Major Highlights of the Insurance Laws (Amendment) Bill, 2015

Major Highlights of the Insurance Laws (Amendment) Bill, 2015 Passed by Parliament; Provides for Enhancement of the Foreign Investment Cap in an Indian Insurance Company from 26% to an Explicitly Composite Limit of 49% with the Safeguard of Indian Ownership and Control;

Provides Insurance Regulatory and Development Authority of India (IRDAI) with Flexibility to Discharge its Functions More Effectively and Efficiently Among Others

The Insurance Laws (Amendment) Bill, 2015 was passed by the Lok Sabha on 4th March, 2015 and by the Rajya Sabha yesterday i.e. on 12th March, 2015.The passage of the Bill thus paved the way for major reform related amendments in the Insurance Act, 1938, the General Insurance Business (Nationalization) Act, 1972 and the Insurance Regulatory and Development Authority (IRDA) Act, 1999. The Insurance Laws (Amendment) Act 2015 to be so enacted, will seamlessly replace the Insurance Laws (Amendment) Ordinance, 2014, which came into force on 26th December 2014. The amendment Act will remove archaic and redundant provisions in the legislations and incorporates certain provisions to provide Insurance Regulatory and Development Authority of India (IRDAI) with the flexibility to discharge its functions more effectively and efficiently. It also provides for enhancement of the foreign investment cap in an Indian Insurance Company from 26% to an explicitly composite limit of 49% with the safeguard of Indian ownership and control.

2. Capital Availability: In addition to the provisions for enhanced foreign equity, the amended law will enable capital raising through new and innovative instruments under the regulatory supervision of IRDAI. Greater availability of capital for the capital intensive insurance sector would lead to greater distribution reach to under / un-served areas, more innovative product formulations to meet diverse insurance needs of citizens, efficient service delivery through improved distribution technology and enhanced customer service standards. The Rules to operationalize the new provisions in the Law related to foreign equity investors have already been notified on 19th Feb 2015 under powers accorded by the ordinance.
The four public sector general insurance companies, presently required as per the General Insurance Business (Nationalisation) Act, 1972 (GIBNA, 1972) to be 100% government owned, are now allowed to raise capital, keeping in view the need for expansion of the business in the rural and social sectors, meeting the solvency margin for this purpose and achieving enhanced competitiveness subject to the Government equity not being less than 51% at any point of time.

3. Consumer Welfare: Further, the amendments to the laws will enable the interests of consumers to be better served through provisions like those enabling penalties on intermediaries / insurance companies for misconduct and disallowing multilevel marketing of insurance products in order to curtail the practice of mis-selling. The amended Law has several provisions for levying higher penalties ranging from up to Rs.1 Crore to Rs. 25 Crore for various violations including mis-selling and misrepresentation by agents / insurance companies. With a view to serve the interest of the policy holders better, the period during which a policy can be repudiated on any ground, including mis-statement of facts etc., will be confined to three years from the commencement of the policy and no policy would be called in question on any ground after three years.
The amendments provide for an easier process for payment to the nominee of the policy holder, as the insurer would be discharged of its legal liabilities once the payment is made to the nominee.
It is now obligatory in the law for insurance companies to underwrite third party motor vehicle insurance as per IRDAI regulations. Rural and Social sector obligations for insurers are retained in the amended laws.

4. Empowerment of IRDAI: The Act will entrust responsibility of appointing insurance agents to insurers and provides for IRDAI to regulate their eligibility, qualifications and other aspects. It enables agents to work more broadly across companies in various business categories; with the safeguard that conflict of interest would not be allowed by IRDAI through suitable regulations.
IRDAI is empowered to regulate key aspects of Insurance Company operations in areas like solvency, investments, expenses and commissions and to formulate regulations for payment of commission and control of management expenses.
It empowers the Authority to regulate the functions, code of conduct, etc., of surveyors and loss assessors. It also expands the scope of insurance intermediaries to include insurance brokers, re- insurance brokers, insurance consultants, corporate agents, third party administrators, surveyors and loss assessors and such other entities, as may be notified by the Authority from time to time.
Further, properties in India can now be insured with a foreign insurer with prior permission of IRDAI; which was earlier to be done with the approval of the Central Government.

5. Health Insurance: The amendment Act defines `health insurance business` inclusive of travel and personal accident cover and discourages non-serious players by retaining capital requirements for health insurers at the level of Rs. 100 Crore, thereby paving the way for promotion of health insurance as a separate vertical.

6. Promoting Reinsurance Business in India: The amended law enables foreign reinsurers to set up branches in India and defines‘re-insurance’ to mean “the insurance of part of one insurer’s risk by another insurer who accepts the risk for a mutually acceptable premium”, and thereby excludes the possibility of 100% ceding of risk to a re-insurer, which could lead to companies acting as front companies for other insurers. Further, it enables Lloyds and its members to operate in India through setting up of branches for the purpose of reinsurance business or as investors in an Indian Insurance Company within the 49% cap.

7. Strengthening of Industry Councils: The Life Insurance Council and General Insurance Council have now been made self-regulating bodies by empowering them to frame bye-laws for elections, meetings and levy and collect fees etc. from its members. Inclusion of representatives of self-help groups and insurance cooperative societies in insurance councils has also been enabled to broad base the representation on these Councils.

8. Robust Appellate Process: Appeals against the orders of IRDAI are to be preferred to SAT as the amended Law provides for any insurer or insurance intermediary aggrieved by any order made by IRDAI to prefer an appeal to the Securities Appellate Tribunal (SAT).
9. Thus, the amendments incorporate enhancements in the Insurance Laws in keeping with the evolving insurance sector scenario and regulatory practices across the globe. The amendments will enable the Regulator to create an operational framework for greater innovation, competition and transparency, to meet the insurance needs of citizens in a more complete and subscriber friendly manner. The amendments are expected to enable the sector to achieve its full growth potential and contribute towards the overall growth of the economy and job creation.

*****

Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein,

Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified

In exercise of the powers conferred by Sub-section (2) of Section 14 of the Customs Act, 1962 (52 of 1962), the Central Board of Excise & Customs (CBEC), being satisfied that it is necessary and expedient so to do, hereby makes the following amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 36/2001-Customs (N.T.), dated the 3rd August, 2001, published in the Gazette of India, Extraordinary, Part-II, Section-3, Sub-section (ii), vide number S. O. 748 (E), dated the 3rd August, 2001, namely:-

In the said notification, for TABLE-1, TABLE-2, and TABLE-3, the following Tables shall be substituted namely:-

TABLE-1

TABLE-2

TABLE-3

************

Digital Life Certificate for Pensioners; More Than One Crore Pensioners May be Benefitted by the Scheme

Under the ‘Digital India Mission’, Government has launched ‘Jeevan Pramaan – an Aadhaar based Digital Life Certificate’ for pensioners on 10.11.2014. This facility provides an option to the pensioners to submit their life certificate digitally by authenticating biometrically using UIDAI Database. The pension disbursing agencies integrated with the Jeevan Pramaan Portal will get access to digital life certificate. The pensioners need not go to the pension disbursing agency in person.

Aadhaar numbers is used for bio-metric authentication of pensioners. All pensioners having Aadhaar number may avail this facility. More than one crore pensioners may be benefitted by the scheme.

Government has taken a number of steps to bring awareness among the pensioners regarding the digital life certificate scheme such as publicity through leading newspapers, organization of camps for pensioners, regular meetings with pension disbursing agencies etc.

This was stated by Shri Jayant Sinha, Minister of State in Ministry of Finance in written reply to a question in the Lok Sabha today.

* * * * *

Commitment of Government of India With World Trade Organisation (Wto) For Regulation on Issue of Licences And Opening of Branches of Foreign Banks in The Country

The Government is under commitment with the World Trade Organisation (WTO) with regard to regulation on issue of licenses and opening of branches of foreign banks across the country. As per India’s commitment to the WTO under financial services, market access is restricted to 12 branches in a year to all foreign banks taken together. India has been complying with this commitment.

However, as per the WTO commitment, licenses for new foreign banks in branch mode presence, may be denied when the maximum share of assets in India both on and off balance sheet of foreign banks’ branches to total assets both on and off balance sheet of the banking system exceeds 15 percent.

During the year 2014, following banks were allowed to open branches/representative office in India:

i) Korea Exchange Bank was allowed to open its maiden branch in Chennai through upgradation of its representative office in New Delhi.
ii) Industrial Bank of Korea was allowed to open its maiden branch in New Delhi through upgradation of its representative office in New Delhi.
iii) Banco Santander was allowed to open a representative office in Mumbai.

As per India’s commitment to WTO under financial services, market access is restricted to 12 branches in a year to all foreign banks taken together. India has been complying with this commitment and in some years gone beyond this commitment as a measure of autonomous liberalization. Foreign banks are granted a universal banking license in India, in terms of which they can carry all banking activities as provided in the relevant statute. Further, in allocating specific centres, the Reserve Bank of India has been following a consistent policy on ‘inclusive’ banking by foreign banks in India and therefore a mix of banked and under-banked centres is allotted to each foreign bank to expand their presence.

This was stated by Shri Jayant Sinha, Minister of State in Ministry of Finance in written reply to a question in the Lok Sabha today.

*****

International Financial Services Centres to be Set up to Enable India to Become a Producer and Exporter of International Financial Services

The Government proposes to set up International Financial Services Centres (IFSC) in the country. The IFSCs are envisaged to be set up/operationalized in India to provide avenues to finest financial minds in India to fully exhibit and exploit their strength to the country’s advantage and enable India to become a producer and exporter of international financial services.

The IFSCs will be set-up in the Special Economic Zones (SEZ). The first IFSC is proposed to be set up in Gujarat International Finance Tec-City, which is located in the notified Special Economic Zone. Appropriate regulations in this regard will be issued in March, 2015.

This was stated by Shri Jayant Sinha, Minister of State in Ministry of Finance in written reply to a question in the Lok Sabha today.

*****

Trading of Shares Through Smart Phones More Than Doubled in 2014-15 (Till February 2015) as Compared to Last Year (2013-14)

Trading of shares through smart phones has increased. The Securities and Exchange Board of India (SEBI) permitted securities trading using wireless technology vide its circular dated August 27, 2010. The said circular deals with trading using devises such as mobile phones, laptops with data cards etc, which use Internet Protocol.

Based on information provided by SEBI, the details regarding trading of shares through Securities Trading using Wireless Technology (STWT) in Cash Market of NSE and BSE in the last three financial years (i.e., 2012-13, 2013-14 and 2014-15 till February 2015) are given below:

2012-13 2013-14 2014-2015 (till Feb 2015)
Turnover on account of 19,871.20 38,523.54 90,597.98
trades undertaken
using STWT (in Rs. crores)
Source: SEBI

SEBI Circular dated August 27, 2010 contains, inter alia, directions to stock exchanges, with which the exchanges are required to assure compliance of brokers. These include:

i) To ensure secure access, encryption and security of communication for internet-based trading and securities trading using wireless technology. The level of encryption in this regard is governed by Department of Telecommunications, policy regulation.
ii) Adequate measures to be provided for user identification and authentication and access control to prevent misuse of such facility by unauthorized persons.
iii) Unique identification number as given in case of internet based trading shall be made applicable for securities trading using wireless technology.
iv) Additional provisions specifying possible risks, responsibilities and liabilities associated with securities trading using wireless technology are required to be incorporated in the Broker-Client agreement as an addendum or by bringing to the notice of clients, who are desirous of availing such facility, and taking their concurrence on the same.
v) Further, the said Circular requires network security protocols and interface standards to be as per prevalent industry standards and sound audit trails to be available for all transactions conducted using wireless devices.
vi) In addition, the stock exchanges are required to arrange periodic systems of broker systems to ensure that the requirements specified in the SEBI circular are being satisfied.
vii) Stock exchange shall also include securities trading using wireless technology in their ongoing investor awareness and educational progamme.

This was stated by Shri Jayant Sinha, Minister of State in Ministry of Finance in written reply to a question in the Lok Sabha today.

*****
Easy Registration for Mobile Banking Services to Customers by Banks

The Reserve Bank of India (RBI) has asked the banks to make registration process for mobile banking services easy and activate the services at the earliest to expand the reach of mobile banking. The RBI vide its circular dated 4.12.2014 has asked banks to strive to provide options for easy registration for mobile banking services to their customers through multiple channels, thus minimizing the need for the customer to visit the branch for such services.

Banks have also been asked to ensure that the time taken between registration of customers for mobile banking services and activation of the same should also be minimized. Further details in this regard are available at RBI’s website www.rbi.org.in.

This was stated by Shri Jayant Sinha, Minister of State in Ministry of Finance in written reply to a question in the Lok Sabha today.

* * * * *

Norms for Delisting of Companies

The Securities and Exchange Board of India (SEBI) has proposed to ease the norms for delisting of companies, issue new regulations norms on insider trading, make certain provisions in the listing agreement mandatory and also to introduce Electronic IPO (E-IPO).

Securities and Exchange Board of India (SEBI) has received various representations from the market participants, stock exchanges, industry representatives and investor associations highlighting challenges faced in the existing delisting process. To address these concerns and to make the delisting process less cumbersome, SEBI Board in its meeting held on 19th November, 2014 and 22nd January, 2015 has approved certain proposals to review the existing regulatory framework on delisting for making it more effective by amending the SEBI (Delisting of Equity Shares) Regulations, 2009. The proposals approved, among others, includes conditions for the delisting to be successful, the process of the determination of offer price through reverse book building process, reducing timeline for completing the delisting process etc.

SEBI Board in its meeting held on 19th November, 2014 approved, inter alia, new regulations namely SEBI (Prohibition of Insider Trading) Regulation, 2014 and SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2014.

The SEBI (Prohibition of Insider Trading) Regulations, 1992 were notified in 1992, which was framed to deter the practice of insider trading in the securities of listed companies. Since then, there had been several amendments to the regulations. To ensure that the regulatory framework dealing with insider trading in India is further strengthened, SEBI sought review of the extant insider trading regulatory regime. The new regulations strengthen the legal and enforcement framework, align Indian regime with international practices, provide clarity with respect to the definitions and concepts, and facilitate legitimate business transactions. SEBI has notified the SEBI (Prohibition of Insider Trading) Regulations, 2015 on January 15, 2015 which would replace the existing regulations of 1992 with effect from May 15, 2015.

The SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2014 (Listing Regulations) intends to replace all existing Listing Agreements. The Listing Regulations, inter alia, will be comprehensive regulation in respect of various types of listed securities. This regulation would consolidate and streamline the provisions of existing listing agreements thereby ensuring better enforceability.

SEBI Board in its meeting held on 19th November, 2014 approved the proposal to utilize the synergies of the secondary market infrastructure for raising capital through public issues. The proposed framework is intended towards achieving the following broad objectives:

· to use the existing secondary market infrastructure for collection of bids and application money;
· to further reduce the overall post issue timelines from T+12 days;
· to broad-base the retail investor reach by using the network of registered stock brokers and depository participants across the country for submitting applications.

SEBI has informed that the process of implementation involves preparation of discussion paper, hosting the discussion paper on SEBI website for public comments, analysis of public comments, approval of regulations by the SEBI Board and notification thereof, as such, no specific time can be indicated.

This was stated by Shri Jayant Sinha, Minister of State in Ministry of Finance in written reply to a question in the Lok Sabha today.

****

Subsidy Disbursed by The Government

The details of subsidy disbursed by the Government, Ministry-wise and scheme-wise is as under:

The Government of India has deregulated the petrol and diesel prices, and has also launched a new universal Direct Benefit Transfer (DBT) Scheme for LPG from 1st January, 2015 onwards which covers both Aadhaar card and non-Aadhaar card holder in which the subsidy will be transferred directly into the bank accounts of cash-transfer-compliant customers in a manner that will avoid duplication and prevent leakages. The Government has also launched a dedicated scheme for end-to-end computerization of Public Distribution System (PDS) throughout the country. 11 States have already joined the National Food Security Act (NFSA) framework, and as the required systems are in place, the other States will follow suit. The Government has simultaneously launched a drive to ensure universal coverage of Aadhaar throughout the country. End-to-end computerization, combined with universal Aadhaar coverage will help improve the targeting efficiency of PDS system in the country.

This was stated by Shri Jayant Sinha, Minister of State in Ministry of Finance in written reply to a question in the Lok Sabha today.

*****
Customs Appraisal Counter at Delhi Airport

The Government has opened counter at Delhi Airport for appraisal of fliers travelling with expensive items such as gold and precious jewellery. The facility has been provided by the Customs at Delhi airport for foreign bound passengers. The facility is available at departure IGI Airport Terminal-3, Airport Link Building, New Delhi during working hours from Monday to Friday. This facility is operational with effect from 6th January, 2015.

This was stated by Shri Jayant Sinha, Minister of State in Ministry of Finance in written reply to a question in the Lok Sabha today.

* * * * *