Insurance Article, The Insurance Times 2023


The Union Cabinet has approved a unified regulating authority for international financial services centres (IFSCs) such as Gujarat International Finance Tec-City (GIFT City).  The authority will be established through the International Financial Services Centres Authority Bill, 2019. The draft Bill was approved by the Cabinet and will now go to Parliament. Currently, banking and capital markets and the insurance sectors in IFSCs are regulated by multiple regulators such as the Reserve Bank of India, the Securities and Exchange Board of India, and the Insurance Regulatory and Development Authority of India. The dynamic nature of business in the IFSCs necessitates a high degree of inter-regulatory coordination. It also requires regular clarifications and frequent amendments in the existing regulations. According to the draft Bill, prepared by the finance ministry, the proposed authority will be headed by a chairperson and will have one member each nominated by the RBI, SEBI, IRDAI and the Pension Fund Regulatory and Development Authority (PFRDA). Two members will be nominated by the central government. There will be two other full-time or part-time members. An IFSC like GIFT City tries to provide a business and regulatory environment comparable to any leading international financial centre in the world. This is aimed at providing Indian corporate entities with easier access to financial markets and also attracting services and transactions that are now carried out in offshore locations. The need for a separate unified regulator arose after the existing regulators expressed concerns that transactions in GIFT City can have an impact on the domestic markets. The establishment of a unified financial regulator for IFSCs will result in providing a world-class regulatory environment to market participants from an ease of doing business perspective. This will provide stimulus for further development of IFSCs in India and enable bringing back financial services and transactions that are currently carried out in offshore financial centres.

IFSCs require focussed and dedicated regulatory environment

The development of financial services and products in IFSCs would require focussed and dedicated regulatory interventions. Hence, a need was felt for a unified financial regulator for IFSCs in India to provide a world class regulatory environment for financial market participants. In view of the regulatory requirements of IFSCs and the provisions of existing laws of the financial sector, the Ministry of Finance has piloted the draft Bill to set up a separate unified regulator for IFSCs.

Management of the IFSC Authority:

The Authority shall consist of a chairperson. One member each will be nominated by the RBI, SEBI and IRDAI and the Pension Fund Regulatory and Development Authority (PFRDA). In addition, two members will be nominated by the central government. Two other whole-time or part-time members will also be appointed.

Functions of the Authority:

The Authority shall regulate all such financial services, financial products and financial institutions (FIs) in an IFSC which have already been permitted by the financial sector regulators for IFSCs. The Authority shall also regulate such other financial products, financial services or FIs as may be notified by the central government from time to time. It may also recommend to the central government such other financial products, financial services and financial institutions which may be permitted in the IFSCs.

Powers of the Authority:

All powers exercisable by the respective financial sector regulators (RBI, SEBI, IRDAI, and PFRDA) under the respective Acts shall be solely exercised by the Authority in the IFSCs in so far as the regulation of financial products, financial services and FIs that are permitted in the IFSC are concerned.

Processes and procedures of the Authority:

The processes and procedures to be followed by the Authority shall be governed in accordance with the provisions of the respective Acts of Parliament of India applicable to such financial products, services or institutions, as the case may be.

Grants by the central government:

The central government may, after due appropriation made by parliament by law in this behalf, make to the Authority grants of such sums of money as the central government may think fit for being utilised for the purposes of the Authority.

Transactions in foreign currency:

The transactions of financial services in the IFSCs shall be done in the foreign currency as specified by the Authority in consultation with the central government. GIFT City has been ranked as third most promising financial services centre globally, in a half-yearly report in 2018 by The China Development Institute (CDI) in Shenzhen and Z/Yen Partners in London. The ranking takes into consideration five major factors namely business environment, human capital, reputation, infrastructure and financial sector development. This ranking should build further confidence in investors to set up operations in GIFT IFSC.

While at this stage, the Gujarat International Finance Tec-City (GIFT City) is the lone and exclusive IFSC which is operational in the country, but due to these collective efforts of the government, regulators and operators, the IFSC juggernaut has started rolling and is starting to show some early signs of success. The significant growth in the total assets of banks based out of GIFT City, or the noticeable increase in the trading turnover on the stock exchanges organised in GIFT City, or the growth in the number and value of international insurance policies written by insurers with presence in GIFT City are all clear indicators of this success, despite the early stage.

With the objective of making India a one-stop destination for financial services and transactions that are typically effectuated offshore, Gujarat International Finance Tec-City (GIFT City) has certainly made significant strides towards facilitating lucrative access to the global financial services milieu for corporate entities, financial service providers, investment funds, etc. that are set up in India. However, the Bill seems to address preliminary concerns that arise in terms of regulation of the wide-ranging financial services, products and institutions housed in IFSCs. While such proposals in the Bill are largely modelled on global international financial services centres, this is undeniably a very prominent and positive leap towards a more dynamic IFSC regime in India, facilitating streamlined regulation for all financial participants in IFSC by obviating the pre-existing confusion as overlapping regulatory supervision by different regulators. Such a unified regulator will provide impetus to IFSCs to retain foreign capital that was originally routed through other offshore financial services centres and catalyse the strengthening of India’s global position as a more mature, eminent, and business-friendly jurisdiction for financial services. A more comprehensive view of the regime by a regulator could further facilitate and expedite the growth of the IFSC to make them globally competitive. The Department of Economic Affairs (DEA) and Ministry of Finance (MoF) have drafted the Bill with the aim to set up a separate unified regulator (Authority) for IFSCs.


The existing laws have failed to regulate India’s healthcare sector. India needs a medical regulator that is more like a tribunal and not the consumer court. Regulations are only confined to asking hospitals to earmark and admit patients from the weaker sections as per the undertaking given while availing of the concessions, generally providing 10% of in-patient department and 25% outpatient department care free of cost. Even this was completely unsuccessful. The health ministry had no power or political will to enforce it. Two recent events have put the private health sector in India under intense scrutiny in recent weeks. One is the death of seven-year-old Adya Singh at Fortis Memorial Research Institute in Gurugram. The child had been admitted in the hospital with dengue and died there after 15 days. Her family said that they had been billed Rs 15 lakh, an amount that most believed was grossly inflated. A government investigation into the case found irregularities, unethical practices and violation of the protocol for diagnosis and medical duties. A doctor at the hospital has been charged with culpable homicide and local authorities are considering action against the hospital management.

The second case is that of Max Super Speciality Hospital, where a premature infant, declared dead and handed over to the parents, was later found to be alive. Although the child was taken back to hospital for treatment, he did not survive.

These two cases are only the latest in a long list of reported malpractices, negligence, and ethical violations at private hospitals across India. The main reason that these violations are all too common is the lack of strict and uniform regulation of healthcare in the country. The private medical healthcare system of India is set up in such a way that there is little accountability, there are numerous gaps between old laws that are irrelevant to new healthcare systems and new laws that are robust but not being implemented, and there should be a body to oversee healthcare just like there are for telecom and aviation.

The Clinical Establishments Act:

The Clinical Establishments Act has drawn up standards that hospitals must meet and needs healthcare providers to declare the services provided. If there are transgressions of these standards, the authorities can cancel registration. This should be implemented without further delay across the country. If the states do not listen the subject of medical standards and quality of care should be brought on the concurrent list of the Constitution. You cannot shut a hospital overnight, because there are a lot of critical and serious cases for which treatment cannot just be stopped. These are not just consultations but operations, dialysis, haemophilia cases where treatment is going on all the time and over a period of time. You cannot leave those patients in the lurch. Patients have to find another doctor, get an appointment and in doing this can lose precious time and may lose a life. The Medical Council of India is supposed to set standards but it only registers doctors on the medical register of India. State medical councils enrol doctors on state medical registers. Now, medical councils are elected bodies and members have to fight elections. Their purpose is to look after the interests of doctors and not to annoy them with enquiries and punishments – very rarely does the council resort to suspending a licence of a doctor, leave alone cancelling it. There is virtually no oversight of doctors or deficient or unethical treatment by the national or state medical councils. Once admitted into a high-end private hospital, patient has no estimate of what the ultimate bill might be as the hospital charges whatever it wishes to. Private hospitals are in it for profits and do not operate based on charitable or altruistic motivation. Therefore, these horror stories of people being overbilled are often correct. If you look at private hospitals, there will be anything from a 100 to 500 cases against each in consumer courts, most often about billing. The Clinical Establishments Act covers public and private establishments. All state regulations should cover public and private medical establishments. Public hospitals have enormous problems. For instance, government doctors siphon off patients telling them to come to their private practices where they charge them five times the cost. They also need to be put under check. There are many ways whereby the medical sector can be regulated and, indeed, that is a crying need today

Lack of Regulation:

Super-speciality corporate hospitals hire highly qualified people, have state of the art equipment and are highly organised. So a man, who has money but no insurance, has at least this outlet where he might be paying four times what he should but he gets the service. Regulation was only confined to asking hospitals to earmark and admit patients from the weaker sections as per the undertaking given while availing of the concessions, generally providing 10% of in-patient department and 25% outpatient department care free of cost. Even this was completely unsuccessful. The health ministry had no power or political will to enforce it. India needs medical tribunals starting with an ombudsman at the sub-district level, a district forum, a state forum and a national forum. Each of these should have a judge, a doctor and a medical administrator who knows about hospital administration. Country needs such medical tribunals that can look into these specific cases of malpractice, negligence, apathy and overbilling.

The private health sector is the outcome of a policy climate that encouraged the establishment of specialty hospitals. During the 1980s up to the time of liberalisation, there was nothing like a private healthcare sector other than small nursing homes, which took care of maternity cases and so on. For complicated cases patients were taken to public sector hospitals like Safdarjung or Lok Nayak Jayaprakash Narayan or Ram Manohar Lohia or the All India Institute of Medical Sciences. There was nothing like corporate hospitals. Then, between 1992 to about 1998, a slew of concessions were given and Foreign Direct Investment was permitted for the health sector. With that, foreign money and Indian money could come into the health sector, treating is as an industry. Land was given at concessional rates to hospitals as well as income tax exemptions and huge customs duty exemptions. This ensured that it was worthwhile and profitable for investors to invest in the health sector. Meanwhile, the health sector in small towns offering medical or surgical services is dominated by single practitioners only. Of the 10.4 lakh healthcare enterprises, which include hospitals, nursing homes, diagnostic centres and laboratories about 8% are hospitals, while 50% are single practitioners. Of the 50%, unqualified practitioners account for more than the qualified doctors. This creates a bottleneck where only people with resources can go to specialty private hospitals while the rest have to go to small nursing homes or depend on overcrowded government hospitals.

Apart from implementing the Clinical Establishments Act which is a must, Industry needs a regulator that is more like a tribunal and not the consumer court. The consumer court only looks at faulty service and award of compensation and has no medical advice available to it while deciding case of medical negligence or malpractice. A particular administrative member may or may not have a health background. Even among lawyers, there are only those who add on to their areas expertise and do a little of medical negligence and malpractice cases but there are no specialists in these areas. Medical negligence and malpractice cases need lawyers that can interpret medical findings and are conversant with best practices and treatment regimen. So, you can’t sue a doctor for anything and you are only stuck with the consumer court. The consumer court has a long pendency and might be looking at a case of the operation of a toaster or lift and case of a hospital on the same day. That is not the ideal forum.

Hospitalisation insurance cover found lacking

A three-state study has found that India’s government-funded or private health insurance schemes that pay for hospitalisation have not adequately protected households from catastrophic health expenditures. This has rekindled the debate on how to achieve universal health care. The study that examined sample households in Gujarat, Haryana and Uttar Pradesh found 28% of insured households and 26% of uninsured households faced catastrophic health expenditure that significantly altered their expenses on essential services. Health insurance in its present form does not seem to provide requisite improvement in access to (health) care or financial risk protection, health economists who analysed health-care spending by 12,134 households in the three states said in their report. Their findings, published this week in the journal PLOS One, echo long-standing concerns among sections of health experts that insurance schemes that only cover hospitalisation costs continue to expose households to significant financial risk.

The government last year launched the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PM-JAY) for 100,000 poor households — or 40% of the population — that pays up to INR500,000 ($7,030) per year per household for hospitalisation. The central government and the states pay the scheme’s premium on a 60:40 ratio. The three-state study probed health-care spending by households covered by earlier government-funded schemes — such as the Centre’s Rashtriya Swasthya Bima Yojana (RSBY) that paid up to INR30,000 per year — and private health insurance. The households covered by the Centre’s Rashtriya Swasthya Bima Yojana had the highest proportional prevalence (39%) of catastrophic health expenditure followed by households with private insurance (23%) and state insurance schemes (21%). The study found that average out-of-pocket or personal expenditure for in-patient care among the insured was about INR32,000 and about INR24,000 for the uninsured. The average out-of-pocket expenditure was highest (INR73,000) for people enrolled under private health insurance schemes and lowest (INR15,000) for people under the RSBY.

There are valid reasons for such poor quality of insurance products, regulatory failure. The failures can be traced to gaps in regulation drafted by the regulator, poor enforcement of regulations and failures in the design of the redress mechanism. This creates incentives for insurers to reject valid claims. The proposed changes may reduce such behaviour of insurance companies. This includes a feedback loop system between the regulator and grievance redress agencies to continually improve existing regulations and identify areas which require new regulations. In recent years there has been an increased role for health insurance in Indian health care, through government funded health insurance programs and privately purchased health insurance. An analysis of the claims ratio and the complaints rate in the health insurance industry, suggests that there are important difficulties with the working of health insurance. The lack of fair play in this industry is derived from deficiencies in regulations, weak enforcement of regulations and faulty institutional design of consumer redress. The solutions lie in laws and regulatory processes for consumer protection. Examination of health policy and financial policy, together would formulate a strategy for change. This high rate of complaints is still an understatement of the problems with the health insurance industry in India. Health insurance in India covers only hospitalisation costs. In contrast, insurance in all the other jurisdictions covers hospitalisation, clinical visits, medication and some wellness care. Therefore, Indian consumers invoke health insurance only a fraction of the number of times health insurance is used in the other jurisdictions. There is no method for adjusting for this lesser use of health insurance. However, it is reasonable to imagine that increased contact between the insured and the insurer in other jurisdictions creates more chances of complaints. Consequently, if such comprehensive health insurance is available in India, the Indian health insurance complaints rate would be even higher. The insurance ombudsman has repeatedly stated that insurance companies often reject claims without any reasoning and do not re-examine complaints against such rejection. This behaviour flows from the text of existing regulations which do not lay down the procedure for settlement of claims or the redress of consumer grievances against rejection of claims. Consequently, health insurance disputes are not settled in accordance with the law but in an ad-hoc manner. Even the legislature has given separate recognition to health insurance as a business. Consequently, the regulatory framework for health insurance was overhauled in 2016. The Financial Sector Legislative Reforms Commission has substantial insights into these problems. There is a need of an independent Regulator for collaborative work between health policy thinkers and financial sector policy thinkers in addressing these problems, as the concerns of health policy and the concerns of financial sector policy point in the same direction.

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