Insurance Bill: Win-win for customers

Revised Section 45 says no claim can be repudiated after three years of policy being in force, even if a fraud is detected

The contentious Insurance Laws (Amendment) Bill is expected to be a win-win for customers with provisions made to benefit policyholders' interest.

The revised Section 45 in the new Bill says no claim can be repudiated after three years of the policy being in force, even if a fraud is detected.

This would mean that customers who have been missold a policy can get their claims passed even if some discrepencies are seen in the policy or claim.

Section 45 of the Insurance Act, 1938 had said that no life insurance policy can be called into question on grounds of mis-statement or wrong disclosure after two years of the policy coming into force.

However, if the insurer is able to prove that the claim was fraudulent, they were rejected.

"This is completely customer friendly, though some criminals may tend to use it for wrong purposes," said a senior life insurance executive.

Further, agent commissions may also be spread out during the first three years of the policy, which will not only benefit agents but customers as well.

A large portion of first year life insurance premiums goes into agent commissions. If it is spread out, a larger portion of premiums paid by policyholders in the first year will go into the savings, protection and investment kitty.

The passage of the contentious insurance amendment Bill in Parliament looks unstoppable now with differences being ironed out at the select committee of the Rajya Sabha.

The report was adopted with the Opposition Congress on board and only four of the 15 members of the committee dissented.

The Congress, which was initially opposed to the inclusion of foreign institutional investors, on Monday appeared satisfied with the composite cap of 49% for foreign equity.

The report is now slated to be tabled in the Upper House on December 10 by Chairman Chandan Mitra, two days before its extended deadline.

The parliamentary logjam also having been resolved this morning, the Modi government’s intention to get its reform agenda rolling with a nod to the insurance Bill in this winter session looks within reach.

The decks had been cleared for the smooth passage of the Bill after the Congress did an about turn on accepting the government’s move to invite all types of institutional and portfolio investment as part of foreign investment in the insurance sector.

The report, which was accepted without much opposition, only inserted the phrase “all types of institutional investments” within the clause on inclusion of foreign institutional investors.

The issue of Indian ownership and control as recommended by the select committee has been defined in the Bill with “control” including the “right to appoint the majority of directors or to control the management or policy decisions, including by virtue of their shareholding or management rights or shareholder agreements or

voting.

The select committee has accepted the unanimous view of all members to enhance the minimum capital for health insurance companies from Rs 50 crore to Rs 100 crore. This would mean that only serious companies would get into business.

Earlier, several smaller companies had approached the insurance regulator, for setting up regional health insurance firms to operate in only some regions of India. With minimum capital at Rs 100 crore, smaller players with limited capacity may not enter.

Listing of insurance companies in the near future after FDI cap is hiked may also promote higher degree of transparency and customer services.

The role of the Insurance Ombudsman is expected to become stronger as also the regulator to deal with malpractices including huge bills and errant hospitals in health insurance.