Insurance Institute of India C – 46, G Block, Bandra-Kurla Complex, Mumbai – 400051 INSUNEWS - Weekly e-Newsletter 5th - 11th December 2014 ● ● Quote for the Week “Believe that life is worth living and your belief will help create the fact “ William James {{INSIDE THE ISSUE Insurance Industry News Pg. More amendments likely to the Insurance Bill - The Hindu Business Line Industry 1 The Select Committee on the Insurance Bill is expected to propose four amendments to the Bill, including IRDA Reg 4 enhancing the minimum capital for health insurance companies and compulsory provision by insurers for agent commissions. The Committee completed its discussions on all clauses of the Bill and, at a meeting held Life 4 here on Wednesday, decided to submit its report two days ahead of its December 12 deadline. Health 5 Health cover Reinsurance 6 The panel, headed by BJP leader Chandan Mitra, may also suggest enhancing the minimum capital for health insurance companies from ₹50 crore to ₹100 crore. It is also recommending that fresh shares should be Global News 7 issued during the sale of shares of Indian companies to a foreign owner so that FDI helps in capital 6 enhancement. Another idea is to make a compulsory provision for commissions to be given to agents by insurers. “This is to help lakhs of insurance agents in the country,” a panel member told BusinessLine. The Committee wants the report of independent surveyors to be made mandatory for settling the claims over Rs 20,000 — a provision that was part of the original Bill. The Committee is, however, likely to add that as the rate of Rs 20,000 was decided much earlier, the IRDA may prescribe a new limit in this regard. “The panel has sought the assistance of the Finance Ministry, the Law Ministry and SEBI to include this amendment to the Bill we are going to table in Parliament,” the member said. The Committee witnessed a heated debate on submission of the report as the Opposition members insisted they needed more time to Source study the draft report, which is likely to be circulated on Friday. The Chairman, however, said the panel had a deadline to adhere to, and the members could submit dissent notes along with the report. Back Insurance Bill: Congress changes tack, toes Centre’s line - The Hindu Business Line The ruling Bharatiya Janata Party (BJP) succeeded in limiting the dissent notes to the Select Committee’s report on the Insurance Bill to four, as the Congress, AIADMK and Bahujan Samaj Party (BSP) decided to toe the Government’s line. Four parties — the CPI(M), Trinamool Congress, Janata Dal (United) and Samajwadi Party — have submitted dissent notes to the panel’s report recommending an increase in the foreign direct investment (FDI) limit in the insurance sector. The panel, headed by BJP MP Chandan Mitra, has asked the Centre to define the term ‘control’ in the Bill. It suggested that an explanation be added in the Bill that “the term ‘control’ shall include the right to appoint a majority of the directors or to control the management or policy decisions, including by virtue of their shareholding or management rights or shareholder agreements or voting rights”. “We felt that there should be clarity on the issue of control. The control of the companies should remain with Indians,” a panel member said. The Select Committee, which makes recommendations to the House, will table its report on Wednesday. The Bill is likely to be taken up next week. Insunews – weekly e-Newsletter With the Congress offering its support, it will be easy for the Government to pass the Bill. Later, Finance Minister Arun Jaitley told a trade delegation from the UK that he is hopeful that expansion of the insurance market will take place once the Bill is passed. He expressed his “sense of satisfaction” over the recommendations made by the Select Committee. The committee rejected the demand of Opposition parties to not increase the FDI limit from the existing 26 per cent. “In view of the increasingly globalised economy and expanding global financial flows, involving manufacturing, banking etc for growth and development, the Committee is not in agreement with the argument of not increasing the cap in the insurance sector…” the report said. It, however, urged the Centre to limit FDI and all portfolio investments to 49 per cent. The Opposition parties accused the Congress of taking a U-turn from its Source stated position against the foreign institutional investor route. Back Report on insurance Bill to be tabled in RS today - The Financial Express The Parliamentary Select Committee report on the Insurance Laws (Amendment) Bill is likely to be tabled in the Rajya Sabha on Wednesday. The panel is learnt to have agreed with the government on a 49% composite foreign investment cap (including FDI and other foreign investments including FII) in the insurance sector with full Indian management and control through the Foreign Investment Promotion Board (FIPB) route. Next week, the government is likely to move the bill for Rajya Sabha’s consideration. Expressing satisfaction over the recommendations made by the Parliamentary panel, finance minister Arun Jaitley has said the insurance market expansion would take place once the Bill is passed by Parliament. The report could feature dissent notes from CPI-M, Trinamool Congress, Samajwadi Party, and JD(U) — in Rajya Sabha on Wednesday. The four parties are against raising the FDI ceiling in the sector from the current 26%. In the 245-member Rajya Sabha, those members backing the Bill are in a minority compared to those opposing it. The Bill envisages, among other things 49% foreign investment (composite cap including FDI or FII or a combination of both) in the sector. As per the current norms, foreign investment by way of FDI, investment by FIIs/FPIs and NRIs up to 26% under automatic route is permitted in the sector. The country’s insurance sector needs capital of around $12 billion up to 2020. Increasing the foreign Source investment cap to 49% is expected to lead to foreign investment of around $3 billion immediately, most of it in life insurance sector. Back Insurance bill can hike no of claim rejections - The Times of India Discussion on the insurance amendment bill has centered on the increase in foreign direct investment ( FDI). However, a lesser known provision in the bill could end up increasing the number of claims rejected by insurance companies as it allows them to turn down claims on grounds of non-disclosures even if the omissions were not material to the claim. The key amendment which impacts policyholders adversely is the one which seeks to do away with the differentiation between inaccurate statements and concealment done due to inadvertence or lack of awareness and those which are made deliberately with intent to deceive. This amendment pertains to Section 45 of the Insurance Act which is sought to be changed by clause 58 of the insurance bill. Former chairman of Life Insurance Corporation of India S B Mathur, who appeared before the select committee headed by Chandan Mitra to look into the bill, had pointed out five major areas of concern that affect consumers. The other four areas are repudiation on grounds of fraud, accountability of agents and onus of proof, refund of premium paid and retrospective applicability of provisions. Under the existing act, an insurance policy cannot be called into question after two years of issue. Under the amendment, insurers can repudiate a policy for a period of three years after the policy was issued. Incidentally, the three-year time limit has now been extended for repudiation on grounds of fraud. "On one hand, genuine claimants can be deprived of a genuine claim that takes place within three years if they have made inadvertent mistakes. At the same time, by extending the three-year limitations to frauds, the rules 2 Issue No. 2014/48 www.insuranceinstituteofindia.com Insunews – weekly e-Newsletter allow a fraudster to make a claim after three years," said Mathur. Some of the private insurers have much higher levels of repudiation - around 20% by number and around 28% by amount - according to data published by IRDA. The third discrepancy in the new bill is that it holds the insured responsible for any fraud conducted by the insured or his agent. This goes against insurance regulation in India, which deems agents to be a representative of the insurance company. The other provision that could hurt policyholders is the provision in the amendment which places onus of disproving lies upon the beneficiaries, in case the policyholder is not alive. "Since allegations of fraud will be in Source early claim cases, the beneficiaries are likely to be a young wife with small children. Is it fair to take away the responsibility of proof from the insurer and dump it on a young grieving family?" asked said Mathur. Back Insurance Bill: Select panel tables report in Parliament - The Hindu Business Line The Insurance Bill in the Rajya Sabha here on Wednesday. While the Congress, BJP, BSP, AIADMK and Shiromani Akali Dal supported the Bill, the CPI(M), SP, JD(U) and Trinamool Congress submitted dissent notes to the report. The Government is likely to bring the Bill for passage in the ongoing session. The panel, headed by BJP leader Chandan Mitra, also submitted an amended Bill along with the report. The Bill has about a dozen amendments. The committee has said in its report that increasing the foreign direct investment (FDI) limit will help domestic insurance companies. “In view of the increasingly globalised economy and expanding global financial flows, involving liberalised foreign investment (including in India) in various fields like manufacturing, banking etc.