Amendments in Insurance Bill that would benefit policy holders
Last week, Prime Minister, Mr. Narendra Modi has approved the Insurance Amendment Bill 2008. There are several amendments suggested by the Parliamentary selection panel to be incorporated in the Insurance Laws (Amendment) Bill, 2008. This would be presented further to Rajya Sabha next week for further consideration. There are 110 clauses being included in Insurance Laws (Amendment) Bill, 2008 which includes a foreign investment cap increase from 26% to 49% in insurance sector. There are some major benefits which you would get benefitted as insurance policy holder with these amendments. What are these amendments in Insurance Bill? What are those 4 major amendments that would benefit policy holders?
4 Amendments in Insurance Bill that would benefit policy holders
I am indicating 4 key amendments in the insurance amendment bill which would benefit you as policy holder
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1) Insurance Company cannot reject claim after 3 years
This is one of the biggest benefit policy holder would benefit from amendment in insurance bill. As per insurance amendment bill, insurance companies cannot reject any claim made by policy holders after 3 years from the date of the policy including misstatement of facts. They cannot question about material facts indicated in the policy document after 3 years and reject the claim.
Mr. Sidd, Insurance expert (name changed as per his request) commented saying, the earlier bill suggested this to be for 5 years, but now amendment bill proposes 3 years which is good for policy holders. However, insurance companies would be more careful before accepting the policy. They may bring more checks before issuing the insurance policy from their side. However, now, no insurance company can reject any claims of policy holder citing several reasons which they have been doing all along.
2) Heavy Penalty for mis-selling to insurance company and agents
Some of the agents have been mis-selling insurance policies (mainly ULIP’s) to get a higher commission.
Do you know that insurance agents would get up to 35% as commission on the premium amount in 1st year. Later the comission would reduce in between 5% to 8% per annum on the premium paid.
Insurance Amendment Bill now helps policyholders by imposing heavy penalties. With these rules, insurers now need to be more responsible for all facts and omissions of its agents. Violating Code of Conduct by insurers would be liable to pay a heavy penalty up to Rs 1 Crore. On the other hand, agents too will be penalized up to Rs 5 Lakhs in case they offer any special promises / high returns to buyers of the policies which it generally happens.
3) Electronic Records to be maintained by Insurance Companies
While private insurance companies are maintaining insurance records of policy holders in electronic form to some extent, LIC and other insurance companies owned by Govt of India, still do not maintain complete electronic records nor such details are easily accessible by the policy holder on the website. In this Insurance Amendment Bill, all insurance companies are supposed to maintain complete records of policy holders in electronic form online on their website. This would help policy holders to view all their documents online and transact online.
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4) Insurance Agents appointment by Insurance companies themselves
Currently, IRDA gives license to insurance agents based on certain criteria. As per the amendment in Insurance Bill, going forward, Insurance companies can appoint insurance agents provided they follow the criteria laid down by IRDA. This includes that agents should posses necessary qualification and they are certified in the insurance exam. However IRDA has been still authorized to take any action on agent if required. One hand, this would bring opportunities for new agents. On the other hand, insurance companies would be more careful in choosing the agents as they are liable for huge penalties. This way, they may focus on hiring professional agents.
Conclusion Remarks: Every day I read several sad stories from readers on this blog about how some of the agents mis-sold the policies to them and how insurance companies are rejecting the insurance claims without their fault. Hopefully these amendments in the Insurance Amendment Bill would be passed in final stage and policy holders would be benefitted from them.
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Suresh
Amendments in Insurance Bill that would benefit policy holders
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nice Article Suresh Garu
First one is very good and reasonable in customer point of view. But it will increase the premium ???
Mis-seeling practice should be penalized with heft penalty for the person who sold and for the company who is pushing to do it….
Insurance companies can increase the premium due to these changes.
If they are increasing the premium for a mistake which happens due to the Insurance company, then We should avoid the Insurance products and go for more safer products like FDs after securing a decent lumpsum for the family (which already hard earned without depending on the Money from insurance).
Dear Mr Suresh,
This bill has come at the right time, and as mentioned by you these pointers are most welcome, I have been previously conned into buying ULIPs by these agents and hope these change in policy brings about a new dawn in the insurance sector, making it more people centric and serving its actual purpose of acting like a cushion in case of an adversity.
As always 5 star for this article.
Thank you again.
Regards.
Vaibhav
Thank you Vaibhav
Thanks for the article. With regards to 1st amendment mentioned above, Is it applicable for new policies only or old policies too (policy taken 2 years back)?
It would be applicable only for fresh policies Sri
Sir,
These amendments are for Life Insurance or General Insurance.
This is for all insurance.
Suresh JI,
will it also applicable on Mediclaim policies ?
Regds
Yes Arav