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New Norms of Insurance Soon to Benefit Policyholders

January 30 2015

The much-awaited amendment in the insurance sector to raise the limit of FDI (Foreign Direct Investment) from 26% to 49% has finally seen the light of day. An ordinance approving the hike was recently signed by our Honorable President, Mr. Pranab Mukherjee. The ordinance is now pending for an approval in the parliament.

Besides paving the way for fresh infusion of capital and bringing cheer to the insurance companies of India, the amendment is all set to benefit policyholders too. Third party policy transfer, technology driven claim processing and easy accessibility of information to combat miss-selling are a few of the positive changes that policyholders can expect.

A curtailment of the claim rejection period too is in the offing. Earlier the IRDA allowed insurance companies a period of two years for rejecting a claim on the grounds of deliberate misrepresentation, suppression or fraud. Post which, the power of rejecting the claim remained vested with the insurance company.

However, as per this ordinance, a claim rejection period of three years is all that insurance companies would get henceforth. Any claims that are found to be fraudulent in nature must be rejected during this period, beyond which no pending claims can be rejected.

The ordinance also states that a penalty of ` 1 crore would be imposed on fraudsters. Industry experts feel that imposition of such heavy penalty could perhaps serve as a deterrent for perpetrators of crime in the country.

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