Brokers To Be The Interface, Irda Changes Act

In a move to professionalise the insurance intermediary business, the Insurance Regulatory and Development Authority (Irda) has made necessary changes to the Insurance Act to bring in insurance brokers who will act as an interface between the insurance organisations and the customers.

"In the next 2-4 weeks, when the Insurance Amendment act gets approved, we will allow insurance brokers to enter the business," Irda chairman N Rangachary said here. The brokers will create, nurture and develop the insurance market by educating the policy holders.

In fact, a vibrant intermediation is the second most important aspect in strengthening the insurance industry with the first factor being improving the product range and customer service levels of the insurance companies, Rangachary said while addressing a seminar today on the insurance industry organised by the Federation of Andhra Pradesh Chambers of Commerce and Industry.

The regulatory body will also release shortly a few regulations related to the policy holders' rights and obligations. These regulations will have penal provisions and any violation of the regulations or failure to implement the directives, by the insurance companies will attract penalties from Irda under the Insurance Act 1938.

"These regulations are ready for quite some time now as deemed provisions, but a member of Irda has objected saying that the Insurance Act should not have deemed provisions and must have firm points. So we are now slightly modifying the provisions," Rangachary said.

The significant impact of the private players' entry into the insurance sector is, the response time has come down and treatment of customers has improved, he observed.

Allaying the fears about the private insurance companies, Rangachary said money paid as insurance premia to the private insurance players will be safe as the regulatory authority will continuously monitor the solvency position and investment pattern of these companies.

"We look into their (companies) future capital adequacy requirement even upto a period of 5-10 years. For example, we have not spared even Life Insurance Corporation which till some time back had only Rs 5 crore equity and increased it to Rs 100 crore recently," he said. Even some private players have increased their equities recently from the Rs 100-plus crore level to Rs 250-300 crore he added.

Addressing the gathering, Andhra Pradesh governor C Rangarajan stressed the need to take care of old age financial needs. Even among the gainfully employed people in the country, only 11 per cent are covered by a provident or pension fund and a large mass of people is left out of any old age security, he said.