The Hindu : Law Commission suggests changes in life insurance laws

Online edition of India's National Newspaper
Saturday, Jun 21, 2003

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Law Commission suggests changes in life insurance laws

By J. Venkatesan

NEW DELHI June 20. The Law Commission of India has called for sweeping changes in life insurance laws not only to promote insurance business in the country but also to protect policyholders from hassles in claim settlements.

In its consultation paper on the subject, the Commission has said that the Insurance Act, 1938, being a legislation of colonial era, contained provisions that were redundant and required deletion. Further the insurance sector, which earlier covered only a few areas such as life and marine insurance, had now expanded to cover various kinds of risk activities. Hence, reclassification of insurance business was necessary.

The panel has pointed out that while insurance business had increased several fold, the interests of policyholders had not been entirely satisfied, particularly in the area of claims settlement. Although at present there was an Ombudsman under the Redressal of Public Grievances Rules, 1998, complaints nevertheless continued to be filed in the consumer fora.

Among the major areas of changes suggested are: merging of the provisions of the Insurance Regulatory Development Authority Act, 1999, with the Insurance Act to avoid multiplicity of legislations; deletion of redundant and transitory provisions in the Insurance Act;

Providing for a full-fledged Grievance Redressal Authorities (GRAs) comprising one judicial and two technical members to deal with complaints/claims of policy holders against insurers; providing for appeal against the decisions of IRDA, GRAs and adjudicating officers to an Insurance Appellate Tribunal with appeal only to the Supreme Court.

It has also suggested that the principal Act should be amended so as to empower the IRDA to intervene whenever the solvency margin fells below the control level.

Considering the fact that the insurance company often challenged policies posing hardship to policyholders, the Commission has suggested that Sec. 45 of the Insurance Act be amended in such a way which would reconcile the rights of the insured or a claimant by giving protection from challenge on frivolous grounds and the right of the insurer to repudiate only on good grounds.

It has also been suggested that a new proviso be introduced to provide for partial assignment of policies with the rider that the original assignor was not allowed to further assign his residual rights to the third party.

The Commission has asked those interested to respond to this paper on or before July 10 to enable the panel to study the comments and suggestions and submit its final report to the Government.

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