Government of India Volume I: Analysis and Recommendations

ANNEXES
10. All individuals, who may be individual agents or employees of corporate agents,
brokers, advisers, banks and insurance companies, who are involved in the sale of
insurance services to consumers must be registered with the regulator. This registration
process will be based on certain objective criteria, such as minimum qualifications,
training and certification requirements, which will be prescribed by the
regulator. The responsibility of verifying the individual’s compliance with the specified
requirements should be left to the insurance company, in respect of its employees
and agents. In case of independent advisors and brokers, who are not aligned
with any particular insurer, the relevant service provider would be responsible for
the registration of its employees.
11. No minimum or maximum cap on commission or fee should be mentioned in the
primary legislation. The law should allow the regulator to prescribe incentive structures
for the sale of insurance services, keeping in view consumer interests.
12. In case a policy lapses due to the non payment of premium, there should be an
obligation placed on the insurer to issue a notice to the policyholder. However,
these details need not be specified in the primary law. The primary law should
only provide that the regulator may frame specific regulations for dealing with the
lapsation on insurance policies, with a view to protecting policyholders.
13. The scope of the present insurance ombudsman system needs to be expanded
to allow complaints against insurance intermediaries, other than agents of the insurance
company for whom the insurer will be directly liable. The ombudsman
awards should be made enforceable against the complainant as well as the service
provider, subject to the right to appeal before a specialised appellate forum.
14. The law should specify the duty of parties to an insurance contract to act in good
faith. It should also set out the meaning and consequences of insurance fraud.
15. The collection and sharing of insurance information can help insurers make better
pricing and underwriting decisions. It can also help insurers combat instances of
insurance fraud. The law should enable the sharing of insurance information while
specifically providing the data protection and confidentiality requirements applicable
to any person, including the regulator, that holds information belonging to
others.
16. The primary legislation must empower the regulator to act in a manner that promotes
better access to micro insurance. This should be done by stating that ‘promoting
innovation and access to insurance services’ is one of the key principles to
be followed by the regulator.
17. There is a need for reforms in the heath care sector to provide for the codification
of ailments, procedures and protocols followed by health providers. This will help
in promoting better underwriting by insurance companies by reducing the moral
hazard problems in the supply of health care services to insured persons.
18. Motor insurance:
(a) In order to minimise inconvenience and costs, the law should provide the accident
victim, insurer and insured an opportunity to arrive at a voluntary settlement
of the claim without having to go through the adjudication process. If
the parties fail to arrive at a settlement, the compensation should be decided
on a fast track basis by a specialised tribunal.
(b) The law should lay down the minimum amount of insurance coverage that
must be obtained by every vehicle owner. This will ensure that accident victims
are assured of receiving compensation of up to the insured amount. It
will also provide insurers with more certainty on their potential liabilities. In
order to achieve this, the regulator will have to discontinue the practice of fixing
the premium for third party motor insurance policies.
168 FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION