Insurance reforms & their implications

The Insurance Regulatory and Development Authority of India (Irdai) is involved in bringing out an array of reforms in the insurance sector to bring it in tune with the Insurance Laws (Amendment) Act that has been passed by Parliament. In fact, till June-end alone, the regulator is expected to bring about more than half a dozen reforms that will have a significant impact on the customer. Business Standard takes you through the reforms and their impact on the policyholder

Bancassurance

• Banks till now were acting as corporate agents for only one life, one non-life and one standalone health insurer
• From now on, they would have to tie up with more than one insurer in each segment
• For customers, this would mean each bank branch will no longer be pushing one insurer's product
• They will have many more policies to choose from and the bank will be liable for each product sold

Common service centres

• In rural areas, small micro-offices of insurers were the only avenue to buy insurance, apart from bank branches
• Now, common service centre (CSCs) will be empowered to sell insurance to people
• Simple and easy-to-understand insurance products will be sold across 100,000 plus CSCs across the country
• Renewals and claims will also be handled here

Agent remuneration

• A significant portion of first-year premiums goes towards paying agent commissions
• Irdai is expected to bring out regulations to ensure commissions are not concentrated only on first year
• First-year premiums might come down for policyholders due to a more spread out commission structure
• Greater thrust on yearly renewals will be put by respective agents, to ensure policies don't lapse

Electronic insurance

• The new insurance Act has talked about insurance repositories that will offer electronic insurance
• More policies expected to be digitised, which is free of cost to customers
• No fear of claim rejection due to loss of policy documents once it is digitised
• No additional KYC requirements since e-Insurance Account will hold all details

Claims rejection

• According to the new insurance Act, no insurance claim can be rejected after three years of completion of policy
• Insurers will be more stringent at the time of issuance of policy
• A policyholder's claim cannot be questioned on any ground
• Since fraudulent gangs operate to get fake claims cleared, too many such instances may increase risk of premium rise in particular segments, or absence of smaller ticket products