Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
0
PROJECT ON
INDIA
Roll no. 61
S U BM I T T E D ON – 15 T H OF A PR I L , 2010
INDIA, PATNA
L A W O F I N S U R A N C E
INSURANCE ASSOCIATION OF INDIA 201
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STRUCTURE
RESEARCH METHODOLOGY
The research methodology adopted for this project is entirely doctrinal in nature
wherein books in the CNLU law library have been used. Information from websites has
also been relied upon by the researcher.
RESEARCH SCHEME
The project has been primarily divided into 4 parts. The first part deals with the general
introduction to the insurance sector in India. The second part talks about the
evolution of the insurance industry. It deals with the nationalization of the
insurance sector and then liberalization and entry of private players. The third part
which is the core of the project deals with the various regulatory bodies in India
which regulate the business of insurance, including the insurance association of
India. The fourth part deals with the two councils under the insurance association
of India. The last part deals with the conclusion where the views of the researcher
are expressed.
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ACKNOWLEDGEMENT
PROF. DR. S.C.ROY FOR INSPIRING ME AND GUIDING ME DURING THE COURSE OF THIS
PROJECT WORK AND ALSO FOR HIS COOPERATION AND GUIDANCE FROM TIME TO TIME
DURING THE COURSE OF THIS PROJECT WORK ON THE TOPIC “INSURANCE ASSOCIATION OF
INDIA”
YOURS SINCERELY
SHAILENDRA PAL SINGH
ROLL NO. 61
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Table o f Contents
1. LIST OF
ABBREVIATIONS……………………………………………………....V
Research Methodology.................................................................................................II
.....................................................................................................................................II
Research Scheme..........................................................................................................II
The project has been primarily divided into 4 parts. The first part deals with the
general introduction to the insurance sector in India. The second part talks about the
evolution of the insurance industry. It deals with the nationalization of the insurance
sector and then liberalization and entry of private players. The third part which is the
core of the project deals with the various regulatory bodies in India which regulate
the business of insurance, including the insurance association of India. The fourth
part deals with the two councils under the insurance association of India. The last part
deals with the conclusion where the views of the researcher are expressed................II
“I express my gratitude to the faculty of, ‘Company Law’ for the concepts given
by him in the subject which has Been the base for this small piece of work.”........III
Table of Contents..........................................................................................................IV
List Of Abbreviations.....................................................................................................V
1. Introduction.................................................................................................................1
Expansion Of Insurance Industry In India – Nationalisation Of Insurance
Business............................................................................................................................3
Insurance Regulatory Authorities.................................................................................5
Insurance Regulatory and Development Authority (IRDA):........................................5
Tariff Advisory Committee:..........................................................................................6
Insurance Association of India:.....................................................................................7
2. Councils Of Insurance Association Of India..........................................................10
Life Insurance Council:..............................................................................................10
General Insurance Council:.........................................................................................14
3. Conclusion..................................................................................................................18
Bibliography............................................................................................................XXIII
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List Of Abbreviations
All Allahabad
Bom Bombay
Cal Calcutta
Co. Company
ed. Edition
ER England reporter
Ibid Ibidum
KB Kings bench
LJ Law Journal
Ltd. Limited
Mad Madras
n. note
p. page
Pvt./(P) Private
SC Supreme Court
v. versus
LIST OF STATUTES
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1. Introduction
“What the insurance companies have done is to reverse the business so
that the public at large insures the insurance companies”1
- Garry Spence
The past few decades have witnessed growth in insurance business. Day by
day more and more people are taking insurance policies to give themselves
a sense of security. Now they value their life and their property more than
they did some five decades ago. Simply put, insurance can be defined as
some form of risk management which is used to block or nullify certain
contingent/ possible loss to life or property. Insurance law in India had its
origins in the establishment of a British firm, the Oriental Life Insurance
Company in 1818 in Calcutta. These firms in India were established
primarily for safeguarding the interest of English widows. Up until the
beginning of 20th century the foreign insurance companies dominated in the
scene of business of insurance. These companies were investing in the
insurance sector in India. Interestingly in the 19th century, the premiums
charged for insuring Indian lives was far more than that charged for insuring
an English person’s life, because Indian lives were considered to be riskier.2
The Indian Life Assurance Companies Act, 1912 (which was based on the
English Act of 1909) was the first statute to regulate the life insurance
business in India. However other classes of insurance business were not
covered under the sweep of the Act of 1912. This was so because other
kinds of insurance were still in nascent stage for which legislative controls
1
http://thinkexist.com/quotes/with/keyword/insurance/2.html , last visited on 14th
April, 2009.
2
http://www.indiahousing.com/insurance-companies-india.html last visited on 1st
March, 2009
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were not considered necessary.3 The first general insurance company
established by an Indian was Indian Mercantile Insurance Company Ltd. in
Bombay in 1907.4 With the growth of fire, accident and marine insurance,
eventually the need was felt to bring such kinds of insurance within the
purview of the Indian Life Assurance Companies Act, 19125
Non-life insurance was finally regulated in 1938 through the passing of the
Insurance Act, 1938. This Act of 1938 along with various amendments over
the years continues till date to be the definitive piece of legislation on
insurance and controls both life insurance and general insurance.6
The insurance sector plays the socio-economic role in our nation. Not only
does it provide security but also it plays important role in the mobilization of
capital. The premiums paid by the insured to the insurance companies
accumulate to form a large pool of capital. To achieve the full potential of
this sector there is a need of constant and effective regulation of insurance
business.7
3
Ibid
4
General insurance has its origins in the United Kingdom.
5
M.N. Srinivasan, “Principles of Insurance Law”, 8th ed. 2006, p.92
6
Ibid
7
Ibid
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Both LIC and GIC have played a significant role in the development of the
insurance market in India and in providing insurance coverage in India
through an extensive network. With liberalization of economy in 1991 the
insurance sector also witnessed the benefits of liberalization coming its way.
8
www.nishithdesai.com, “Insurance law regulation in India”, report prepared by Nishith
Desai Associates, Legal and Tax Counseling, 2002 last visited on 28 February, 2009.
9
Ibid
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In 1993, the Government of India set up an eight-member committee
chaired by Mr. R. N. Malhotra, a former Governor of the Reserve Bank of
India to review the prevailing structure of regulation and supervision of the
insurance sector and to make recommendations for strengthening and
modernizing the regulatory system. The Committee submitted its report to
the Indian Government in January 1994. Two of the key recommendations of
the Committee were, namely,
10
Malhotra Committee Report on Reforms in the Insurance Sector, April, 1993
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11
www.nishitdesai.com last visited on 10th March, 2009.
12
www.irdaindia.org last visited on 10th March, 2009.
13
Ibid
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Committee, specifying the percentage of premium income of the insurer to
finance schemes for promoting and regulating professional organizations
and specifying the percentage of life insurance business and general
insurance business to be undertaken by the insurer in the rural or social
sector.14
14
Ajit Ranade, Rajeev Ahuja, “Issues in Regulation of Insurance”, EPW, January 29,
2000
15
http://www.tac.org.in/ last visited on 01-04-2008 at 04:25pm
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Like the above two bodies Insurance Association of India is also one of the
important regulatory bodies in the insurance sector. It was incorporated in
the in the Insurance Act of 1938, by way of amendment in 1950 in the Act
as a result of which Part II-A was inserted into the Act. This part has Sections
64-A to 64-T.16 The Insurance Association of India is a statutory body, with
the characteristics of a corporate body like perpetual succession, common
seal, independent existence, power to hold acquire or dispose property and
power to sue or be sued in its own name. 17 Basically, all insurers who carry
on the business of insurance in India are members of the Insurance
Association of India. Even all provident societies carrying on insurance
business in India are members of it, if the Central Government declares so
by notification in the Official Gazette. All insurers and provident societies
incorporated or domiciled in India are members, whereas all those
incorporated or domiciled outside India, are associate members.18
16
B.N. Banerjee, “Law of Insurance”, 4th ed. 1994, vol.1, p.559
17
Section 64-A(3) of the Insurance Act
18
Rajiv Jain, “Insurance Law & Practice”, 2001 ed., p.4.359
19
Section 64-C of the Insurance Act, 1938: There shall be two Councils of the
Insurance Association of India, namely:(a) the Life Insurance Council consisting of
all the members and associate members of the Association, who carry on life
insurance business in India, and (b) the General Insurance Council consisting of all
the members and associate members of the Association who carry on general
insurance business in India.
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these Executive Committees.20Following is the constitution of executive
committee of both the councils:21
• 2 Nominated Officials
• 8 representatives of members of Insurance Association of India from
Life Insurance/General Insurance business
• 1 non-official nominated by the Central Government
• 5 persons connected with Life Insurance/General Insurance business
from areas without sufficient representation in Executive Committee
Any member of the Life Insurance Council or the General Insurance Council
can lawfully authorize any individual (whether an officer of the insurer or
not), to act as the representative of such member at any meeting of the
Council concerns or to stand as a candidate for any election held by that
Council.22 The councils have the power to form committees with prior
delegation of power from authorities, for the purpose of performing various
functions in relation to the business of insurance. 23 The Executive
Committees of both the councils perform the following functions on behalf
of the Councils:24
20
Section 64E of Insurance Act, 1938
21
Section 64-F(4) of Insurance Act, 1938
22
Section 64-D of Insurance Act, 1938
23
Section 64-F(5) of Insurance Act, 1938
24
S. 64J & L of Insurance Act, 1938 for Life Insurance Council & General Insurance
Council respectively
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• to render advice to the Authority in the matter of controlling the
expenses of insurers in respect of their life/general insurance
business in India
• to bring to the notice of the Authority the case of any insurer acting in
a manner prejudicial to the interests of holders of life/general
insurance policies
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The life insurance council has been set up with the following mandate:26
25
http://www.lifeinscouncil.org/aboutus.htm last visited on 05-04-2008 at 08:50pm
26
Ibid
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The following are the broad range of main functions and duties performed
by the Life Insurance Council within the broader framework of its role as
provided for in the Insurance Act:27
27
Ibid
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l) It also performs various quasi-judicial functions.28
For the purpose of Training & Certification the Life insurance Council
performs following functions:29
The council takes up the work relating to the training, examination and
certification of Agents as provided in the Insurance Act. Play a positive
role in establishing standards, training of officials and intermediaries not
only in products and sales but also other aspects relevant to the life
insurance industry and lift the level of professionalism Conduct
professional development programs in collaboration with international
councils and life insurance institutes.
The following paragraph discusses the steps taken by the Council to spread
Education & Awareness:30
28
Ibid
29
Ibid
30
Ibid
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• Organise / participate in major conferences, seminars, workshops and
lectures by Indian/visiting experts on insurance and related areas
• Co-ordinate with educational institutions in India and overseas to
encourage research, professional development courses etc
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31
http://gicouncil.in last visited on 26th February, 2009.
32
Ibid
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• pro-active analysis and lobbying to secure improvement in the legal
and regulatory framework
33
Ibid.
34
http://gicouncil.in last visited on 28-03-2008 at 01:20am
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The amendment brought about in the Insurance Act in 1968 as a result of
which the functions of the Tariff Advice Committee came to be defined in
Part II-B. One of the provisions relating to Tariff Advice Committee is Section
64-UF, which deals with the transfer of various assets and liabilities of the
General Insurance Council to the Tariff Advisory Committee. This provision
has the effect of limiting the powers exercised by the General Insurance
Council to a certain extent, because some of the assets and liabilities are
transferred to the TAC instead of the GIC holding them and this has lead to
a shift of hands for such powers and functions etc.35
35
Section 64-UF of Insurance Act, 1938
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3. Conclusion
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councils are highly active and strive towards achieving excellence in their
respective areas of insurance.
Both the Councils under the Insurance Association of India actively engage
in performing their functions and as a result, reduce the burden of
regulatory authorities like the IRDA. Apart from regulatory functions, both
the Councils lay special emphasis on spreading education and awareness in
the industry with regard to various aspects of insurance. This is a unique
endeavor on the part of the Association. Insurance contracts are generally
quite complicated because they comprise of various clauses which are not
clearly understandable by everyone. Therefore, the Councils play a vital role
in this aspect by making people aware of such contracts and the linked
advantages as well as risks involved. The Councils indulge in training as
36
Section 64-C of Insurance Act
37
Section 64-A of Insurance Act
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well. Training is necessary to enhance the standard, quality and level of skill
prevalent in the insurance sector. The insurance market in India is huge and
to be able to upgrade its standards on a constant basis, a lot of training is
required and the Councils of the Association are definitely doing a
commendable job by indulging in the same. Training also helps bring in a
more professional approach to the market of insurance.
Apart from spreading awareness, education and training, the Councils also
do a difficult job of trying to ensure high standards of ethics and
governance. For any economy to progress, these high levels of ethics and
governance are a must. Also, the two Councils actively interact with regard
to policy making of the Government and thus act as a bridge or channel
between the insurers and the Government. The Insurance Association of
India also stays in constant touch with the developments in the global
insurance market through its Councils. This helps it analyse its own
standards with respect to global standards and determine the missing
aspects to be able to reach the global standards successfully.
38
http://www.naic.org/index_about.htm last visited on 7th March, 2009.
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is in turn regulated by the UK Financial Services Authority (FSA) under the
Financial Services and Markets Act, 2000.39
Also, it is interesting to note that apart from usual insurances, the General
Insurance Council has also started indulging in re-insurance and aviation
insurance. Re-insurance helps the primary insurers to accept risks that are
normally beyond their capacity and also in maintaining the financial stability
in case of losses due to mass settlement cases in catastrophic events. The
general insurance company (GIC) is the major player in re-insurance in
India. It assumes the role of national reinsurer and all the insurance
companies in India are supposed to pay 20% of their re-insurance
businesses to GIC. Both, re-insurance as well as aviation insurance are
comparatively new and upcoming fields of insurance and the General
Insurance Council will certainly play a vital role in the coming years with
respect to the same.
39
http://www.lloyds.com/About_Us/What_is_Lloyds/ last visited 7th March, 2009.
40
Section 64-J of Insurance Act
41
Ibid
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permission of the Central Government.42 This helps keep a check on the
unnecessary and improper delegation of authority, which might be
problematic.
In the final analysis it can be said that the Insurance Association of India
plays a very vital role in the Insurance Act. It not only ensures proper
regulation of the insurance sector but also engages itself in other activities
like promoting awareness, education, training, ethics, standards etc. Thus it
can be safely concluded that Insurance Association of India is must for the
regulation of insurance sector and protecting the interest of customers.
42
Section 64-N of Insurance Act
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Bibliography
BOOKS:
• Avtar Singh (ed.), “MN Srinivasan’s Principles of Insurance Law”, 17th ed.
2002, Wadhwa Publications, Nagpur.
• B.N.Banerjee, “Law of Insurance”, 4th ed. 1994, vol.1, The Lane Book
Company (P) Ltd., Allahabad, U.P.
• Rajiv Jain, “Insurance Law & Practice”, 2001 ed., Vidhi Publishing Pvt. Ltd.,
New Delhi
• Prof. K.S.N. Murthy & K.V.S. Sarma, “Modern Law of Insurance in India”, 3rd
ed. 1995
• M.N. Srinivasan, “Principles of Insurance Law”, 8th ed. 2006, Wadhwa &
Co., Nagpur
WEBSITES:
• http://www.lifeinscouncil.org
• http://gicouncil.in
• http://www.indiahousing.com
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• www.nishithdesai.com
• www.irdaindia.org
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