New Delhi: The amended insurance law provides for a penalty of up to Rs 25 crore for mis-selling or misrepresentation of policies by agents or insurance companies to customers.
Dubbed as a major economic reform, the Insurance Laws (Amendment) Bill, 2015 was passed by the Lok Sabha earlier this month, and by the Rajya Sabha yesterday.
In a statement highlighting key aspects of the amended law, the Finance Ministry said consumer interest will be better served through provisions like those enabling penalties on intermediaries/insurance companies for misconduct.
It also disallows multi-level marketing of insurance products in order to curtail the practice of mis-selling.
"The amended Law has several provisions for levying higher penalties ranging from up to Rs 1 crore to Rs 25 crore for various violations including mis-selling and misrepresentation by agents/ insurance companies," said the statement.
It added that with a "view to serving the interest of the policy holders better", the period during which a policy can be repudiated on any ground will be confined to three years from the commencement of the policy and no policy would be called in question on any ground after three years.
"The amendments provide for an easier process for payment to the nominee of the policy holder, as the insurer would be discharged of its legal liabilities once the payment is made to the nominee".
It is now obligatory in the law for insurance companies to underwrite third party motor vehicle insurance as per IRDAI regulations. Rural and social sector obligations for insurers are retained in the amended laws.
Insurance sector regulator, IRDAI has been empowered to regulate key aspects of insurance company operations in areas like solvency, investments, expenses and commissions.
In addition to the provisions for enhanced foreign equity to 49 percent from 26 percent, the amended law will enable capital raising through new and innovative instruments under the regulatory supervision of IRDAI.
The four public sector general insurance companies are now allowed to raise capital, keeping in view the need for expansion of the business subject to the government equity not being less than 51 percent at any point of time.
The amended law also enables Lloyds of UK and its members to operate in India through setting up of branches for the purpose of reinsurance business or as investors in an Indian Insurance Company within the 49 percent cap.
With the passage of the amended law, government expects that foreign capital to the tune of Rs 25,000 crore would flow into the insurance sector.
