| Provision of the Insurance Act, 1938 |
Change proposed |
| Section 33 (1.- Investigation by IRDA into affairs of insurer |
The provisions of section 33 does not lay down standards or criteria (grounds) to guide the Authority to cause investigation judiciously. In absence of such criteria, the power may be misused for ulterior motive. Hence the provisions of sub-section (1) may be amended by adding the words "if it considers expedient to do so" in sub-section (1). |
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It is to be noted that the section uses the term "Authority" for both the Regulating Authority and investigating authority though the latter is mentioned as investigating authority in the section. Yet such a usage may give rise to some confusion. It is, therefore, appropriate to change the terminology from investigating authority to investigating officer. |
| Section 33 (4.- Examination by Investigating Authority of insurer's officer on oath |
The section does not provide for the qualification/ experience/ rank of the person to be appointed as the investigating authority who is obligated to examine on oath the officers of the insurer under sub-section (4). This may be rectified by suitable amendments. A provision may also be incorporated so as to prevent appointment of incompetent person. |
| Section 33 (8.- Information to be maintained by insurer |
The provisions of sub-section (8) speaks of the maintained by insurers minimum information as specified in the regulations to be maintained by the insurers so as to facilitate the investigating authority to discharge its functions. The kind of information which this section indicates is of general nature and should be maintained by every insurer whether its affairs are investigated or not. Hence, the contents of this sub-section should be made a part the obligations of insurers to be especially framed for this purpose. |
| Section 34B (4.- Penalty for contravention of provisions regarding removal by IRDA of managerial persons |
The provisions of sub-section (4) of this section prescribes punishment for contravention of section 34B or of proviso under section 34B (2) in the nature of fine extendable to Rs. 250 per day. The amount of fine is not adequate enough to deter an officer from contravening the orders of IRDA. Therefore, the same may be enhanced appropriately. |
| Section 34.- Power of IRDA to appoint additional directors |
This power should be exercise by IRDA in consultation with the central government and particularly in case of insurance cooperative societies. |
| Section 34.- Power to caution or advise insurers |
In section 34 (E), the word "Controller" should be substituted by the word 'Authority' as the powers described in this section are now exercised by the Authority by virtue of the IRDA Act. |
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| Section 34.- Power of authority to order closure of foreign branches |
This provision is no longer relevant since private players, now permitted, can themselves decide on closure of their branches without being directed by the IRDA. This provision may be deleted. |
| Section 34.- Search and seizure |
The rank of the officer conducting search and seizure should be clarified. The words 'Code of Criminal Procedure, 1898' should be substituted by 'Code of Criminal Procedure, 1973'. |
| Section 35 (1.- Amalgamation and transfer of insurance business |
At present, the provision applies only to life insurance business. It is suggested that this be made applicable to general insurance business as well. |
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Further, a time limit may be specified within which IRDA has to approve the scheme of transfer or amalgamation. |
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The title of the marginal note requires minor change in the context of the provisions of this section. The word "and" be replaced by the word "or". |
| Section 35 (3.- Requirement of preparation of actuarial reports |
The provisions of sub-clause (c) of section 35 (3) states that actuarial reports are to be prepared as per the requirements of Part II of Fourth and Fifth Schedules. As the Fourth Schedule has been repealed by the Insurance (Amendment) Act 2002, clause (c) of section 35 (3) may be amended by deleting the reference of Schedule IV and to provide that actuarial reports be prepared in conformity with the regulations made by the Authority. |
| Section 3.- Approval of amalgamation by IRDA |
The Authority is empowered under section 36 of the Act to approve the arrangement of amalgamation after giving adequate opportunity of hearing to the directors and policy holders who desire so and to pass consequential orders to give effect to the amalgamation including the disposal of deposits made under ss. 7 or 98. Section 98, which provides for mutual insurance companies and cooperative life insurance societies, has become redundant. Therefore, the words "or section 98" may be omitted. Similar omission is required in clause (c) of the proviso to this section. |
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The provisions of amalgamation may be made applicable to general insurance business, as well. If this is done, then the words "life policy" in section 36 (1) would have to be replaced by the words 'of any kind of policy'. |
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The word 'and' in the marginal note be replaced by the word 'or'. |
| Section 37A (2.- Power of IRDA to prepare scheme of amalgamation |
The contents of sub-section (2) which enumerates the clauses which the scheme should contain can be made part of the Regulations. |
| Section 37A (4.- Central government is specify scheme of amalgamation sanctioned by it |
The following may be added in section 37 (A) (4) after the words "in this behalf". |
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"in the Official Gazette with such constitution, with such property, powers, rights, interests, authorities and privileges and with such liabilities, duties and obligations as may be specified in the order." |
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The following provisions may also be incorporated to protect the interest of policy holders or shareholders etc. as provided in the Companies Act: |
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"(4A) Every policyholder or shareholder or member of each of the insurers, before amalgamation, shall have the same interest in, or rights against the insurer resulting from amalgamation as he had in the company of which he was originally a policyholder or shareholder or member: |
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Provided that where the interests or rights of any shareholder or member are less than his interest in, or rights against, the original insurer, he shall be entitled to compensation, which shall be assessed by the Authority as may be prescribed. |
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(4B) The compensation so assessed shall be paid to the shareholder or member by the insurance company resulting from such amalgamation. |
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(4C) Any member or shareholder aggrieved by the assessment of compensation made by the Authority under sub-section (4A) (proposed) may within thirty days from the publication of such assessment prefer an appeal to the Central Government." |
| Section 42 (1.- Licensing of insurance agents |
Consistent with the Regulations the Authority should itself authorise officers of the insurers who can issue or renew licences. |
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Subject to changes made in the Regulations in this behalf from time to time by the IRDA, the fee limit for issuing of licence should be increased beyond the present limit of Rs.250/-. |
| Section 42 (2.- Number of insurers for whom a person can act as agent |
Consistent with the Regulations, sub-section (2) of Section 42 should be amended to provide that an agent can act for "only one life insurer and/ or one non-life ins rer" insurer". |
| Section 42 (3.- Licence renewal fee and penalty |
Licence renewal fee and penalty may be increased from the present limits of Rs.250/- and Rs.100/- respectively and be made subject to further changes to be specified in the Regulations. |
| Section 42 (4.- Disqualifications for acting as insurance agent |
The disqualification enumerated under Regulation (8) (j) should be incorporated in Section 42 (4). |
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Further, used to be considered by the nationality of an insurance agent should be expressly mentioned as a requisite qualification. |
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It must be provided in Regulation 3 (2) in addition to satisfy the requisite qualification, licence will be issued only if the person does not attract any of the disqualifications under Section 42 (4). |
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The provision in Regulation 8 (j) (ii) that an insurance agents cannot apply for a fresh licence for a period of 5 years after cancellation, should be incorporated in the Act, preferably in Section 42 (4) itself. |
| Section 42 (5.- Power to cancel licence |
Consistent with the Regulations in this behalf, it is appropriate that section 42 (5) be amended to provide that a designated person authorised by the IRDA can exercise the power to cancel a licence. Any person so aggrieved may file an appeal against such cancellation to the appropriate authority. |
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Regulation 9 requires to be amended to empower the designated officer to cancel the licence of agent who 175deliberately contravenes the provisions of the Act. |
| Section 42 (6.- Issue of duplicate licence |
The designated officer instead of the Authority may be authorized to issue duplicate licence. |
| Section 42 (7.- Punishment for acting as agent without licence |
The present fine of Rs.500/- on a person acting as agent without licence and Rs.1000/- on an insurer appointing a person to act as such are inadequate and require to be enhanced. |
| Section 42.- Licence to intermediary or insurance intermediary |
The power to issue licence should be exercised by an officer authorised by the IRDA and not the IRDA itself. |
| Section 42D (1) proviso (a) |
In view of the inconsistency with 42D (5), it is proposed that clause (a) of the proviso to Section 42D (1) may be amended so as to substitute words in figures '(5) of this section' in place of words and figures '(4) of section 42'. |
| Section 42D (8) & (9.- Fine to be imposed for contravention |
These required to be specified. |
| Section 64 U.- Issue of licence to surveyors/ loss assessors |
The provision requires to be amended to expressly empower the Authority to issue licence on the same grounds of qualifications and disqualifications as specified in Section 42 (1) & (2) for insurance agents. |
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The ground found in Regulation 8 (4) for cancellation of licence of a surveyor who fails discharge duties and responsibilities in a satisfactory and professional manner or violate the code of conduct prescribed by the Regulations requires to be incorporated in Section 64 UM (1) (G). |
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A provision for suspension of licence, as provided in Regulation 8 (4) should be incorporated in the Act. |
| Section 64 UM (1A) |
At present there is no transparency on appointment of surveyor/ loss assessor by general insurers. Public sector general insurers, by and large, appoint some privileged surveyors with some understanding with respective department/ staff/ officer/ manager. By an appropriate amendment, this should be done away with. General insurers should publish a list of appointed surveyors in notice board/Web Sites regularly indicating fees paid to be to the surveyor/loss assessor. |
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The principal Act does not provide about the functions to be performed by a surveyors or loss assessor, but mandates them to comply with the code of conduct in respect of their duties and responsibilities as provided in Regulation 13 (2). Hence a provision in regard to the functions to be performed by a surveyors or loss assessor may be incorporated after sub-section (1A) as follows: |
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"A surveyor and loss assessor shall investigate, survey, manage, quantify, valuate and deal with losses on behalf of the insurer or insured arising from any contingency, carry out the work with objectivity and professional integrity by strictly adhering to the code of conduct expected of such surveyor and loss assessor and report thereon within the time specified in the regulations." |
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It is suggested that the Authority should exercise the power under sub-section (3) to call for independent report from an approved surveyor upon receiving a complaint. There is also a suggestion for appointment of a second surveyor or loss assessor, if any complaint is received by the Authority. It would be appropriate if the power to settle the claims under this section are exercised by an adjudicating officer to be appointed by the Authority. |
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It has been suggested that appointment and payment to surveyors/loss assessors should be on rotation and controlled by IRDA with the help of respective State Chapter of Institute of Surveyor/ Loss Assessor so that surveyors/loss assessors are independent of general insurers and need not to appease the respective department/ staff/ officer/ manager for getting appointment and payment. |
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There is a suggestion that to set aside the written test for issuing licence to any person to act as a surveyor because the new trainees are well qualified technical graduates. Moreover, the candidates have to go through one year training under a senior surveyor. |
| Section 4.- Power to call for information |
The provisions of this section is to be recast because the system of principal agent, chief agent or special agent is no more in existence and in consequence of which, the repeal of sections 42B and 42C has already been proposed. Hence, in this section, wherever there is a reference to the principal agent or special agent or chief agent, or references to sections 42B and 42C, such references require omission. There is a suggestion for the deletion for the section itself. |
| Section 47.- Power of IRDA to decide claims on small insurance policy |
The limit of the claim may be enhanced to Rs.5,000/-. |
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Further, the IRDA may be given powers of the civil court for execution of the order in this regard. |
| Section 5.- Winding up |
The power of IRDA to apply to the court for winding up of an insurance company should be extended to cover a situation where the insurer is a cooperative society. |
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