. eee, me ee ee insurer, relieves the sufferer from the effects of the loss by paying the insuran, money. According to Maclean, Insurance is a method of spreading over a large number of Persons a possible financiay loss too serious to be conveniently borne by an individual. ‘ K Ne i ice whereby uncertain risk, Thus it serves the social purpose; it is a social device wl in; Be of individuals may be combined in a group and thus made mote certain; smal] Periodic contribution by the individuals providing a fund out of which those who suffer jy may be reimbursed.’ Thus the institution of insurance serves a two-fold purpose, the immediate, short range gp, proximate purpose and the far-sighted long-range and remote purpose. The immediate a direct object is to protect the individual assured from any loss or damage to his life property by distributing the loss among a large number of persons through the media of i professional risk-bearers, the insurers, thus serving also the sociological Purpose. The fg, sighted and long-range purpose is to accelerate the economic growth of the nation. Th, insurers collect ‘the savings of numerous policy-holders and ‘these funds are invested j organised’ commerce and industry. They help the running of giant industries and mobil; Se capital formation. By insuring the lives of the workmen, they are relieved of their anxiet and worry and put their heart and soul in their work. The employer too by insuring the live of workmen, his machinery, building etc, will have peace of mind and can become carefree So it has been rightly said: Life insurance is one of those agencies which improves the mental, moral and national circumstances and raises the condition of the community which they are’ members.’ These observations apply equally to all branches of insurance The insurance company will have Jarge funds available with them, which they may utili in helping the formation of big industries directly or by underwriting securities of thos companies which tend to help in the growth of the commercial Prosperity of the nation There is no denying the fact that growth of industrialisation is an adventure in which the triumvirate namely, industry, credit and cover of insurance make a sojourn in each “ other’s companionship. Panance thus reduces the fears of future risk to the individual insured and by capit formation it helps the growth of industry, accelerates Production, lubricates the machinery of production and distribution and improyes the economy of the nation. mobilises the resources, accelerates and stabilise ofa welfare state. es growth and helps in the establishmer MAY geen HISTORY OF INSURANCE " i /Marine Insurance i in England and it was imported fro 4 i at about the end of the J2{h ceptury On the passing of the Bubble Act 1720, two compani ef anies, (London ance)and(R arters in the same year. The Act created a monopoly i aging poations by prohibiting other coxporations, partnership: ©ngaging in marine insurance as a business. Even before these ranted the charters, individual merchants used to meet in Lambard ntracts Of marine insurance and they continued as competitors (0 te _ Marine insurance to. the; and societies from Corporations were gi Street and effect co; £ = Maclean, Life Insurance, p |. a nae and Miller, Insurance Principles and Practice, p'10. RM Ray, Principles of Life Insurane 4. Commerce, 28 July 1950. naIntroduction chartered companies. It was only during the 18th century that marine insurance was started as a Spi ecialised business. Coffee-houses_were the common meeting places for ‘pusinessmen ‘and business transactions of importance were negotiated there during the ver half of the 17th century and the early L8th century. Of such coffee-houses, Lloyd’s coffee-house naied after its proprietor Edward Lloyd, who opened the coffee-house in Tower Street, London, became a rendezvous for the ship owners, seamen and merchants. Some time later, the proprietor of Lloyd’s started a business newspaper called Lloyd’s List (1734) which is published even today. Slowly it gained influence and found place in remises of the Royal Exchange and some time later moved to its own building adjacent to that and became a worldwide organisation. The Roya Exchange. Assurance and the London Exchange from the corporate side, and Lloyd's, being a common, meeting place for individual underwriters started and developed marine insurance in England. The corporation’s monopoly [Link] after a little over_a century, in 1824, when a few_joint s! in companies were formed after the passing of the Joint Stock Comps about this time the steamship was invented and foreign trade improved. As a result marine insurance also expanded and provided sufficient business to both the joint stock companies and the individual underwriters, who created a world market for marine insurance. The marine insurance business today is regulated by the provisions of the- English Marine Insurance Act 1906. In India even during Aryan period, there was evidence of the existence of some thing like marine insurance. But marine insurance, as known in the civilised world today, had its origin only in England.|Seven marine insurance companies, of which none is in existence today, were started between 1797 and 1810, in Calcutta. Later, mostly composite offices were started. Most of the British offices had branches in India and they acted as world offices.\Early monopoly and later increased rates of duties charged on British offices tempted them to form independent offices in the colonies of the Commonwealth including India and thus the British offices exercised tremendous influence in the Indian insurance market. The rules in English law were applied in India with little variation to adapt them to Indian circumstances. After Independence and with the abolition of the Privy Council, the Indian Superior courts including the Supreme Court started drawing authority from the other foreign sources, like the American cases. But today marine insurance is regulated by the Indian Marine Insurance Act 1963, which is but a replica of the English Marine Insurance Act 1906: Fire Insurance ‘After marine insurance, fire insurance was the next to be organised in England. The great fire of London 1666, was mainly responsible for the establishment of this branch of jnsuranceAdded to this the effects of the Industrial Revolution in England enormously exposed the properties to the tis! fire and the need for fire qnsurance increased. Again impetus for organised action was given by the disaster of the Tooley Street Fire in, 1861. If the first great fire originated this branch of, ‘insurance the second became responsible for streamfining the organisation and’ blended. the two paradoxical principles of competition and collaboration. The Tire officer's Committee Consisting of representatives of all insurers was formed. It ‘established, Tor public benefit, a fire testing station with the collaboration of government departments and ultimately established the joint fire research association (1946), The fire offices had enough business both at home and abroad. hrough brokers and he Alliance British \dras and probably In India most of the successful fire insurance business was only branches of foreign companies of Britain, America, and even Japan. Tl and Foreign Fire Insurance Co first established an agency office at MaModern Law oj insurance“ i i icy in India. Soon other offices like th this agency office was the first to issue a fire policy in ot the Royal Lissette Co, the Liverpool and London and Globe, North British oan Commerejaj Union started many branch offices at Bombay, Calcutta and other presidency town, Slowly the business spread to the mofussil areas. During the last century, many fi;, offices were started but were closed down shortly. uULife Insurance ity tables were available, Guutual life assurance wa; In England, even before the mortality table: with short term insurances and all thes. revalent in the 17th century commencing miitaaonices disappeared with the passing of the Bubble Act 1720. peay the Amicable Society survived, It was started in 1705 and its business increased’ Dy - In 1807, 4 fresh charter Was obtained and the Ainicable Society thereafter transacted life insurance according to modern methods. For a number of decades, it was the only society which offered whole life assurance, In the meanwhile, mortality tables were prepared which made it possible to do profitable and scientific life insurance business. Towards the end of the 17th century the requirement of insurable interest was done away with when the life insurance business’ became a way for gambling. To check this evil, the Life Assurance Act 1774 was passed. Then came big joint stock companies which started business on sound and scientific principles. Protective legislations like the Policies of Assurance Act 1867 and the Life Assurance Companies Act 1870 were passed. The Act of 1867, which regulated the life insurance business was repealed and replaced by the Assurance Companies Act 1909 and the legislation now in force is in the Insurance Companies Acts, 1958-67. In the later years, ordinary life business was extended to accident insurance and further by industrial and technological advancements to industrial insurance. Instances of this branch can be found in liability insurance such as engineering, motor vehicles and aviation insurances, f In India, the known history of life insurance commenced in 1871 with the Starting of the Bombay Mutual followed in 1874 by the Oriental, both in) Bombay. There was a steady growth from 1870 to the beginning of this century as many other life offices were established in India. The history during the first half of this century may, for purpose of convenience be divided into the following periods: | i j Period of Mushroom Growth (1900-1912) During this peri shroom Gre 90 g this period there wa: s a growth oi anen companies and. this was mainly due to the SAGs Hioveinent Bi Promoted the-baycott of British goods, British institutions and everything British. This Shyful indigenous talent and capital. Many life started publishing returns of life insurance comp: Period of Struggle and Steady Growth (1913-1938) Thi i a Te ANE 1938) This i word wa Dag te Boe cere eet gauge TOVREA Ceought GaN CEN MLaE ie ie MameeCIa avenue ec rought with it evils of its own due tae given by the national inexperience in business. When this was checked by th ccumulation of wealth and 1912, followed by the first world war and the consequent Life Assurance Act (Act 6) of to struggle for its steady growth. Many small offices had to te os SutmP. business had survived had to face the competition of many flourishing fg wound tip and the few that ign Offices, 6 qIntroduction ‘After the first world war, when the Britishers. refused to grant even the promised dominion status, there was again a united national movement demanding complete independence and to denounce and once again to pledge to boycott British institutions. This anti-British national spirit again gave life to the Indian life offices and their business. The government was compelled to protect the Indian insurance business and in 1934, Sri SC Sen was appointed as special officer to investigate and report on reform of insurance law. In 1936, a committee under the chairmanship of Sri NN Sircar was appointed to examine the report of the special officer. In 1937, a draft bill was introduced and in 1938 the Insurance Act was passed. The Act provided for a uniform control by government over all insurers, Indian as well as foreign, as a result of which several foreign offices discontinued their business in India. Period of Stability and Consolidation (1938-1950) Being free from the competition of the foreign offices, the Indian offices gained stability and they brought about the necessary changes in their office organisation, terms and conditions in their policies etc, to conform to the provisions of the 1938 Act. ‘After the second world war, the swadeshi movement gained strength and national spirit increased. By this time the Indian industries also started developing. The business of insurance assumed significant size and importance as large amounts of capital were available with them for investment in the developing industries. There was sometimes malinvestment of insurance funds for the selfish purposes of the people in charge of these offices. In 1945, the government appointed a committee under the Chairmanship of Cowasji Jehangir, which condemned the malpractices in the matter of investing the funds available with the ingurers. This led to the regulation of investments and the Insurance Act has been so amended several times. The partition of the country, made a good number of policy-holders leave their policies. ‘The non-devaluation of the Pakistan currency in September 1949, created a number of problems. An informal committee was again appointed under Sri SR Ranganathan and this reviewed the entire insurance law and submitted its report on the basis of which the Insurance Amendment Act 1950 was passed. The Act made far reaching changes to make insurance institutions more useful for the country’s economic growth. It provided for amongst other things, appointment of a controller of insurance, constitution of a life insurance council and a general insurance council and also made provisions for the appointment of investigators ‘and administrators for ill-managed and sick companies. Provisions regarding investments are also made. To reduce drain of foreign exchange compulsory reinsurance with Indian insurers was insisted upon. Périéd 6f Boom and Nationalisation (1950 upto date) Political independence under the stewardship of our first Prime Minister Jawaharlal Nehru, the people of India moved to achieve their economic independence by the Five Year Plans. The agrarian society was to be industrialised by governmental activity and planning. The level of education was also rising as a consequence of which the insurance consciousness in the people of the country .d confidence in domestic companies. The leading insurers increased, There was increase also indulged in vigorous developmental programmes, ‘All these contributed to a boom in Huge amount of capital were the insurance business and in particular in life business. available with the insurers and the government found it handy to utilise these funds for its developmental plans and also to ensure the investing public, a better security. The life insurance business was first nationalised in 1956 by the passing of the Life Insurance Corporation Act 1956, The Life Insurance Corporation was created on 1 September 1956 confetring on it the exclusive privilege of carrying on life insurance business 1" India except to the extent otherwise expressly provided in the Act was taken ‘The controlled business of all insurers whose business was nationalised war Tr over by the Corporation along with their assets and liabilities The original capital, st ie Corporation was Rs 5 crores which was provided by the Central Government under FzModern Law of Insurance in India a ‘Act. The creation, control and extension of the Corporation is 1n the hands of the Centra) ct. Ny ia eee i i like motor vehicles, aviatic, ife, fi ther insurance noto u 4 a eae ae site a eltces aldo Hevelobédl Tn the beginning pies business ia a a ae ish Fen ‘The Indian insurer got into this Ba luring be Presen ET abe business was in the hands of the foreign ms and the firs, Shor aise namely, the Reinsurance Corporation of India was formed jn Heer dan alice OI I wy drain on our foreign exchange. After th, 1957 with a view to stop, the heat 8 applied mainly to the genera) nationalisation of the life business, the Insurance Act 1938 app! eesti a, i i the Act, me it ce. By a drastic amendment in 1968 to e ve-control_and neon wa provided over the general insurance companies requiring increase, avin the cont e-powers 10 inspect and issue Fee or Ee ee Ticistik Wid appokienet and remnoval O¢ the, directors, itt iff advisory committee to fix, control and regulate the rates of Te ee cr ie maT ava comma fixing and revising the rates of tariff was held as a legislative power and not an administrative one and so binding on the insured in the same manner as any other provisions of the Insurance Act.’ In spite of such control there was a persistent public demand for the nationalisation of the general insurance business, on which, an ordinance was promulgated by the President of India on 13 May 1971, which was replaced by the General Insurance (Emergency Provisions) Act 1971. Finally, in 1972, the general insurance business was also nationalised by setting up a government corporation called the General Insurance Corporation with four subsidiary companies for carrying on the Beneral insurance business. The nationalised insurance companies were expected not to confine themselves to the present activities but would cover new fields in due course. Also new standards of behaviour in their dealing with their customers, the polic The ae eee {re AIC ate not of a purely commercial nature, LIC ig a statutory Tae ae the cont, ,OF an ‘Instrumentality’ of the State within Article 12 of Colmes ene ra a ka eae entered into by the Life Insurance HC" promote the Welfare of the people. © “OCI, # it is the primary goal of the Hence a writ under Article though contractual,’ highhoens tal thar tization the Judiciary kept the state and aati gat hs nh 226 can He against the LIC for enforcement of its liability its instrumentalities ona Obligation on the part of 5S. KMD Association y Uni. : na & AIR 1986 Bom 412,12" Of dia ATR 1983 5, 7. National Insurance nL 400. Cc Jt i 8. AIR 1988 Gau'57 (op). 8’ Kibhore AIR ogg $C 786,Introduction policy should gants for insignificant amounts, award of compensation of Rs 60,000 as high. The court resist the temptation to litigation like cantankerous iti; faising technical pleas.” ‘This is precisely what the Supreme Court has said in Trustees, Bombay Port Trust v remier Automobiles Ltd.’ In National Insurance Cov Jugal Kishore,” the insurer, an crumentality of the state, while defending the claim for compensation on the ground ability was not in excess of the statutory liability, did not file a copy of the fore the tribunal or the High Court. Had they produced the policy there would Court. Ojah J, therefore remarked: inst that its li licy be have been no need to come to the Supreme isistently emphasised that it is the duty of the party in possession of. document which would be helpful in doing justice in the cause to produce it and such party should not be permitted to take shelter behind the abstract doctrine of burden of proof. This duty is greater in the case of instrumentalities of the state. ‘The obligation on the part of the State or the instrumentalities to act fairly can never be over emphasised.” Inaseries of cases the judges reiterated their strong disapproval of state undertakings like the ESIC, LIC, GIC, STRC ete raising technical pleas to defeat honest claims of victims of accidents by legally permissible but ‘marginally unjust contentions including narrow limitation." This court has con: ERA OF PRIVATISATION The insurance sector is open to participation by private insurance entities on the recommendation of the Malhotra Committee. This does not mean that the public sector entities do not continue their activities in the insurance sector. After this privatisation, both public and private sector entities play their roles simultaneous|)- In this context, financial institutions play a key role in the growth process of insurance. More competitive environment and rapid expansion in insurance sector is expected to emerge with new private participants. The nature and scope of the insurance sector is fast changing with the passing of the IRDA Act 1999, the details of which are discussed in the next chapter. Fad AIR 1954 SC 923, i” 09 La SC 789. + National Insurance Co v Jugal Kishore AIR 1988 SC 789. 2 esta State v Jhansi Bhai 1987 ACJ 496; Bhuvaneswari Devi v Murarilal AIR 1986 HP 44; ESIC vy Dhannibai 1986 AC) 429, (MP); Assam Wool Exports Lid v Export Credit Guarantee ‘orporation of India Ltd AIR 1998 Cal 1.CHAPTER 2 The Insurance Regulatory and Development Authority INTRODUCTION g the last decade of the last century, there was a wave of liberalisation in all economic ectors of the country including the insurance sector. By that time, insurance was int public Sector arid for recommending changes in the insurance sector, the governmen appointed a committee in April 1993 upder the chairmanship of Sri RN Malhotra ex-govemnor of the Reserve Bank of India.) This committee on reforms of the insuran.c sector submitted its report on 7 January 1994 to the then Union inance Ministe: recommending many changes including its privatisation. The terms of reference of th. committee included a requisition of recommendation, for creating a more efficient. and competitive financial system suitable for the requirements of the changing scenario of the economy of the country and in particular the examination of the ture of the insurance industry, Recommendations were also sought from the committee for strengthening and modernisation of the insurance regulatory system for smooth development of the insurance sector. Far-reaching and virulent changes were recommended to supplement the hitherto monopolistic insurers in the arena of the insurance industry. It recommended far-reaching amendments to regulate the insurance sector to adjus with the economic policies of privatisation. The most important recommendations ar listed below: 1. Recommendation of the entry of private entities into the insurance sector tc introduce healthy competition between the new Private insurers and the existing monopolistic entities including limited participation of foreign equity, banki and cooperative sector. 2. Recommendation of gradual withdrawal of government capital in the existin: public sector monopolistic entities, the Life Tnsurance Corporation and the General Insurance Corporation and its subsidiaries and also de-linking of the subsidiaries making them independent entities, af Recommendation that the General Insurance Corporation would exclusively de: with the reinsurance business.’ 4, Recommendation to spread the insura of institutions lik and cooperatives, 5. Recommendation to delink the tari Insurance Corporation and the comm authority, 6. M My eet of the Jast but most important recommendation of the Malhotr iat taeins Ie Lindi had taken a decision in 1996 to establish a Provision’! ailthorigy ae ee, and Development Authority to replace the erstwhile © Controller Of Thisurance, constititted under the Insurance Ac! \ nce sector to rural areas by taking assistanc’ © panchayats, selected Voluntary organisations, mahila mandals iff advisory committee from the Gener! ittee should act as an independent statutoryThe Insurance Regulatory and Development Authority 1938, which first worked under the Ministry of Comi transferred to the Ministry of Finance, i oe a any The decision a establishment of the Insurance Regulatory and Development Authority was implemented by the passing of the Insurance Regulatory and Development Authorit\ Act 1999 (Act 4 of 1999). The Preamble of the Act reads: i A 4 An Act to provide for the establishment of holders of insurance policies, to regulate, promote and ensure orderly growth of the Insurance industry and for matters connected therewith or incidental thereto and further to amend the Insurance Act 1938, the Life Insurance Corporation Act 1956 and the General Insurance Business (Nationalisation) Act 1972. an authority to protect the interests of As can be seen from the above the first and the most important object of the Act is to establish a regulatory authority as recommended by the Malhotra Committee. Every institution, more so a financial institution where the ownership is divested from its management and the right of the management is vested in a body other than the owners, an impartial independent and potent regulatory authority is inevitable. When the insurance industry was a part of the public sector with a monopoly, the owner was a single entity, the government, and in such a case it was sufficient if it is regulated by a governmental body like the Controller of Insurance; but when insurance is to be privatised, there is a greater need of a regulatory authority since the smooth functioning of business depends upon the trust and confidence reposed by customers in the solvency of the entity now permitted to enter the scene of the insurance market. If the customers cannot repose trust in the company to keep the promises it makes, the insurance products pale into insignificance in their value of the customer-consumers. The regulatory framework in relation to insurance is desired to take care of three major concerns, viz, (a) the protection of the interest of the consumers; (b) to ensure the financial soundness of the insurance industry, and (c) to pave the way to help a healthy growth of the insurance market, where both the government and private parties play simultaneously. The need for a strong regulatory authority was not felt so long as insurance remained a monopoly of the government. With the granting of the permission for the private entities to play along with the instrumentalities of the government the need for an independent regulatory authority became paramount. With the passing of the Insurance Regulatory and Development Authority Act 1999 (hereinafter referred as the Authority) this has become a reality. The Act is a small enactment containing 32 sections divided into 6 chapters. There are schedules attached to it of which the second and third schedules merely declare that the Principle of the exclusive dealings of the Life Insurance Corporation and General Insurance Corporation be withdrawn by introducing amendments to s 30 of the Life Insurance Corporation Act 1956 and s 24 of the General Insurance Business (Nationalisation) Act 1972 and they read, After s 30 insert the following: 30A. Exclusive privilege of corporation to cease: “Notwithstanding anything contained in this Act, the exclusive privilege of camying on the life insurance business in India by the Corporation shall cease on a bro Commencement of the Insurance Regulatory and Development Authority Act 199% (4! of 1999) and the corporation shall, thereafter carry on life insurance business in Accordance with the provisions of the Insurance Act 1938 (Act 4 of 1938)Modern Law of Insurance in India After s 24, insert the following: Exclusive privilege of corporation and acquiring companies to cease: Notwithstanding anything contained in this Act, the exclusive privilege of the corporation and the accruing companies of the carrying on of general insur, business in India shall cease on and from the commencement of the Insur, Regulatory and Development Authority Act 1999 and the corporation and the acqui companies shall, thereafter, carry on general insurance business in India in accord, with the provisions of the Insurance Act 1938 (4 of 1938). Further, the subsidiaries of the General Insurance Corporation were delinked and made independent entities. All these companies have to do insurance business along with the new entrants, the private entities. The Insurance Act 1938 as amended by the Act applie alike to all companies, old and new as amended. by the first schedule of the 1999 Ac, Section 30 of the Act says that The Insurance Act 1938 shall be amended in the manner specified in the first schedule. THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY ACT 1999 Establishment of IRDA ) ‘ance ‘ance iting lance Chapter 2 of the Act 2 provides for the establishment of the Insurance Regulatory an: Development Authority. It declares the Authority to be a body corporate with perpetuz Succession and common seal. It can hold property, enter into contracts and is entitled sue and is liable to be sued by its. name. The Authority shall have its head office at such a place as the Central Government notifies and it may establish its branches at other places in India. Section 13 provides for the transfer of all Properties rights and liabilities of the Provisional Insurance Regulatory and Development Authority to the present authority. = it : : : ase Composition i * ( The Act states th the Authority should consist of a chairperson, not more than five full dine se than four part-time members td be appointed by the Céntral wg este ae chairperson and other members shall hold office for S years and are sp me A Teappointment. The chairperson shall not be above 65 years and other persons oe eet Pe mem! are permitted to relinquish their off ces and are also liable Government il a in accordance with the Provisions of s 6. The Central aajidoad ait y i Ve a Member from office if he has or at any time has been i Wi i @ “an insolvent of sibeeailen " member or (6) hep become mentally or Physically incapable of acting as @ has “acquired financi; eas of any offence involving moral turpitude or (d) ‘member or (e) has abused Wet is likely to effect Prejudicially his functions as a Public interest. He au ey pomuen 8s to render his continuation detrimental to say SPPOntunity OF being heard in the Mates ‘ed only after giving him a -reasonable ye salaries and alfowances At TO be prescri and the whole-time members Ci prescribed) by rules (s 7), aime they cease to hold office any not 8cePt fora period oF t from the @ company in the cee ie, Bovernment appotntment, eee in PRON Bra ats approval of the wenn hd i ) he chairpersonThe Insurance Regulatory and Development Authority “co. 4 i have the power of general superintendence istrative matters of the Authority) . | Government. /‘The chairperson sho' and direction in respect of all admi Meetings The Authority shall hold its meetings at such times and places and shall observe rules and procedures including quorum as determined by the regulations made by ‘att Sap (f the chairperson is absent, a member present may be elected to preside over that ting and the decision of the Authority is by majority and if they are divided equally gy) the president has a second casting. vote-/Any vacancy or defect of appointment or mere irregularity in proceeding does not invalidate the proceeding.’ The Authority’can recruit necessary ‘staff and their [Link] conditions of service shall be according to the regulations under Chapter 13.(All the assets and liabilities of the Interim Insurance Regulatory and Development Authority are transferred to the Authority under the Act.’ Duties, Powers and Functions of the Authority seu The lone s 14 in Chapter 4 provides for the duties, powers and functions of the Authority. Duties ‘ i The only duty of the Authority is to regulate, promote and ensure orderly growth of the insurance and the reinsurance business. This is subject to the provision of the Act and any other law for the time being in force.” I l) b Powers and Functions Section 14(2) describes and delineates the powers and functions of the Authority and it contains cll (a) to (q). The,last sub-cl (q) suggests that the powers and the functions mentioned therein are not exhaustive and the Authority reserves its powers to add to the lists 14(2) which reads as: © Without prejudice to the generality of the provisions contained in sub-s (1), the powers and functions of the authority shall include: @) issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration; oa ee _ (b) protection of the interests of the policy-holders in matters concerning assigning of "policy, nomination by policy-holders, insurable interest, settlement of insurance ¥ Elaim, surrender value of*policy and other terms and. conditions of contracts of a f insurance; ' ag x uisite qualifications, code of conduct and practical training for © specifying req 5) c intermediary or insurance intermediaries and agents; “specifying the code of conduct for surveyors and loss assessors; © (promoting efficiency in the conduct of insurance business; <= Q& promoting and regulating professional organisations connected with the insurance } and re-insurance business; “(& levying fees and other charges for carrying out the purposes of this Act: ng argent gy laa ih ‘ 3 Section 8. Beato” $5, IRDA (Meetings) Regulations 2000; for full text see Appendix 9 6 Section 10. _T. Section 11. 8. Section 13. 9. Section 14(1).Modern Law of Insurance in India [ i i ing i i ducting inquiries , i information from, undertaking inspection of, coni ting inqui and e eeentions including audit of the insurers, intermediaries, insurance intermediaries and other organisations connected with the insurance business: (i) control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled ang regulated by the Tariff Advisory Committee under § 64U of the Insurance Act 1933 (4 of 1938); { G) specifying the form and manner in which books of account shall be maintained anq statement of accounts shall be rendered by insurers and other insurance intermediaries; j py regulating investment of funds by insurance companies; (1), regulating maintenance of margin of solvency; i (m)-adjudication of disputes between’ insurers and intermediaries or insurance intermediaries; St (nq) supervising the functioning of the Tariff Advisory Committee, (0) specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professipnal organisations referred to in clause (f);- (P) specifying the percentage of life insurance business ar siness and general insurance business to be undertaken by the insurer in the rural or social sector; and (@ exercising such other powers as may be présctibed. The Act by amending the Insurance Act in effect transfers all the powers and duties hitherto enjoyed and discharged by the Controller to the Authority. Finance and Accounts Chapter 5 deals with finance, accounts and audit of the Authority, Section 15 provides that the Central Government may grant such sums 0: money as the government may think necessary. Further, s 16 provides that a fund maybe created and called ‘The Insurance Regulatory and Development Authority Fund’ and consists of: 4 (a) the government ‘grants, fees and charges received by the Authority; .- () all sums received by the authority from such other sources as may be decided upon by the Central Government and (c) the percentage of prescribed Premium income received from the insurer. The funds shall be utilised for the ‘payment of the Salaries, allowances, etc of the members and other employees Of the Authority and Other expenses of the Authority ee bie ts functions,” The Authority shall maintain proper accounts and Secouunt ae le la ale audited by the Comptroller and Auditor-General of India or his nominee, Ms i Power of the Central Government Chapter 6, aay f Seca 1320 eeecaptoned as eous,-still contaihs very important provisions intends to contol the ingurane we Of fhe Central Government over the Auihceity which PoWer to give difeciion io the Ames BY 8 18 the Central Government is secured of the technical “and -administrative tnatitel tt i, vestion of policy, other than those relating t0 is 2 provides * ia Yentral veThment i final Om The question 48 to Whether & particalen ates cecision of the Centra Supercession The Central Gov, iculat matter is one of policy or not. Authority by notification in the ofr HS al8© invested with the power'to suncreode the 'Y by notification in the o icial gazette when the Authority docs a aan its 10. Section 16,The Insurance Regulatory and Development Authority guties properly or defies the directions BBE Sieheaulceavetacilt4 athe hnoeiteation of the supercession of the chaitman, the members should vacate their offices and a new Quthority may be constituted.)There is no prohibition for nominating the vacating Members as the chairperson of sHe newly appointed authority. Parliamentary Control The ultimate control is vested with Parliament by requiring the notification of supercession and the full report of the action is therefore, to be laid before each House of Parliament at the earliest. A duty is cast inder 5°20 on the Authority to furnish an annual report of its actiVities: including the activities for promotion of the development of the instirance business during the previous financial years and copies of these reports shalll be laid before each house of Parliament. “) ‘ Interim Arrangements If at any time, the Authority is superseded under sub-s'(1) of s 19 of the Insurance Regulatory and Development Authority Act 1999, the Central Government may, by notification in the official gazette, appoint a person to’ be thé Controller of Insurance till as such time the Authority is reconstituted under‘sub-s 3 of s 19 of the-Act- In making any appointment under this section, the Central Government shall have due regard to the following considerations, namely, whether the person to be appointed has had experience in industrial, commercial or insurance matters and whether such person has aétuarial qualifications: paces eS Insurance Advisory Committee ‘The Act in s 25 also provides for establishment of an Insurance Advisory Committee. The chairperson and members of the Authority shall be ex-officio members of the advisory committee. The advisory committee shall consist of not more than 20 members to represent the interests of commerce, industry, transport, agriculture, consumer fora, surveyors, agents, intermediaries and research bodies engaged in the study of safety and loss. It shall advise the Authority in making regulations and-on such other prescribed matters. Rule Making Power the state and Central Governments to make rules. and s 26 Regulatory Authority to make regulations on the’ subjects e sections. The rules and regulations so made shall be laid before cach House of Parliament. Section 28 makes it clear that the provisions of the Act shall be in addition fo and not in derogation of any law for the time being in force. ° Three Schedules are attached-to the Act making amendments in the Insurance Act 1938 in Sch 1, the Life Insurance Corporation Act 1956 in Sch 2 and the General Insurance Business (Nationalisation) Act 1972 in Sch 3. The second and third schedules contain only one Section each, which abolish the exclusive privilege of the Corporations—of conducting life insurance business by LIC (s 30) and general insurance business by the GIC and its Subsidiaries (s 24A) and directing them to conduct their respective business in India. In accordance with the provisions of the Insurance Act 1938, they are not abolished but their Sole privilege to run the business is withdrawn, These entities have to carry on the business side-by-side with the newly permitted private entities. It is made possible for the Private entities even to collaborate with foreign investors within ce mits and subject to certain conditions. In the emerging scene of the gradual privatisation it is ae that there should be government regulation through an independent authority and so the Section 24 empowers empowers the Insurance mentioned in the respectiv I iin oa M1. Section 19, IRDA Act 1999. 12. Section 28, IRDA Act 1999.Modern Law of Insurance in India \ Insurance Regulatory Authority originally set up provisionally, is no permang, constituted under the Act ! It is but proper in view of the change that there should . greater control to safe-guard interests of the policy holders and to improve the Methods vy conducting the insurance business in India. The first schedule introduces a good num, of amendments to the Insurance Act 1938. Particularly to shift all the powers ang 4, duties of the Central-Government, thé Controller of Insurance and to a limited extent the Insurance Tariff Commissioner to the chairperson of the Insurance Regulatory Author); The Insurance Regulatory Authority is empowered to make Regulations under s 32, an( 114A of the Insurance Act 1938 and under s 26 of the Insurance Regulatory 2), Development Authority Act 1999 on matters specified in the respective sections. Under 26, the IRDA can make regulations on the advice of the Insurance Advisory Commitiec The Insurance Regulatory and Development Authority is to insurance law what SEBI | to company-law. Both make regulations which by the doctrine of delegated legislatio; have the same force as law made by the Parliament itself. Both the Central Governmen and Parliament exercise control over this part of the law.(Whenever the insurance company wants to take approval from IRDA, it has to follow Regulations, Guidelines and Circulars of IRDA and all those are binding'on the insurance companies."