The Insurance Laws (Amendment) Bill, 2008 introduced in the Parliament proposes to amend the Insurance Act, 1938, the Insurance Regulatory and Development Authority Act, 1999 and the General Insurance Business (Nationalization) Act, 1972. The amendments to the Insurance Laws (Amendment) Bill, 2008 proposes to raise foreign equity participation from 26% to 49%, have already been cleared by the Government and the official amendments to the bill is likely to be introduced in the forthcoming Parliament session. The Bill also provides to permit foreign re-insurers to open branches only for re-insurance business and entry of Lloyd’s of London in insurance business in India etc.The amendments to the Insurance Act and the IRDA Act focus on the current regulatory requirements. The proposed changes provide for more flexibility in operations and are aimed at deletion of certain sections which are no longer relevant in the present context. The amendments also provide for enhancement of enforcement powers and levy of stringent penalties.
Government is also considering further initiatives to give fillip to the insurance industry in the country and expand the spread and penetration of life/non-life insurance. This includes faster approvals under use and file system for standard products and relaxations in investments in debt instruments and other issues relating to service and indirect taxation.
Insurance Regulatory and Development Authority (IRDA) has issued guidelines vide circular dated 9.9.2011 implementing portability of health insurance policies amongst non-life insurance companies w.e.f. 1.10.2011. The health insurance policy holder by virtue of the said circular can, at the time of renewal, switch:- i) from one insurance company to another insurance company of his choice; or ii) from one insurance plan to another insurance plan with the same insurance company. By the process, the policy holder will not lose the credits gained in terms of waiting periods for pre-existing conditions, time-bound exclusions, etc. The Health Insurance Policy Holder can at the time of Renewal of his/her policies can shift to another Insurance Company for a similar product, if he is not satisfied with the present Insurance Company for any reason, without losing the Credits gained, if renewed with the existing company. This was not the case earlier; because change in insurance company or plans amounted to loss of these credits and the policies started as new, carrying all time limitations afresh. Thus “Portability” helps to have a level playing field for all insurance companies and the Customer can choose and compare benefits across products and Companies. IRDA has also provided a portability portal facilitating easy data transfer between the insurance companies.
Eighty per cent of all health expenditure in the country is spent through personal resources. This is despite an increase in premium from Rs. 519 crore in 2000-01 to Rs. 9944 crore (19 times) in 2010-11. With increasing demand, the health insurance industry has introduced innovative products to enable the policyholder to plan comprehensive protection against health eventualities by combining hospitalisation indemnity products with supplementary covers or additional policies to meet specific needs of the policyholder. There are products available that provide Daily Hospital Cash benefit in the form of fixed daily allowance which could be used to cover the incidental costs associated with hospitalisation (like travel and stay costs of an attendant). These benefits are available either on standalone basis or as optional component of a packaged health insurance policy. Though most of the health policies offered are annually renewable, insurance companies are finding innovative ways to establish long term arrangements with the policyholder by offering long term policies or by incentivising timely renewals, free health check-ups, loyalty vouchers for OPD covers, etc. The innovative covers offered by the health insurance industry have to some extent blurred the lines between life and non-life covers. Recently, the Authority has allowed insurance companies to offer pure term life insurance products along with health insurance products under the umbrella of a single product. It is envisaged that the combi-products could enhance the penetration of personal lines of insurance business with a wider product choice to policyholders.
One of the main objectives of promoting financial inclusion packages is to economically
empower those sections of society who are otherwise denied access to financial services,
by providing banking and credit services thereby focusing on bridging the rural
credit gap. The banking sector is focusing on financial inclusion on a priority
basis. Vulnerability to various risk factors is one of the fundamental attributes
of these sections of the society. Lack of protective elements may, thus, not serve
the objective of promoting financial inclusion packages as the targeted sections
may fall back into the clutches of poverty in the event of unforeseen contingencies.
Hence, to provide a hedge against these unforeseen risks, micro insurance is widely
accepted as one of the essential ingredients of financial inclusion packages. Micro
insurance regulations issued by IRDA have provided a fillip in propagating micro
insurance as a conceptual issue. The micro insurance regulations have been made
effective from 2005. These regulations are in addition to the obligations for rural
and social sector business to be done by all insurers on an annual basis. There
were 10482 (PY 8678) micro insurance agents operating in the micro insurance sector
as at the end of 2010-11. The new business premium secured during the year was Rs.
130.40 crore (Rs. 243.41 crore in 2009-10) on 36.51 Lakh lives (1.68 crore lives
in 2009-10) in group category and Rs. 158.22 crore premium (Rs. 158.22 crore in
2009-10) on 1.53 crore policies (0.33 crore policies in 2009-10) in the individual
category. An amount of Rs. 208.43 crore (Rs. 178 crore in 2009-10) was paid on 50805
claims (43463 claims in 2009-10) in group category and Rs. 17.04 crore (Rs. 8.19
crore in 2009-10) on 11391 policies (7508 policies in 2009-10) in the individual
category during the year 2010-11.
Keeping in view the requirement of financial inclusion program accordingly a draft of the regulation is put by IRDA in public domain for seeking comments.
During 2009-10, the IRDA aligned the definition of ‘infrastructure facility’ with that of the Reserve Bank of India (RBI) thereby creating more room for the insurers to invest in infrastructure sector. The Authority has also relaxed the ceiling of investments in infrastructure to 20 per cent in a “single” investee company as against 10 per cent earlier. The limit is applicable to the combination of both debt and equity taken together without sub ceilings in instruments satisfying certain criteria. An additional exposure of 5 per cent has been permitted in ‘debt’ alone with prior approval of the respective insurer’s Investment Committee. Further strengthening on the risk management structure, IRDA has issued guidelines on the scope for “Internal and Concurrent Audit” for investment operations of insurance companies to monitor investment of both traditional and unit linked portfolio, at a closer level with the aim of mitigating risk. Similar, stipulations are also applicable to non-life insurance companies. The guidelines for audit of Investment Risk Management Systems and Processes were also issued during the year.
The total funds invested by life insurers as on 31st March, 2011 was Rs. 1430118 crore (Rs. 1205155 crore in 2009-10), of these Rs. 399116 crore (27.91 per cent of total funds) represents ULIP funds and the remaining Rs. 1031002 crore (72.09 per cent) is the contribution by traditional products. Non-Life insurers have contributed around 5.45 per cent of total investments made by the insurance industry. The total amount of investments made by the sector, as on 31st March, 2011, was Rs. 82520 crore (Rs. 66372 crore as on 31st March, 2010). During 2010-11, the net increase in investments by the non-life industry stood at Rs. 16148 crore (24.33 per cent growth over previous year).