Insurance Act 1938 Archives - Tax Heal

Govt allows 49% FDI in Insurance companies via automatic route

CA Satbir Singh — Fri, 18 Mar 2016 14:17:00 +0000

INDIAN INSURANCE COMPANIES (FOREIGN INVESTMENT) AMENDMENT RULES, 2016

SUBSTITUTION OF RULE 5 AND OMISSION OF RULE 6

NOTIFICATION NO. GSR 314(E)[F.NO.12018/1/2006-INS.IV], DATED 16-3-2016

In exercise of the powers conferred by clause (aaa) of sub-section (2) of section 114 of the Insurance Act, 1938 read with clause (b) of sub-section (7A) of section 2 of the Insurance Act, 1938 and section 24 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), the Central Government hereby makes the following rules further to amend the Indian Insurance Companies (Foreign Investment) Rules, 2015, namely:—

1. (1) These rules may be called Indian Insurance Companies (Foreign Investment) Amendment Rules, 2016.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Indian Insurance Companies (Foreign Investment) Rules, 2015,

(1)		for rule 5, the following rule shall be substituted, namely:—
		“5. The Foreign Investment proposals up to forty-nine per cent of the total paid up equity of the Indian Insurance Company shall be allowed on the automatic route subject to verification by the Insurance Regulatory and Development Authority of India”.
(2)		rule 6 shall be omitted.

Govt approved Pradhan Mantri Fasal Bima Yojana : Boost to farming sector

CA Satbir Singh — Thu, 14 Jan 2016 02:11:54 +0000

Cabinet approves New Crop Insurance Scheme – Pradhan Mantri Fasal Bima Yojana – A boost to the farming sector

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi today has approved the ‘Pradhan Mantri Fasal Bima Yojana’ – a path breaking scheme for farmers’ welfare.

The highlights of this scheme are as under:

i) There will be a uniform premium of only 2% to be paid by farmers for all Kharif crops and 1.5% for all Rabi crops. In case of annual commercial and horticultural crops, the premium to be paid by farmers will be only 5%. The premium rates to be paid by farmers are very low and balance premium will be paid by the Government to provide full insured amount to the farmers against crop loss on account of natural calamities.

ii) There is no upper limit on Government subsidy. Even if balance premium is 90%, it will be borne by the Government.

iii) Earlier, there was a provision of capping the premium rate which resulted in low claims being paid to farmers. This capping was done to limit Government outgo on the premium subsidy. This capping has now been removed and farmers will get claim against full sum insured without any reduction.

iv) The use of technology will be encouraged to a great extent. Smart phones will be used to capture and upload data of crop cutting to reduce the delays in claim payment to farmers. Remote sensing will be used to reduce the number of crop cutting experiments.

The new Crop Insurance Scheme is in line with One Nation – One Scheme theme. It incorporates the best features of all previous schemes and at the same time, all previous shortcomings/weaknesses have been removed.

Crop Insurance Scheme – Comparison

No	Feature	NAIS [1999]	MNAIS [2010]	PM Crop Insurance Scheme
1	Premium rate	Low	High	Lower than even NAIS (Govt to contribute 5 times that of farmer)
2	One Season – One Premium	Yes	No	Yes
3	Insurance Amount cover	Full	Capped	Full
4	On Account Payment	No	Yes	Yes
5	Localised Risk coverage	No	Hail storm Land slide	Hail storm Land slide Inundation
6	Post Harvest Losses coverage	No	Coastal areas – for cyclonic rain	All India – for cyclonic + unseasonal rain
7	Prevented Sowing coverage	No	Yes	Yes
8	Use of Technology (for quicker settlement of claims)	No	Intended	Mandatory
9	Awareness	No	No	Yes (target to double coverage to 50%)

One Nation – One Scheme: best features of all previous schemes incorporated + all previous shortcomings / weaknesses removed

Cabinet 13-January, 2016

Applicability of provisions of Section 45 of Insurance Act in various scenarios

CA Satbir Singh — Wed, 28 Oct 2015 14:49:07 +0000

To all the Life Insurers

Ref:IRDA/Life/GDL/MISC/186/10/2015 Date:28-10-2015

Applicability of provisions of Section 45 of Insurance Act 1938 in various scenarios

After amendment to Section 45 of Insurance Act 1938 , we have been receiving queries from the Life Insurers with regard to the application of new provisions in various scenarios that can arise during the course of life insurance policies in general and more specifically the approach to be taken for refunding premium , once the insurer takes the decision of repudiating a policy on the ground of misrepresentation or suppression of the material fact made by the policyholder / life Assured to effect or continue a Life insurance policy.

The queries raised with regard to various scenarios and the view taken by Authority is as follows:

Q1: In case of delayed intimation by the claimant i.e. where death of the life assured has occurred within 3 years of effecting the policy, but death claim intimation is given late by the claimant (whereby the period of 3 years from the date of effecting/revival of the policy is over). In such cases, since the period of 3 years will be over, whether the insurer has the option to call the policy in question?

Answer: The Insurer has only 3 years window for calling a policy in question on the ground of misrepresentation or suppression of a material fact not amounting to fraud, from the date of issuance of Policy or date of commencement of risk or date of revival of policy or date of rider of the policy, whichever is later. It is regardless of whether claim has arisen or not and when it is intimated. Once this period of 3 years is over, the policy cannot be called in question.

Q2: Whether the period of 3 years within which a policy can be called in question by the insurer is to be interpreted as date of effecting the policy till the date of death of the life assured (or) date of effecting the policy till the date of repudiation (if any) by the insurer.

Answer: The 3 years period is not necessarily connected with death claim arising under the policy and is counted from the date of issuance of policy or commencement of risk or revival or rider whichever is later. A Policy can be called in question within 3 years even if there is no death claim.

Q3: In case of ULIP polices, whether to refund the entire amount of premium received or pay only the fund value + refund of risk premium.

Answer:

a) In case the policy is called in question within 3 years from the date of issuance on the ground of misrepresentation or suppression of a material fact not amounting to fraud :

The premiums collected under the policy up to the date of repudiation are to be refunded. It has no relevance to the fund value.

b) In case the policy is called in question within 3 years from the date of last revival for the statements made at the time of revival :

Fund Value as on preceding day to the date of last revival + the entire premium collected for revival and thereafter would be refunded.

Q4: In case of a policy which has run for more than 3 years and acquired paid up value results in claim within 3 years from the date of last revival and it is found that there was suppression of material facts at the time of issuance of policy, whether premiums collected under the policy since inception is to be refunded.

Answer: As the time of 3 years has already elapsed from the date of inception/ issuance of policy, there is no scope of calling the policy in question as per amended Section 45.

Q5: However in the above case, if it is found that there was suppression of material facts at the time of revival, then the revival is treated null and void. Whether the premium collected under the policy since inception should be refunded?

Answer: The revival of a policy is treated as a fresh contract and if the policy (revival) is called in question within 3 years of such revival, the premium collected from date of revival of the policy to the date of repudiation is to be refunded along with all the admissible benefits accrued as on the preceding day to the date of such revival.

Q6: In case of Money Back plans, where one or more Survival Benefits (SB) are paid and the policy results in claim within 3 years from the date of subsequent/ last revival and it is found that there was suppression of material facts at the time of issuance of policy, whether the SB already paid should be recovered from the premium amount refundable.

Answer: In the given scenario, 3 years period to call has already elapsed from the date of issuance of policy, hence, there is no scope to call the policy in question.

Q7: In the above case if there was suppression of material facts at the time of revival and revival is treated as null and void then whether to refund the premiums collected under the policy since inception after deducting the SB amount paid or to just refund the premium collected for revival of the policy and not recover the SB paid prior to revival, but recover the SB paid after such revival, if any.

Answer: The revival of a policy is treated as a fresh contract and if the policy (revival) is called in question within 3 years of such revival, all the premiums collected from such revival of the policy to the date of repudiation along with all the admissible benefits accrued as on the preceding day to the date of such revival (after adjusting the SB amount paid, if any) are to be refunded.

Q8: In the Act there is no mention of claims arising within 3 years of Reinstatement of Surrendered policies.

Answer: Reinstatement of surrendered policy can be treated at par with the revival of the policy. Further it is clarified that calling a revival or reinstatement or reinstatement of surrendered policy in question will only arise if any misstatement / suppression of material facts is made at the time of revival or reinstatement of surrendered policy.

Q9: Where the Date of issuance of Policy and date of Commencement of Risk are different, how the refundable premium would be calculated.

Answer: If the Policy is called in question within 3 years of date of issuance or date of commencement of risk, whichever is later and the insurer takes a decision to repudiate the policy, the premiums collected from the date of issuance till the date of repudiation shall be refunded.

Q 10: if a policy is revived/ reinstated by collecting arrears of premium with interest and without obtaining a Declaration of Good Health/Medical, can it be repudiated within 3 years?

Answer: No. Since the policy is revived without taking any document/ statement from the policyholder, there is no scope for repudiation within 3 years of such revival.

MEMBER (LIFE)