Parliament on 12th march 2015 passed long delayed insurance bill allowing foreign investors to hike stakes in domestic insurers from the present limit of 26% to 49%.
This is the first major foreign investment reforms that Modi government has managed to push through.
With this new insurance bill, foreign companies like Britain’s Standard life, UK based health group Bupa and other foreign companies will be allowed to increase their stake in India’s domestic joint venture companies up to 49%.
Insurance bill was earlier approved by Lok Sabha on March 4th and now has been approved in Rajya Sabha on 12th march 2015. Now, once the president of India signs, it will become part of the Act.
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.
The four public sector general insurance companies, presently required as per the General Insurance Business (Nationalisation) Act, 1972 (GIBNA, 1972) to be 100% government owned, are now allowed to raise capital, keeping in view the need for expansion of the business in the rural and social sectors, meeting the solvency margin for this purpose and achieving enhanced competitiveness subject to the Government equity not being less than 51% at any point of time.
With a view to serve the interest of the policy holders better, the period during which a policy can be repudiated on any ground, including mis-statement of facts etc., 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 new Act will entrust responsibility of appointing insurance agents to insurers and provides for IRDAI to regulate their eligibility, qualifications and other aspects. It enables agents to work more broadly across companies in various business categories; with the safeguard that conflict of interest would not be allowed by IRDAI through suitable regulations.
Appeals against the orders of IRDAI are to be preferred to SAT as the amended Law provides for any insurer or insurance intermediary aggrieved by any order made by IRDAI to prefer an appeal to the Securities Appellate Tribunal (SAT).