Proposed Amendments to Insurance Laws: Concerns Raised by Unions

Four unions within the Life Insurance Corporation of India (LIC) have expressed concerns regarding the proposed amendments to insurance laws, highlighting potential disputes in health claims and risks of misappropriation by insurers.

The unions, including the Federation of LIC of India Class I Officers’ Association, National Federation of Insurance Field Workers of India, All India Insurance Employees Association, and All India LIC Employees Federation, emphasized that the proposed changes lack specificity in defining health insurance business, which could lead to conflicts during claims processing. Additionally, the absence of a clear definition for “liability” raises concerns about potential misuse by insurers.

Proposed Amendments and Concerns

The Indian government has put forward significant changes to the Insurance Act 1938 and the Insurance Regulatory and Development Authority Act 1999, inviting feedback from stakeholders. Among the proposed revisions are the elimination of statutory capital requirements for insurance businesses, the inclusion of various types of insurers, and modifications to investment regulations.

Specifically, the proposed amendment to Section 2(6C) of the Insurance Act 1938 focuses on health insurance business, aiming to cover contracts providing sickness benefits or covering medical and health expenses. However, the unions argue that the proposed amendment lacks clarity compared to the existing definition, potentially enabling insurers to exploit loopholes and inconvenience policyholders.

Opposition to Additional Financial Product Distribution

Furthermore, the unions oppose the idea of insurers distributing other financial products, expressing concerns that it might divert focus from core insurance products and compromise customer service quality. Industry experts echo these concerns, emphasizing the need to safeguard policyholders’ funds from risks associated with selling non-insurance products.

Net Owned Funds and Reinsurer Requirements

The proposal to reduce the net owned funds requirement for reinsurers from Rs. 5,000 crore to Rs. 500 crore is met with resistance from the unions. They argue that such a reduction could lead to insolvency risks, especially considering inflation since the original requirement was enacted.

Moreover, the unions emphasize the importance of maintaining Section 27A of the Insurance Act, which mandates conservative investment practices to protect policyholders’ interests. They warn that its omission may facilitate irresponsible investments by insurers, posing significant risks to customers.

Multilevel Marketing and Complex Agent Appointments

Additionally, the unions oppose the introduction of multilevel marketing in the insurance sector, expressing concerns about increased complexity and higher probabilities of mis-selling and fraudulent activities. They argue that appointing principal, chief, and special agents for insurance transactions could further complicate the system and undermine customer protection measures.

In conclusion, the unions stress the need for comprehensive definitions, prudent investment practices, and stringent regulations to safeguard policyholders’ interests amidst proposed amendments to insurance laws.