INSURANCE LAW
UNIT-3 INDIAN INSURANCE LAW IN GENERAL
SYNOPSIS
Introduction
Objective of insurance
History and development of insurance law of india
Insurance act, 1938
Insurance regulatory authority act, 2000
Roles and functions of IRA act
Conclusion
INTRODUCTION
Insurance has its own market. It comprises of Buyers (insured), sellers
(Insurance companies), and intermediaries.
This marked is a regulated market. The market economy needs to
function within the boundaries framed by regulating authority as well as
various laws which govern the insurance business.
OBJECTIVES OF INSURANCE
Insurance serves two-fold purpose
1. Immediate – short ranged & proximate purpose Loss/risk/damage spread over
large number of risk bearers and the immediate beneficiary is the insured.
2. Far-sighted – long-range & remote purpose, where it accelerates economic
growth of nation through investment by Insurance Companies the in
development of commerce & industry of the nation.
HISTORY AND DEVELOPMENT OF INSURANCE LAW OF INDIA
In 1914, the government of India began publishing insurance-company returns.
The Indian Life Assurance Companies Act, 1912 was the first statute regulating
life insurance.
In 1928 the Indian Insurance Companies Act was enacted to enable the
government to collect statistical information about life and non-life-insurance
business conducted in India by Indian and foreign insurers, including Provident
Insurance Societies.
In 1938 the legislation was consolidated and amended by the Insurance Act,
1938, with comprehensive provisions to control the activities of insurers.
An ordinance was issued on 19 January 1956, nationalizing the life-insurance
sector, and the Life Insurance Corporation was established that year.
The LIC absorbed 154 Indian and 16 non-Indian insurers and 75 Provident
Societies.
The LIC had a monopoly until the late 1990s, when the insurance industry was
reopened to the private sector.
INSURANCE ACT, 1938
It was the first comprehensive legislation governing both life and non-life
companies providing strict control over insurance business.
The salient features of this Act were as follows:
Constituting a Department of Insurance to supervise and control insurance
business.
Compulsory registration of insurance companies & submission of annual
financial returns.
Provision for initial deposits to allow only serious players in the field.
Compulsory investment of life fund to the extent of 55% in Government
approved securities.
Prohibiting rebating, restriction on payment of commission and licensing of
agents were other important provisions to bring in a sort of professionalism
in to this business.
Periodical Valuation was made compulsory to assess financial viability of
the insurance companies.
Provision was made for policyholder’s director in the Board.
Policy formats were standardized and premium tables were to be certified by
an Actuary.
INSURANCE REGULATORY AUTHORITY ACT, 2000
Recommendations of the Malhotra Committee, in 1999 the Insurance
Regulatory and Development Authority (IRDA) was constituted to
regulate and develop the insurance industry and was incorporated in April
2000.
Objectives of the IRDA include promoting competition, to enhance
customer satisfaction with increased consumer choice and lower
premiums while ensuring the financial security of the insurance market.
ROLES AND FUNCTIONS OF IRDAI
The functions of the IRDAI are defined in Section 14 of the IRDAI Act, 1999
and include:
1. Issuing, renewing, modifying, withdrawing, suspending or cancelling
registrations
2. Protecting policyholder interests
3. Specifying qualifications, the code of conduct and training for intermediaries
and agents
4. Specifying the code of conduct for surveyors and loss assessors
5. Promoting efficiency in the conduct of insurance businesses
6. Promoting and regulating professional organisations connected with the
insurance and re-insurance industry
