| Section 2(9) |
Definition of 'Insurer'. Has to be changed to include Insurance Cooperative Society as defined in Section 2 (8A) and an Indian Insurance Company as defined in Section 2 (7A). |
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The inclusion of government organisations within this term may be considered under exceptions/ exemptions. |
| Section 2C |
Prohibition of transaction of Insurance business by certain persons:- With the introduction of the third proviso to Section 2 C in 1999, the prohibition spelt out in Section 2C has become redundant. The provision may be recast as under: |
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"No insurer shall begin to carry on any class of insurance business in India under this Act unless it i.- |
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(a) an Indian insurance company as defined in clause (7A) of section 2, or |
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(b) an insurance cooperative society as defined in clause (8A) of section 2 : Provided that the Central Government ......" (first proviso may be retained) |
| Section 4 |
It is proposed that minimum limits for annuities and other benefits secured by policies of the insurance require upward revision and this should be specified by the Regulations from time to time. The section may, therefore, be amended accordingly. |
| Section 6A(1) |
It is proposed that Section 6A (1) be amended to permit insurers to issue preference shares. However, the prior permission of the IRDA should be obtained for every fresh issue of capital and in accordance with the Regulations issued by the IRDA in this behalf. |
| Section 6A (10) |
It is proposed that the power of the Central Government to issue directions in regard to capital structure and voting rights should be exercised by the IRDA. |
| Section 6B |
It is proposed that the power of the Central Government to issue directions for appointing an officer to examine any scheme to enable an insurer to bring its capital structure in line with the requirements of Section 6A should be entrusted to the IRDA. |
| Section 6B(4) |
If Section 6B (1) is amended by adding the words 'General Insurance Business' after the words 'Life Insurance Business' then there would be no need for Section 6B (4) which may accordingly be omitted. |
| Section 6C |
At present a public company limited by shares can convert itself to a company limited by guarantee with the approval of the Central Government. It is proposed that the approval should instead be given by the IRDA and the provision amended accordingly. |
| Section 6C(5) |
The words 'Indian Companies Act 1913 (7 of 1913)' may be replaced by the words 'Companies Act 1956'. |
| Section 7(1) |
Deposits: |
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It is proposed that there should be an amendment to Section 7 (1) to clarify that the deposits made by an insurer at the time of making the application for registration should be treated as deposits under Section 7 (1). |
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The formula regarding the amount to deposits, based on total gross premium, does not help insurers applying for registration for the first time. A provision has to be incorporated for such first time insurers. |
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Under the IRDA Regulations first time insurers are required to deposit a sum of Rs.10 lakhs along with their application. This requires to be reflected in Section 7 (1) itself. |
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Section 7 (1) empowers the Central Government to apply this requirement with modification in the event that an insurer does not have a Share Capital. It is proposed that this power should be exercised by the IRDA in consultation with the Central Government. Accordingly, the words 'Central Government' in the second proviso to Section 7 (1) may be replaced by the word 'Authority' with a clarification that the authority will exercise the power in consultation with the Central Government. |
| Section 7 (9A), 7 (9B) |
It is proposed that the power of Reserve Bank of India, in the matter of sale of securities/ investment of deposits held by the insurer, should be exercised in consultation with the IRDA. The provision may be amended accordingly. |
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Further, in clause (b) of section 7(9B), the words "Central Government" should be replaced by the word "Authority". |
| Section 9 |
Refund of Deposits:- |
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It is proposed that IRDA may be empowered to pass orders for refund of deposits to the insurer upon the Insurer ceasing to carry on insurance business. Where the ceasing of business is pursuant to winding up proceedings in court, such order may be made by the court. |
| Section 10(1) |
The proviso to this section which prohibits prescribing of certain subclauses of miscellaneous insurance business needs review and modification. |
| Section 10(2) |
The requirement that all receipts due in respect of life insurance business "shall be carried to and shall form a separate fund to be called the life insurance fund..." is irrelevant as the life insurers cannot carry general insurance business. However, general insurers can be obligated to maintain separate accounts and funds in respect of sub-classes of general insurance business, hence amendments to be made. |
| Section 11(2) |
Preparation of accounts and balance sheet: |
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Section 11(2) is required to be amended because of the legislative changes prohibiting partnership firms from carrying on insurance business and introducing cooperative societies as insurers. The part of the section referring about the signatory of a partnership firm should be dropped as it cannot transact insurance business. However, signatories in respect of insurance cooperative societies are be inserted. |
| Section 12 |
Liability of the auditor: |
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The words "s.145 of the Indian Companies Act 1913" may be substituted by the words "s.233 of the Companies Act 1956." |
| Section 13(4) |
The provision of sub-section (4) needs to be recast in view of the Regulations made by the Authority as follows: |
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"(4) There shall be appended to every such abstract a statement prepared in accordance with the regulations contained in Part I of the Fifth Schedule in respect of the accounts of the insurer, which are made up for the purposes of such abstract, in the form and in the manner specified by the regulations made by the Authority." |
| Section 15 |
Submission of returns: |
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Since section 11 (2) also provides for the signing of the documents, sub-sections (1) and (2) of section 15 need to be recast in order to simplify them which may be as follows: |
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"15(1) The audited accounts and statements referred to in section 11 or subsection (5) of section 13 and the abstract and statements referred to in section 13 should be submitted in four copies within six months from the end of the financial year." |
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(2) The statements referred to in sub-section (1) shall be signed in the case of a company by the chairman and two directors and by the principal officer of the company, and if the company has a managing director by that director, in case of insurance cooperative society by ____________: |
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Provided that in addition to the persons mentioned in sub-section (2) above, the statements shall be signed by auditors and the actuary who made the valuation." |
| Section 16 |
Returns by Insurers outside India: |
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The words in section 16 (2) (b) "Third Schedule applicable to that class or subclass of insurance business." may be deleted and replaced by the word "Regulations" in view of Insurance (Amendment) Act 2002. |
| Section 28 |
Submission of statement of investment of assets: Section 28(1) and (2) may be recast as follows: |
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"(1) Every insurer carrying the business of life insurance shall every year submit to the Authority a return showing as at the 31st day of March of the preceding year as to the assets held invested in accordance with section 27 within the time and in the manner as specified in the regulations in this regard. |
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(2) Every such insurer shall also furnish quarterly return of the assets held invested showing at the end of June, September and December within the time and in the manner as specified in the Regulations." |
| Section 28(3) |
Section 28(3) needs to be recast. The words" August" and "June" are then to be replaced by the words 'November' and 'September' respectively. |
| Section 28 A & 28 B |
Submission of return of investments: |
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In view of the detailed Investment Regulations, the provisions of ss. 28A and 28B providing for submission of return of investments by the life insurers and general insurers respectively to the Authority are not required to be provided in the principal Act, hence, may be amended so as to make just a reference of the manner specified in the regulations. |
| Section 29 |
Prohibition on giving of loans: |
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The provisions of section 29 restrict an insurer to the giving of loans or temporary advances to any director, manager, actuary, auditor or officer and partner. However, life insurers may advance loans or advances to insurance agents to facilitate carrying out their functions as such under clause (b) of sub-section (3) of this section. It would be appropriate if the provisions of section 29(3) are also made applicable to insurers carrying on general insurance business. |
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The advancement of loans etc. to its employees being the internal matter of the insurance company, some relaxation in this regard would be appropriate. It is, therefore, suggested section 29(3)(a) may be amended so as to replace the words "except such loan as are specified in sub-section (1) of section 27A" with the words "except as per the scheme of the insurer duly approved by its Board of Directors." |
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A suggestion has been made that the temporary advances given to the employees may be exempted from the application of section 29. In section 29 (2), for the words "86D of the companies Act, 1913 (7 of 1913)", words, "220 of the Companies Act 1956 should be substituted. |
| Section 31 |
Maintenance of assets by insurers: |
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The principal Act provides in section 31 as to in whose name the assets of company or firm or an individual are to be kept. As the partnership firm or an individual cannot carry on insurance business under this Act, their references in the section have became redundant. Hence the words "in the name of partners, if a firm, or in the name of proprietor, if an individual" may be deleted from this section and the words "in the name the society, if an insurance co-operative society" may be substituted because of the introduction of insurance co-operative societies as insurers by the Insurance (Amendment) Act, 2002. |
| Section 31B(3) |
Restriction on payment of excessive remuneration: |
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The provisions of sub-section (3) empowers the Authority to issue notice to the insurer to submit certified copies of the agreement between the insurer and the agent in case remuneration exceeding Rs. 5000 has been received by persons other than chief agent, principal agent or special agent. The limit of Rs. 5000 as mentioned in sub-sections (2) and (3) may be enhanced appropriately. |
| Section 32A |
Prohibition of common officers: |
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The Managing Director or other officer of a life insurer are prohibited to act as such for other insurer or banking company under sub section (1) of section 32A and the insurer are under an obligation to keep whole time managing director or an officer under sub-section (2) if the insurance funds exceeds 50 lakh or life insurance funds Rupees 25 lakh. Sub-section (2) needs review and revision as the requirement of whole time managing director is conditional under this sub-section. It would be appropriate if such employment is made unconditional, i.e., without depending on the amount of the funds of the insurers. It would be more appropriate if the provisions of this section are made part of regulations. |
| Section 32B & 32C |
Social and rural sector: |
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The word "or" may be replaced with the word 'and' so as to eliminate the choice of rural or social sector by the insurer so that insurers are obligated to contribute to the development of both the sectors without having an option to choose either of them. In consequence, the marginal note to these sections would also be required to be amended accordingly. |
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The third proviso to the said Regulation 3 empowers the Authority to revise the obligation stated in this regulation every five years. This power of the Authority should find place in the Act and may after necessary changes be made proviso to section 32C because Authority should derive its power to revise to the percentage from the statute otherwise exercise of such power would be ultra vires the principal Act. |
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The provisions of section 32 C obligates every insurer to provide life insurance or general insurance policies including crop insurance in the social sector as may be specified by the regulations. However, Regulation 3 in clause (b) states about number of lives in respect of the obligation for the first five years. It is suggested that for the word "lives', the word "policies" be substituted. |
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The word "official gazette" in section 32 B(1) may be replaced by the word "Regulations". |
| Section 35 |
Amalgamation: |
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The principal Act allows amalgamation of insurance business under a scheme to be sanctioned by the Central Government whether prepared by the Authority or not. Where such a scheme is sanctioned, then the insurers carrying on amalgamated business or the transferee insurers are required to furnish scheme, agreement, balance sheets etc. in respect of transfer and amalgamation to the Authority even where the amalgamation or transfer has not been made in accordance with the scheme approved by the Authority under clause (c). This part of the section appears to be inconsistent with the provisions of sections 35 and 36 whereby no amalgamation can take place without approval of the Authority. Therefore, this inconsistency may be removed by way of addition of an explanation in the provisions. |
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With a view to avoiding any duplication or ambiguity about the operation of the Companies Act, 1956 and the Insurance Act, 1938, an express provision has to be made to the effect that no option to amalgamate under the Companies Act should be given without compliance with the requirements of the Insurance Act, 1938. |
| Section 37A |
Power of IRDA to prepare scheme of amalgamation: |
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The details of the scheme for amalgamation set out in section 37A may be shifted to the Regulations. |
| Section 40(2) |
Payment of commission to insurance agents: The following may be substituted in sub-section 2. |
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"No insurance agents shall be paid or contracted to be paid by way of commission or as remuneration in any form an amount of not exceeding the amount as specified in the regulations in respect of policies, whether life or non-life and as also in respect of renewal of policies." |
| Section 4(2A) |
Payment of renewal commission: |
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Section 40(2A) be amended to provide that subsequent renewal commission be paid to the agent other than the agent through whom the policy was effected. |
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In consequence, the proviso to this sub-section may also be amended to provide that commission on renewal premium to be paid to only one agent who assisted in effecting revival of the policy which stood lapsed due to non-payment of the premium. Thus the agent who procured the policy will be prohibited from receiving the commission. In this regard the Authority may frame regulations. |
| Section 40A |
Limitation of expenditure on commission: |
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Section 40A may be recast as follows: |
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"40A. No insurer whether carrying on life insurance business or general insurance business shall pay or contract to pay to an insurance agent and no insurance agent shall receive or contract to receive, by way of commission or remuneration in any form in respect of any kind of policy issued except as specified in the regulations made in this behalf by the Authority." |
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In consequence of the proposed section, sub-section (5) may be recast. |
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Again, the punishment for contravention of sub-sections (1) and (3) of existing section 40A is provided in sub-section (5) as fine extending to Rs.100. This amount is inadequate and hence it may be enhanced appropriately. |
| Section 40B & C |
Limitation on expenses of management: |
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Clause (b) of the Explanation of the Section 40B explains the term "expenses of management". This term further needs inclusion of other expenses in the context of recent trends of business in this century. It would be appropriate if this term finds place in the regulations. |
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Similarly, provisions of section 40C prohibits an insurer of carrying on general insurance business to spend as expenses of management in excess of the prescribed limits. |
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In both the sections and the explanations attached to them, the reference of the word "calendar" may be replaced by the word "financial". |
| Section 41 |
Prohibition of rebates: |
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For the contravention of the provisions of section 41, sub-section (2) of this section prescribes fine up to Rs.500. The amount of fine is inadequate and needs to be increased. A suggestion has come that section 41 may be amended to enhance the penalty to 100 per cent of the premium or Rs.10000 whichever is higher. |
| Section 43 |
Register of insurance agents: |
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For the word "register", the word 'record' may be substituted which would encompass both the register and records in the electronic form as well. In consequence, the marginal note would be required to be amended accordingly, i.e., 'Record of insurance agents'. |
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The section does not indicate any time frame (maximum time-limit) for maintaining records. It has been suggested that maximum time limit in this regard may be specified in the section. |
| Section 44 |
Heritable Commission: |
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The amount of Rs.50,000 and percentage of renewal commission (4%) mentioned in clause (b) of the proviso to section 44 (1) need upward revision. However, it is appropriate that same be left to be determined by the Authority in the regulations. |
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The condition of continuously serving for 10 years by an agent exclusively for one insurer under clause (c) also needs to be reviewed. |
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The provisions of clause (c) absolutely prevents an agent to solicit or procure business for any other insurer even after he ceases to be an agent for the former insurer. This condition appears to be unreasonable in this age of liberalization. The provision may be amended to be effect that after the lapse of five years from the date he ceases to be an agent, he can solicit or procure business for another insurer. |
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The word "and exclusively" in clauses (b) and (c) may be dropped in view of the development that an agent can act for one life insurer and one general insurer (see Regulation) |
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The payment of renewal commission should be paid only if the agent continues to serve the policy. Section 44 should be amended accordingly. |
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The word "person" occurring in section 44 (1) may be replaced by the word 'insurer'. |
| Section 48A |
The words "or general insurance business" may be added after the words "life insurance business". Consequently, marginal note to the section would also require amendment. The word "Life" occurring in the marginal note may be omitted. |
| Section 50 |
Notice of options: |
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The words "unless these are set forth in the policy" may be omitted. |
| Section 51 |
Supply of copies of proposals etc.: |
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The words 'a fee not exceeding one rupee' be substituted by the words 'a fee as may be prescribed in the Regulations'. |
| Section 52BB |
Powers of administrator: |
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The words "Central Government" occurring in sub-sections (2) and (3) are to be replaced by the word "Authority". |
| Section 52D |
Termination of appointment of administrator: |
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Section 52 D would have to be amended as follows:- |
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"If at any time, it appears to the Authority that the purpose of the order appointing the Administrator has been fulfilled or that, for any reason, it is undesirable that the order of appointment should remain in force, the Authority may cancel the order and thereupon the Administrator shall be divested of the management of the insurance business which shall, unless otherwise directed by the Authority, again vest in the person in whom it was vested immediately prior to the appointment of Administrator or any other person appointed by the insurer in this behalf". |
| Section 52E |
Finality of decision appointing administrator: |
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The words "Central Government" are to be replaced by the word "Authority". |
| Section 53 |
Winding up by the court: |
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In sub-section (1) of section 53, reference to Companies Act, 1913 be substituted by Companies Act 1956 (Act VII of 1956). |
| Section 58 |
Partial winding up: |
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In sub-section (4), reference of section 12 of the Companies Act 1913 be substituted by '15' and sections 15 and 16 be replaced by section 17 of the Companies Act 1956. |
| Section 64 UL |
Power to remove difficulties: |
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The words "Central Government" may be replaced by the word 'Authority'. |
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