Provision of the Insurance Act, 1938 |
Change proposed |
| Section 3 |
Registration of Insurers:- The particulars of the documents/ statements required to be submitted to the IRDA for the purpose of obtaining registration, could be spelt out in the Regulations made by the IRDA. |
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Accordingly, it is suggested that Section 3 (2) be recast as under: |
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'Every application for registration shall be made in such a manner as may be determined by the Regulations made by the Authority and shall be accompanied by such documents as may be specified by the Regulations.' |
| Section 3 (2)(f) |
Under section 3 (2) (f) every applicant seeking registration as insurer of life insurance business is required to furnish the certificate of an actuary. The Subhedar Committee has recommended that this requirement may be extended for applicants for general insurance business as well. If this is accepted, section 3 (2) (f) has to be accordingly amended and then shifted to the Regulations. |
| Section 3 (2A) |
Grant of Certificate of Registration:- Sub-section (2A) of section 3 sets out the conditions that have to be fulfilled before Registration can be granted by IRDA. It is suggested that this should also include compliance with the requirements of Section 6 and 6A. However, the requirements of Section 31A and 32, which deal with Managers and managing agents are irrelevant and require to be omitted. The recast Section 3 (2A) (d) would read as under: |
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"(d) The applicant has complied with the provisions of Sections 2C, 5, 6 and 6A and has fulfilled all the requirements of this section applicable to him." (remaining portion to be retained) |
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It is also proposed that there should be a time limit within which, if all other requirements/ formalities have been complied with by the applicant, the IRDA should take a decision in regard to the grant/ refusal of the certificate of registration. It is proposed that this time limit should be a period of 60 days from the date of completion of all formalities, upon the expiry of which, the insurer would be deemed to have been granted the certificate of registration if no decision is taken by the IRDA within that time. |
| Section 94A (2) second proviso |
It is proposed that with a view to providing a level playing field with other corporate insurers, the proviso enabling exemption from certain provisions in their applicability to cooperative societies carrying on insurance business should be deleted. |
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Alternatively, if the power has to be retained, it should be ensured that it cannot be for all provisions of the Act. The exemption will have to be only in relation to select provisions of the Act and that too for reasons and writing. |
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Further, it is proposed that this power should be with the central government and not the Authority. |
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In regard to departments, organisations and associations carrying on insurance business without obtaining certificate of registration from the IRDA (i.e., Army welfare associations, Postal insurance etc.), it is suggested that such departments or associations be brought within the purview of the regulatory regime but requirements of capital and deposits may be either relaxed or suspended in such cases. |
| Section 3 (2C) |
Appeal against refusal of registration:- At present the appeal lies to the Central Government. It is proposed that in the first instance, a challenge to the order of refusal could be made by an applicant before the Grievance Redressal Authority, as is proposed later in this paper. Thereafter an appeal could lie to an appellate tribunal to be constituted under the Act itself. |
| Section 3 (3) |
Cancellation/ withholding of Registration of insurer having place of business outside India on the ground of absence of reciprocity by the other country:- |
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This provision may not be relevant in the present context were joint ventures are being permitted. Accordingly, it is suggested that sub-section (3) of section 3 may be modified and substituted as follows: |
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"In the case of any insurer having joint venture with a partner having its principal place of business domiciled outside India, the Authority shall withhold registration or cancel registration already made if it is satisfied that in the country in which the foreign partner has principal place of business has been debarred by law or practice of that country to carry on insurance business." |
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Accordingly, the reference to Section 3 (3) in Section 3 (5) is no longer relevant. |
| Section 3 (4) |
Cancellation of Registration:- One ground of cancellation should include the insurer being found guilty of an offence under any law in force in India. |
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The contravention of the LIC Act and other Acts as a ground for cancellation is no longer relevant. On the other hand, a contravention of the Societies Registration Act/ Multi-State Co-operative Societies Act should be a ground for cancellation. An amendment to Section 3 (4) has to be made accordingly. |
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The provision that empowers IRDA to cancel registration "either wholly or in so far as it relates to a particular insurance business" may not be relevant since as a matter of policy composite business is not permitted. This sub-section will have to be accordingly re-worded. |
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Suspension of Registration:- The Act does not provide for suspension of registration. However, regulations regarding registration provide in clause 23 the grounds of suspension of an insurance company. It is appropriate if this very clause and clause 24 of the regulations are made a part of the statute and placed appropriately in section 3. The grounds of suspension may also include grounds referred to in sub-section (4) under its clauses (a), (aa), (e), (f), (g), (h), (i) and (j). |
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It is to be noted that the provisions of sub-section (5C) of Section 3 empowers the Authority to revive the registration cancelled on these very grounds referred in the clauses of sub-section (4). It is suggested that on these grounds, the Authority may suspend registration of the insurer. If the insurer fails to comply with conditions stipulated in these sections or directions of the Authority within six months, then Authority may proceed to cancel registration. |
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Regulation 24 of the IRDA (Registration of Companies) Regulations, 2000 stipulates that no order of suspension or cancellation of certificate of registration shall be made without holding an enquiry as specified in the Regulations. This clause (clause 24) requires to be shifted into the Act itself. |
| Section 3A |
Renewal of Registration:- This is required to be done every year by an insurer. It is proposed that this period may be increased and that the registration may be kept valid for a period of three years especially in the case of life insurance business, after which it could be renewed. |
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The word 'December' may be replaced by the word 'March' as a similar change for this effect has been made by the 1999 Amendment. |
| Section 3A (2) |
The determination of the renewal fee for registration provided under section 3A (2) referring to the percentage of premium income as also the amount specified in section 3A (2)(i) requires reconsideration. The suggestion is that the same should be reduced. |
| Section 3A (3) |
The provisions for making deposits in respect of the renewal fee in the Reserve Bank of India has both been made in section 3A (3) of the Act and regulation 21 of Chapter IV of the Regulations. It is suggested that the statutory provision may be amended so as to provid.- "in the manner as provided in the regulations" and the words "the Reserve Bank of India" in the regulation may be replaced by the words "any Scheduled Bank." |
| Section 3A (4) |
The provisions of sub-section (4) of section 3A provide for an appeal to be made to the Central Government against the order of the Authority imposing a penalty on the insurer. Here, the penalty is in the nature of the 168late fee and the ceiling limit has been spelt out in this very provision. Hence, the provision of appeal seems to be irrelevant. It is suggested that amendments may be made in this regard. |
| Section 3A (5) |
For every renewal the compliance of all requirements for fresh registration must be insisted upon apart from compliance of Section 32B and 32C regarding insurance in rural and social sector. Accordingly, Section 3A (5) may be amended. |
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