The Insurance Laws (Amendment) Bill, 2008 has been cleared by the Lower House of the Parliament and is all set to be presented before the Upper house of the Parliament in the next few days.
The Insurance Laws (Amendment) Bill not only proposes to raise the foreign direct investment cap in insurance companies from 26% to 49% but also incorporated few favourable clauses for policy holders.
In all there are 110 clauses more in the proposed Insurance Laws (Amendment) Bill, 2008 but below I am mentioning the points which would benefit you as a policy holder.
Beneficial Changes in Insurance Bill for Policy Holders
1. No Claims can be rejected after 3 years (earlier it was 2 years)
The New Insurance Bill states that Insurance Company cannot refuse to accept any claims after 3 years from the commencement of the policy or revival/renewal of policy. This means within 3 years, the policy can be called into question on the ground of fraud and misstatement of or suppression of material facts.
As a policy holder, this is the most important change for you that have taken place in the Insurance Laws (Amendment) Bill, 2008. However, earlier this “no claim rejection” time period was 2 years but the original bill had proposed it to be 5 years which is finally settled for 3 years.
2. Higher Penalty for the violation for
a. Fraudulent selling:
Under the new Insurance Bill insurers would be held accountable for any fraudulent or mis-selling of policy by the agents, including violation or contravention of code of conduct. Earlier there was no specific clause for this but now clause 53 has been incorporated specifying the penalty to be levied on the insurer which could go up to Rs.1 crore.
b. Operating without license
The new Insurance Bill also makes it mandatory for every intermediary to be registered with IRDA, fails to do so will attract the penalty of Rs.5 lakhs for the intermediary and Rs.1 crore for the insurer and additionally, Rs.10 lakh for every officer of the company who is in knowledge of such contravention.
3. Electronics record of policies and claims
To increase the transparency, insurer is instructed to maintain the record of policies and claims in the electronic form. The new Insurance Bill also suggested that each insurer should issue policies in electronic form i.e. E-insurance policies after a certain threshold limit.
4. Limitation for Agent
One limitation on agency is also proposed in the new Insurance Bill that a person cannot act as agent for more than one life insurer and one general or health insurer. Earlier there was no restriction on the number of insurers for whom a person could act as an agent.
5. Scope of Health Insurance Business widened
The scope of the Health Insurance Business is widened by providing cover for personal accident and sickness benefits or medical, surgical or hospital expense benefits, on account of domestic as well as international travel.