Perspective | Industry expresses joy on passing of Insurance Bill
The Modi Government has indeed bought some Achhe Din for the Insurance Sector. After about 7 years, the Parliament finally passed the Insurance Bill raising FDI ceiling to 49%.
While the bill was passed in the Lok Sabha last week, the Rajya Sabha was yet to pass the bill. After about a week, the Upper House of the Parliament came up with positive news for the insurance sector by passing the Insurance Bill.
The industry is really happy that the bill has been passed. Some of them had already indicated that they would be happy if the bill was passed and this news has indeed bought them good news. Here is what some of the industry experts had to say.
Sanjiv Bajaj, MD, Bajaj Capital Ltd. said, “The strenuous efforts of the government have paid off, and finally, after much contemplations and debates the Insurance bill has been passed by the Rajya Sabha. The bill will play a great role in determining the future of insurance industry and its growth, and there are likely to be many interesting moves in the sector in the time to come.”
Rajesh Sud, MD & CEO, Max Life Insurance on Insurance Laws (Amendment) Bill 2014 said, “The approval of Insurance Laws (Amendment) Bill, 2014 is a welcome step because it ends the uncertainty. This shows the Government’s resolve to take forward its reform agenda. The Bill approves increase in foreign capital cap to 49%, which will allow the much required flow of long-term capital to the sector and the flexibility of different capital structures depending on each company's requirements. With the availability of additional capital, the industry will be in a position to expand its distribution reach. In this critical phase of growth in the Life Insurance sector, the passing of this Bill will also attract the much needed domain capital.”
He added, “In a rapidly evolving sector, the Bill, by mandating the IRDAI to prescribe regulations on a number of insurance related subjects has equipped the Regulator to make course correction without having to wait for legislative amendments. We expect some constructive and enabling regulatory changes and the industry looks forward to working with IRDAI on that agenda. We are hopeful that in order to nurture the industry and get it up for a growth trajectory, the IRDAI would follow a phased regulatory agenda allowing for stability and growth, deepening access and eventually strengthening industry structure.”
“The approval of Insurance Laws (Amendment) Bill 2014 is a milestone for the insurance industry and I am confident that it will trigger growth of the industry, improvement in processes and greater customer centricity,” he went on to add.
Sandeep Patel – MD and CEO of Cigna TTK health insurance said, “The Insurance Amendment Bill will further support the development and enhancement of the health insurance industry with an infusion of capital and the ability to operate as a separate line of business. The investments and separate business classification will promote customer-centric product and service innovations with an enhancement to technology, deepening market penetration besides improving distribution efficiencies. A paradigm shift moment for the Indian insurance sector."
Alok Bansal, CFO & Co-founder, Policybazaar.com on insurance bill said, “At the onset, the government must be commended for passing the insurance bill. We see this move as positive step towards propelling growth and reviving the insurance sector at-large. The decision to raise the ceiling for foreign investment in insurance sector from 26% to 49% will provide much necessary boost to private insurance players who would now be able to raise capital to meet their ever-increasing business demands. Besides increasing the investment cap, it will hand more power to consumers by providing access to flexibility in paying premium, faster claim settlements, legal recourse against missellings, and capping on agents’ commission.”
Some of the Highlights of the Bill are as below:
1. A new provision in the insurance bill is being considered to be “retrograde” for policyholders.
2. An insurance policy cannot be challenged on any ground after three years. It means that if a fraud is detected three years after the policy being in force, insurance companies will have to pay the policy holder.
3. The new bill allows foreign companies to invest up to 49% in domestic insurance firms. There have been estimates that Rs.20000 crore to Rs. 25000 crore of foreign funds are likely to come immediately. The money will help insurance companies to expand aggressively and will be beneficial for the people. This move will be a positive for private insurers who have limited presence beyond metros and Tier I cities.
4. Domestic firms will look at aggressively expanding with more money being pumped. We might see more companies entering the insurance sector. Analysts say, this will lead to competition and insurance premiums are likely to get cheaper for customers. Apart from that there might be innovations in products as well.
5. The new bill gives more powers to the insurance regulator which will ensure customer protection and make it difficult for companies to take policyholders for a ride. By Archit Ambekar | Twitter: @aambarchit