August 4, 2014
The Indian government has proposed that insurers will be held responsible for all the acts and omissions of their agents, and will have to face a penalty of up to INR10 million (US$164,000) for any violation.
The proposed measure is in new provisions inserted into an amendment Bill to revise the insurance law that would also raise the foreign investment limit in the insurance sector from 26% to 49%, reported the Times of India.
Many policyholders complain that the policy sold to them is not what was promised to them at the time of purchase. In many such instances, insurance companies would heap the blame on agents. Although there are provisions such as a free look-in period, and cancellation of the policy within 15 days, if the buyer is not satisfied, most consumers only realise the flaws in their policies much later.
The Bill, which proposes around 100 amendments to the insurance law, also seeks to allow an insurance company an option to contest 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 the Insurance Regulatory and Development Authority (IRDA) and the subsequent penalising of insurers for any wrongdoing.
The government is slated to move the Bill, which has been delayed since 2008, in the upper house of Parliament today. Once it is passed by both Houses of Parliament and gets the President’s nod, it will become law.
Meanwhile, the All India Insurance Employees’ Association has raised serious objections to the government’s attempt to increase the foreign direct investment ceiling in the insurance sector, claiming that the move is against national interests.
AIIEA vice-president K.Venugopal said: “Since the crisis in 2008 the industrialised nations are experiencing stagnation in premium income. Therefore, it is natural for multinational companies to demand further opening up of the insurance sector in India, which, at the moment, is very promising.
“There may be people who argue that we will still have a majority 51% stake in the insurance sector. But, if an Indian stakeholder wants to sell around 5% of his stake to another Indian, then it’s the foreigners who will become the majority with a 49% share as two Indians will have a 46% and 5% stake in the company,” he said.