Insurance Bill changes seek to curb mis-selling, protect policyholders
The government is slated to move amendments to the Insurance Laws (Amendment) Bill, 2008, in the Rajya Sabha on Monday
New Delhi: While raising the foreign investment limit, the National Democratic Alliance (NDA) government has sought to tighten regulations to curb mis-selling by insurers and protect the interests of policyholders.
The government has moved as many as 97 amendments to the original Bill—the Insurance Laws (Amendment) Bill, 2008. The changes also propose to increase the powers of the Insurance Regulatory and Development Authority (Irda).
The draft law proposes to increase the foreign investment limit including portfolio investors to 49% from the existing 26% in the Indian insurance joint venture. But the joint venture will have to be owned and controlled by the Indian promoter.
The amendment proposes to hold the insurer responsible for any mis-selling and violations of code of conduct by the insurer’s agents. It proposes to levy a penalty on the insurance company of up to ₹ 1 crore in case of such violations.
The Bill also seeks to ensure that the insurance company cannot be called in question after three years of the commencement of the policy on grounds of mis-statement by the policyholder.
The amendments moved require the insurer to maintain a record of policies and claims in electronic mode and display the same on its website. It also asks the insurers to put in efforts to issue the policies above a certain threshold in terms of sum assured and premium in electronic form.
The proposed law also seeks to impose a penalty of ₹ 10 lakh as against the earlier levy of ₹ 5 lakh in cases where an insurance agent offers a part of the commission to the buyer of an insurance policy as inducement for purchase.
However, an insurance company will now get an option of contesting any order passed by Irda under section 33 of the insurance Act in the Securities Appellate Tribunal. Earlier, insurance companies could not contest the order in any court.
Section 33 deals with powers of investigation and inspection by Irda and the subsequent penalizing of companies for any wrongdoing.
The government is slated to move amendments to the Insurance Laws (Amendment) Bill, 2008, in the Rajya Sabha on Monday after the cabinet cleared the higher foreign investment limit, subject to approval of the Foreign Investment Promotion Board, last week.
The Bill was listed for Thursday but could not be taken up as the opposition sought more time to go through the amendments.
Once it is passed by both Houses of Parliament and gets the President’s nod, it will become an Act.
Despite objections from the Left parties and Congress’s ambiguous stance on the Bill, the government seems to be optimistic about the passage of the much delayed bill in the Rajya Sabha, where the Bharatiya Janata Party-led (BJP) alliance does not have a majority.
Parliamentary affairs minister M. Venkaiah Naidu expressed the hope that the Bill will “go through".
The BJP leaders pointed out that many senior leaders in the Congress, including former prime minister Manmohan Singh, favour the passage of the Bill. The leader of the opposition in the Rajya Sabha, Ghulam Nabi Azad, said the Bill had gone to the standing committee and the party needs to see what amendments has been brought. “If there are new amendments, we will have to consult other opposition parties to decide whether the Bill should go to the select committee," he said.
The Communist Party of India (Marxist) slammed the insurance Bill.
“The Modi government has extended a welcome gift to John Kerry, the US Secretary of State, who is visiting India... This will fulfil a long-standing demand of the United States, as voiced repeatedly by the India-US business forum which was set-up during the UPA-1 (United Progressive Alliance-1) government," senior party leader Sitaram Yechury said.
PTI contributed to this story.
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