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Chapter 2 INSURANCE SECTOR AND CONSUMER PROTECTION In the Present scenario, the insurance sector in India has come

a full circle, from being as open competitive market to complete nationalization and then back to a liberalised market. The coming of private companies in the Indian insurance market has changed the nature of competition and the vigorous campaigns of these companies. This has led to rapid increase in insurance business and a sizeable gain of this has also been reaped by life insurance Corporation of India (LIC)Life insurance in its modern form came to us from Europe, the USA and England where modern forms of life insurance appeared in the 16 century and the first life policy providing temporary cover for a period of Twelve months was issued as early as 1583 AD. As mortality tables had not yet been developed, Writing of life business tended to be a gamble. It was therefore only from the 18century onwards that attempts were made to treat insurance scientifically Initially, being in the hands of private enterprise, the Indian insurance industry became the monopoly of the government over the last 44 years. The sector consisted of the Life Insurance 'corporation of India (LIC) and the General Insurance corporation of India (GIC) along with its four subsidiaries i.e. National Insurance Company, New India Assurance Company, United India Insurance Company and Oriental Insurance Company. These Public sector corporations operated through a network of branches throughout the length and breadth of the country Under the impact of globalization the organization and structure of this 134 sector underwent a sea change. From State monopoly the insurance business was opened to private enterprise. The structure of this sector thus, changed and transformed into a joint sector where both the government undertakings and private entities are conducting insurance business. In the government segment of insurance sector, the existing corporations, viz. LIC and GIC with four subsidiaries continue to operate In the private segment of the Indian insurance there are about 24 private insurance companies. These are world renowned players in Insurance business. The multinational insurers are indeed keenly interested in emerging Insurance business in India because their home markets are saturated. The foreign companies are also attracted by the fact that, unlike many under developed countries, The Indian private sector is

welldeveloped and has the capacity to face any challenges posed by competition internally or externally. INSURANCE MARKET IN INDIA AND NEED FOR CONSUMER PROTECTION. The life insurance market in India was underdeveloped and was tapped only by the states owned LIC till the entry of private insurance. Indian customers, who have always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up the new innovative products on offer. The private players have taken some market share from LIC, and major growth has happened because of market expansions. India has highest number of life insurance polices in force in the world, and total investible funds with LIC is almost eight percent of GDP. However more than three fourths of India's insurable 135population has no life insurance, pension cover or post retirement protection cover. This shows this sector has great potential for growth as there is still a huge untapped market. It is submitted that a well developed and consumer friendly insurance sector is needed for economic development of the country as it provides long term funds for infrastructure development and at the same time strengthens the risk of taking ability.The biggest challenge for the industry today is the low levels of penetration and lack of consumer satisfaction. This challenge becomes bigger due to the presence of host of other investment opportunities available to the consumer today and due to the spending habits of the younger generation which believes in consumption today rather than investing for tomorrow. To over come this more marketing is required for insurance products. There is still a huge unexplored potential of growth for the pension products. However, there has been a major growth in the unit linked policies offered by the insurance sector which might be seen as positive trend but what it reflects is that insurance is being looked upon as investment instrument which underlines the true objective of insurance which is risk protection. Insurance has a role to play, and that is as a tool to hedge against risk, and it is crucial that this role be maintained even in the light of the changing scenario.

CHAPTER 3 CONSUMER PROTECTION ACT 1986 AND RIGHTS OF THE CONSUMER AS ON TODAY\ Today common consumer is not well informed, well knowledgeable, well educated and fully aware of his rights. Consumer today wants value for money, a product or service that would meet reasonable expectations, should be safe in use and full disclosure of the product specification. The expectations are termed as "Consumer rights". 15th march is observed as world consumer day in different parts of the world. When, on 15 march 1962, consumer's rights bill was moved in the US congress, the then President John F.Kennedy had remarked, If a consumer is offered inferior products, if prices are exorbitant, if drugs are unsafe or worthless if the consumer is unable to choose on an informed basis, then his dollar is wasted, his health and safety may be threatened and national interest suffers The consumers international for 240 organizations in over 100 countries expanded the charter of consumers rights to include:i) Basic needs ii) safety iii) Information iv) Choice v) Representation Redressal vii) Consumer Education 154 viii) Healthy environment vi)

On this basis, UNO in April 1985 adopted its guidelines for consumer protection. This led to passage of Consumer Protection Act, 1986 in India

MEANING OF CONSUMER AS PER ACT Under section 2(1) (d) of the Act, a consumer means any person who:- i) Buys any goods for a consideration which has been paid or promised/partly paid and partly promised or under any system of deferred payment and include any user of such goods. ii) Hires or avails of any services for a consideration which has been paid or premised or partly paid and partly promised and includes beneficiary of services

COVERAGE OF THE ACT Consumer protection Act Covers all services/products/suppliers in the public/or private sector including banks, education, life and general insurance, health services , retailers with regard to any product/service given to the consumer for consideration MEANING OF COMPLAINT UNDER SECTION 2 (1) (C) OF THE ACT If the allegation in writing is made about; i) An unfair /restrictive trade practice adopted by any trader. ii) The goods bought by him or agreed to be bought suffer from any defect. iii) There is any deficiency in the service hired/product supplied iv) If the trader has charged any excess price as per existing rate or that written on the packet/package. v) When goods hazardous to life rarely are being offered for sale to the public in contravention of the provisions of any law . It is submitted that life insurance policy holder is consumer under the Consumer Protection Act, 1986 and is entitled to seek redressal in consumer courts established under the Consumer Protection Act. It is usually observed that Insurance Companies do not tell the demerits of the policies while selling their Insurance products/Schemes.. Those polices are sold under wrong or misrepresentation of facts. The agents also do not provide customized service once their policy is sold rather they adopt callous attitude towards the policy holders and they become totally indifferent. They put many hidden charges and impose them immediately the policy is sold. In case of prepayment cases, they impose penalty about which they never tell to a customer. They display false picture before the customer to woo him by making the picture very rosy. Many agents have been found to be charging excess from illiterate or less informed people. When the policy matures, they put temporary or fictitious obstacles to delay the payment. Many times notices for periodical premiums are not sent by them with the intention that let the policy lapse & then they would be helpless to entertain the claim and the amount in the account is encroached upon

by them & is not paid to the policy holder. Lot many cases have been filed in consumer courts and many decisions have gone against the insurance companies. There is quite an ample scope for the consumers to make use of consumer forums to stop their exploitation by these insurance companies. In case of Baldev Singh Malhi V/s New India assurance co. Ltd & another, National Consumer Disputes Redressal commission, New Delhi vide its order dated 25/10/2002 has given historical decision in favor of the petitioner. The plea of the insurance company was that the beneficiary had attempted suicide by taking poisonous substance as a result of which all the benefits under the policy were not available to the nominees- District Forum dismissed the complaint holding that the death was not accidental but a suicidal case. State commission decided other wise and directed the insurance company to pay to the complainant the benefit with 12% interest As per news appearing in The Tribune dated 11/8/09, The District Consumer Redressal forum, Chandigarh has directed Reliance General insurance company and pay Rs. 2.8 lacs as insurance claim towards theft of a car which was earlier denied by company on frivolous ground. Complaint was made to the forum by Sh. N.C. Thakur, a resident of Mohali. AUTHORITIES UNDER THE ACT i) If the complaint is less than Rs. 20 Lakh - District Consumers Forum.157 ii) If the complaint is more than Rs. 20 Lakh & upto Rs One crore Consumer Disputes Redressal Commission of the concerned State. iii) If the complaint is more than Rs. One crore National Consumer Disputes Redressal Commission New Delhi

Chapter 4 Insurance core principles related to consumer protection The IAIS The International Association of Insurance Supervisors (IAIS) was formed in 1994 and currently has 190 member jurisdictions. The IAIS acts as the global standard setter for insurance regulation and works closely with the IMF and other international organisations such as the International Actuarial Association. The IAIS issues Principles, Standards and Guidance to help insurance supervisors set regulations and carry out their role in supervising insurance companies. Insurance Core Principles (ICPs) The IAIS issued a revised set of 26 ICPS in October 2011 which for the first time integrated a number of separate standards and guidance into the ICPs which now form a comprehensive set of material to assist insurance supervisors. The ICPs are not binding on IAIS member jurisdictions but they are used by the IMF as a basis for carrying out assessments of the insurance sector under the Financial Sector Assessment Program (FSAP). In addition to the ICPs, Standards and Guidance, the IAIS is in the process of developing a number of application papers which provide further information on the application of the ICPs to particular sectors or issues. An application paper is currently being finalised on the Regulation and Supervision supporting Inclusive Insurance Markets and another has been published giving additional information on insurance fraud. An application paper on captive insurance is currently being developed under Guernseys chairmanship which will replace the existing guidance paper on captive insurance which related to the previous set of ICPs.

Areas covered by the ICPs The 26 ICPs cover a wide range of subjects including licensing, suitability of persons, risk management, reinsurance, group-wide supervision and cross border cooperation. The ones that are of particular interest to captive insurance include ICP 7 on corporate governance, ICP 13 on reinsurance and other forms of risk

transfer, ICP 16 on enterprise risk management for solvency purposes, ICP 17 on capital adequacy and ICP 20 on public disclosure

ICP 19 CONDUCT OF BUSINESS The supervisor sets requirements for the conduct of the business of insurance to ensure customers are treated fairly, both before a contract is entered into and through to the point at which all obligations under a contract have been satisfied. Fair treatment with customers The supervisor requires insurers and intermediaries to act with due skill, care and diligence when dealing with customers. 19.1.1 The concept of due skill, care and diligence implies that insurers and intermediaries should discharge their duties in a way that can reasonably be expected from a prudent person in a like position and under similar circumstances. 19.1.2 Insurers and intermediaries should have proper policies and procedures in place to achieve this outcome, including taking appropriate measures to ensure that their employees and agents meet high standards of ethics and integrity. The supervisor requires insurers and intermediaries to establish and implement policies and procedures on the fair treatment of customers that are an integral part of their business culture. 19.2.1 Supervisors should ensure that insurers and intermediaries have proper policies and procedures in place to achieve the fair treatment of customers and monitor that such policies and procedures are adhered to. 19.2.2 Proper policies and procedures dealing with the fair treatment of customers are likely to be particularly important with respect to retail customers, because of the asymmetry of information that tends to exist between the insurer or intermediary and the individual retail customer. 19.2.3 Supervisory requirements with respect to fair treatment of customers may vary depending on the legal framework in placein a particular jurisdiction. While the desired outcome is fair treatment of customers, this may be achieved through a

variety of approaches, with some jurisdictions favouring a principles-based set of requirements, some favouring a rules-based approach, and others following some combination of approaches depending on the circumstances. Fair treatment of customers encompasses achieving outcomes such as: developing and marketing products in a way that pays due regard to the interests of customers providing customers with clear information before, during and after the point of sale reducing the risk of sales which are not appropriate to customers needs ensuring that any advice given is of a high quality dealing with customer complaints and disputes in a fair manner protecting the privacy of information obtained from customers managing the reasonable expectations of customers 19.2.5 Leadership: Responsibility for fair treatment of customers should be at the level of the Board and Senior management, who should design, implement and monitor adherence to policies and procedures aimed at ensuring that customers are treated fairly. Strategy: Fair treatment of customers should be an Ensuring the achievement of fair outcomes for customers will tend to require that insurers and intermediaries adopt the fair treatment of customers as an integral part of their business culture and that policies and procedures to support this objective are properly embedded in the organisation. Embedding the fair treatment of customers in the culture of the insurer or intermediary may include the following: Leadership: Responsibility for fair treatment of customers should be at the level of the Board and Senior management, who should design, implement and monitor adherence to policies and procedures aimed at ensuring that customers are treated fairly. Strategy: Fair treatment of customers should be an objective taken into consideration in the design of the business strategy ICP 20 Public Disclosure The supervisor requires insurers to disclose relevant, comprehensive and adequate information on a timely basis in order to give policyholders and market participants a clear view of their business activities, performance and financial position. This is expected to enhance market discipline and understanding of the risks to which an insurer is exposed and the manner in which those risks are managed.

ICP 21 Countering Fraud in Insurance The supervisor requires that insurers and intermediaries take effective measures to deter, prevent, detect, report and remedy fraud in insurance.

CHAPTER 5 CONCLUSION CONCLUSION Insurers will eventually have to align their services with the CPA. They should begin now by reconsidering their insurance contracts and advising their insureds to word indemnity terms and/or disclaimers so that they are in line with the provisions of the CPA. Furthermore, in respect of the supply of goods, insurers are encouraged to make their insureds aware of the extended exposure faced in respect of goods sold and delivered. Insurers should consider widening the net of their policy wordings on product liability (subject to higher premiums) for such extended liability exposure of their insureds. Policyholders should take note of their increased exposure towards third parties and should make provision for the additional insurance they will need.