," says Tripathy.

The definition of 'health insurance business' has also been revised to stipulate that health insurance policies would cover sickness benefits on account of domestic as well as international travel. However, it is still not clear whether this would mean all health indemnity plans will now have to cover claims on account of internationals travels or would this risk be covered separately under a different plan.

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