The government recently passed an ordinance to increase the foreign direct investment limit in the insurance sector to 49% from 26%. It also announced some more changes to insurance laws. These had been long pending. It is expected to bring major reforms in the insurance industry. Not only does it help increase foreign participation in the sector, it could also bring more credibility to the sector. Involvement of foreign partners could also bring about technological advancements. This could help address incompetency in the sector. There are a lot of other benefits too that you can avail as an insurance policy holder from this Insurance Act. Benefits include simpler and more reliable products, easy claim settlement, flexibility of premium payment and lesser dependency on agents.
Here are five benefits of the new Insurance rules:
1. More agency channels and easy claim processing: The aim is to make your claim-processing simpler and hassle free. As of now, you can only get insurance policies and handle insurance-related claims through established agents. With this amendment, there will be multiple government-established channels through which you can handle your insurance claims. This also increases the number of medium of sales. Also, online insurance processing is not a preferred option, especially in the rural areas. The new rules propose to make use of technology to make sure that online insurance processing becomes easier and available to its vast audience.
2. Agent dependency and remuneration capped: This change in the Insurance Bill makes sure that you are not fooled by your insurance agents, who try to sell wrong products to you. Suppose there are two policies in the market, policy A and B. Insurance companies can provide extra commission to the agent for selling product B when compared to product A. In this case, the agent would like to sell product B to you because of the extra commission that he can avail, even if the product does not suit your needs. Now, with the new rules, such mis-selling of products can be stopped as such the agent's remunerations are limited. Also, you will be able to get all the details related to the products in the market easily, since online marketing will be made available. This will help you to make wiser decisions.
3. Claim rejection: The old rules stated that insurance companies have a period of two years after a policy is bought to reject fraudulent claims or on the basis of mis-statement. After this two year period, the company could still reject your claim if it found that you hid some important information. The new rules extend this period to three years. Moreover, after this three year period, the company cannot reject any claims for any reason. This rule puts the onus on the insurance company to conduct all the background check at the time you buy the policy, and not when you claim for some amount. So, at the time of the claim, the insurance company cannot back out saying you held some information back or mis-statement or some other reason, especially if you claim after three years of buying the policy.
4. Financial penalties: Since the world is moving towards financial penalties, so is the amendment in this Insurance Act. The new rule holds the insurer responsible for committing fraud. So, the person committing the fraud could be liable for a penalty as huge as Rs 1 crore. This is expected to help reduce insurance fraud by customers.
5. Policy transfer: The new Insurance Bill gives you the right to partly or fully transfer your policy to a third party. You can now transfer your policy by fully explaining and obliging the terms and conditions of the transfer that are clearly. This amendment is in line with the global practice. The person to whom you transfer the policy will have all right over the policy and can obtain a loan under the policy or surrender it.
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