Legal Trends Impacting Industry

With the tightening of Anti Money Laundering laws, the systems, policies and processes in Life Insurance companies have only got more complicated and stricter, thus leading to strain in automation and thus manual interventions. The Insurance Act was amended in 2015 and quite a few matters were moved from the Act into Regulations. The Insurance Regulatory and Development Authority of India (IRDAI) issued a spate of regulations in the last 2 years which have again resulted in Insurers going thru a roller coaster ride. Section 45 of the Act has been amended thus giving a time of a maximum of 3 years to the Insurance Company to contest a fraudulent Life Insurance policy. This means after a Policy has been active for 3 years, no claim can be rejected for any medical non-disclosure or for any other reason. This has resulted in Insurers re-working on their risk appetite which could also result in product pricing. Thanks to social media, every citizen in the country today is well informed about legalities of an insurance contract and thus it is no longer enough to be cryptic in communication and customers now demand lucid explanation on their queries and these are prone to legal risks. Courts, Consumer Forums and Insurance Ombudsmen have also passed important judgements that have impacted the Industry.

Insurance companies have greatly leveraged technology to make significant progress on their customer reach resulting in efficient sales and servicing. Life Insurance today is largely sold through Mobiles and Tablets apart from online purchases through websites. Online customer portals today enable self servicing for both financial and non-financial transactions. With all these and with the spate of cyber attacks like the latest Ransomware etc., it has become extremely critical for an Insurance company to secure all areas of technology that are exposed to the cyberspace and internet in any manner. This is feasible only by implementing a strong and robust cyber security mechanism which consists of both hardware and software. These mechanisms also have to be constantly upgraded to meet the rapidly changing technological environment.

Future of Insurance and Insurance Regulation

Non-life Insurance will continue to be driven by business growth and complexities. It will also grow beyond the geographical boundaries of the country. The regulations have perhaps reached a stage where no further changes are required and the industry should be left to mature on its own. Life Insurance will also grow at a noticeable pace and mergers are inevitable given the stressful cost structures. Bank promoted insurance companies will feel the strain since the promoter banks are already bogged with increasing NPAs and the Reserve Bank has strongly advised Banks to focus on their core business. Customers continue to be attracted by Unit Linked products while Insurers would like to focus on more profitable traditional and protection products. Regulations have to enable more innovation in products, sales practices and customer services.

Health Insurance is a new sector and is growing at a rapid pace. With increasing health related issues, customers are now becoming more aware of the need for health insurance and healthcare. Along with curative measures, regulations should facilitate preventive healthcare and wellness programs. Markets continue to be plagued by instances of spurious calls, mis-selling, fraudulent sales as well as fraudulent claims. While regulations are strict on these matters, the Insurers and intermediaries have to work jointly towards a strong self-regulatory mechanism to reduce and prevent such instances in future.