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All about insurance
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Insurance laws and regulations to know
The insurance industry in India is governed by a strict set of laws, regulations and legal framework. The apex body that is responsible for the regulation and licensing of insurance in India is the Insurance Regulatory and Development Authority of India (IRDAI). Headquartered in Hyderabad, the IRDAI consists of ten members - a chairman, five full-time and four part-time members - all appointed by the government of India.
The functions of the IRDAI
The Insurance Regulatory and Development Authority of India oversees the insurance industry as a whole. Some of its primary functions include -
- Protecting the interest of policyholders and securing fair treatment for them
- Ensuring speedy and orderly growth of the Indian insurance industry
- Promoting and enforcing high standards of integrity
- Supporting speedy settlement of genuine insurance claims
- Preventing insurance frauds and other kinds of malpractices
- Establishing an effective mechanism for redressal of grievances
As you can see, the IRDAI exists primarily to regulate the insurance sector and ensure that policyholders’ interests are protected.
The Insurance Act, 1938
The IRDAI may be the apex regulatory body, but aside from that, there are several laws governing the insurance sector in the country. The oldest among these is the Insurance Act, which was passed in 1938 in British India. It outlines the regulations for companies that seek to carry on the business of insurance and reinsurance in India. As per the Insurance Act, 1938, foreign equity in Indian insurance companies was restricted to 49%, as of 2015.
In 2021, however, the Insurance (Amendment) Bill, 2021 increased the maximum limit of FDI to 74% from the earlier 49%.
Other laws governing the insurance sector in India
There are also several other laws governing the insurance framework in India, such as the following -
- The Insurance Rules, 1939
- The Insurance Laws (Amendment) Act, 2015
- The General Insurance Business (Nationalization) Act, 1972
- The Motor Vehicles Act, 1988
Important insurance regulations and laws you should know about
While most of the laws and legal frameworks pertain to the insurance providers and insurance companies. However, there are some key provisions that you should know about, as a policyholder. Here are the important details.
Things to know about health insurance
The IRDAI recently passed many new regulations pertaining to health insurance. Since this is a dynamic sub sector of the insurance industry, it is always a good idea to remain aware of the new changes introduced by the IRDAI in recent years.
- Health insurance companies can increase or decrease the premiums they charge by 15%, based on the numbers related to their loss ratio over the previous three financial years.
- Any change in premium rates that result in an increase in the costs for the policyholder can only come into effect after three years from the date when the policy was launched or last modified.
- The maximum age limit criteria for health insurance policies is generally 65 years of age. The IRDAI has also notified that health insurers are allowed to increase this age limit. Additionally, health insurance providers also have the option to decrease the minimum age limit for purchasing a health cover.
- Another important regulation that you should know about pertains to pre-existing conditions or diseases. The IRDAI amended the definition of pre-existing diseases in 2020. Before the amendment, any disease or condition diagnosed within three months of purchasing a health cover was also covered under pre-existing conditions. This could lead to rejection of claims for these illnesses or even outright termination of the policy, depending on the insurer’s policies. The amendment made it clear that conditions diagnosed within three months of purchasing the policy will now not be considered as a pre-existing condition. This makes it easier for policyholders to enjoy coverage for any condition they may develop right after purchasing the policy.
Things to know about motor insurance
Motor insurance in India is governed by the Motor Vehicles Act, 1988. As per this law, third party insurance is mandatory for vehicles plying on Indian roads. Third party insurance is essentially a kind of cover that protects you from any liabilities arising to third parties in case your insured vehicle is involved in an accident.
For instance, if your vehicle has injured another person or caused damages to another person’s property, you will have to compensate the said person for the additional liabilities they incur due to this unexpected mishap. The costs for such liabilities may be very steep. Third party insurance can help cover these liabilities. What’s more, a third party cover is mandatory in India too.
Riding or driving without the requisite insurance cover will lead to a fine of Rs. 2,000 for the first offense and/or three months of imprisonment. Any subsequent offense will lead to a fine of Rs. 4,000.
As you can see, there are just a few key things you need to be aware of before you buy certain kinds of insurance. In addition to the above regulations, you also need to read the policy document and the terms and conditions of your policy carefully, so you understand the scope and extent of coverage clearly.
A quick recap
- The Insurance Regulatory and Development Authority of India (IRDAI) oversees the insurance industry as a whole.
- The IRDAI may be the apex regulatory body, but aside from that, there are several laws governing the insurance sector in the country. The oldest among these is the Insurance Act, which was passed in 1938 in British India.
- The IRDAI recently passed many new regulations pertaining to health insurance.
- As per the Motor Vehicles Act, 1988, third party insurance is mandatory for vehicles plying on Indian roads.
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