The Department of Finance Services (DFS) Ministry of Finance, Govt. of India has issued a Public Notice on its website inviting comments from all the stakeholders on the proposed amendments to Insurance Act, 1938 (Proposed Amendments).
Key highlight of the Proposed Amendments to the Insurance Act, 1938 are as follows:
- Introduction of new category of insurers
- Definition of ‘captive insurers’ introduced – (4B) “captive insurer” means an insurer carrying on the class of general insurance business or any of its sub-classes exclusively for its holding company or its subsidiary company or its associate company, as defined in clauses relevant provisions of the Companies Act, 2013
- Authority may specify additional types or categories of insurer, based on criteria such as area of operation, level of risk or premium, channel of distribution, including in the nature of a captive insurer.
- Definition of ‘Intermediary’ modified to exclude ‘TPAs’, ‘Surveyors and Loss Assessors’ and ‘Insurance Consultants’
- Existing definition of ‘Intermediary’ merely provides cross reference to IRDAI Act.
- ‘Surveyors and Loss Assessors’ separately defined in the proposed amendments.
- Definition of ‘Personal Accident Insurance Business’ and ‘Travel Insurance Business’ introduced in the Act
- ‘Personal Accident Insurance Business’ includes hospitalization arising on account of accident:
- ‘Personal Accident Insurance Business’ means effecting contracts of insurance that provide for payment of money in the event of death, disablement or hospitalization arising on account of an accident
- Value Added Services :
Insurers permitted to provide services related or incidental to insurance business as well as distribute other financial products, as may be specified by the Authority.
- Classes and sub-classes of insurance business defined. Application for registration may be made for one or more classes or sub-classes of insurance business:
Class of Insurance
Sub-classes
Life insurance
General insurance
Fire
Marine
Miscellaneous
Health Insurance
Personal accident insurance
Travel insurance
Reinsurance
In addition to the aforesaid, the Authority may specify any part or segment of a class of insurance business as its sub-class and also its eligibility criteria.
- A person carrying on or applying for the class of re-insurance business shall not be eligible for registration of any other class or sub-class of insurance business.
- Definition of ‘Insurer’, ‘Indian Insurance Company’ and ‘Health Insurance Business’ has been simplified
- “Health Insurance Business” means effecting contracts of insurance that provide sickness benefits or pay for medical and health expenses;
- “Indian Insurance Company” means an insurer who is a company, formed and registered under the Companies Act, 2013 as a public company;
- “Insurer” means a person who carries on insurance business;
- Investment of assets
The provisions related to time, manner, limitations, restrictions and other conditions provided in the Act (specifically Section 27 (A) 4 restricting investments in private ltd company) has now been omitted. The same will be incorporated in the Regulations.
- Appointment of Insurance agents
The restriction of one insurer still continues. Other provisions relating to appointment proposed to be moved to Regulations.
- Validity of Intermediary registration
Upon payment of annual fee, registration to remain in force until such time registration is suspended or cancelled in accordance with the regulations:
- Minimum capital requirement
- Minimum capital requirement to be prescribed by the Authority.
- Net owned fund requirement for foreign reinsurers reduced from 5000 Cr to 500 Cr.
- Transfer of shares
Prior approval of the Authority is proposed where, the nominal value of the shares intended to be transferred by any individual, firm, group, constituents of a group, or body corporate under the same management, jointly or severally exceeds five percent of the paid-up equity capital of the insurer (As per extant provisions it is 1%).
- Provisions related to Appointed Actuary introduced
- Requirements with respect to appointment of ‘Appointed Actuary’ to be prescribed by the Authority.
- Actuarial report (encompassing financial condition of the business carried on by insurers, including a valuation of its liabilities) now proposed to be submitted by General and Health Insurers also (As per extant provisions it was limited to Life insurers only).
- Submission of Returns: Returns permitted to be submitted in electronic form.
- Prohibition of common officers and requirement as to whole-time officers has been extended to all insurers (It is now restricted only to life insurance sector in the Act but prescribed in Regulations).
- Section 32D relating to Motor TP obligation restricted to insurers carrying on motor business only.
- The provisions relating to inspection and resultant action against intermediaries provided.
- The Authority has been vested with powers to disgorge any person for the wrongful gain made or loss averted by contravention of any provision of Insurance Act.
- In addition to life insurers, other insurers will now be permitted to deposit the claim money in the court in case an insurers is not able to get a satisfactory discharge where there are conflicting claims or entitlement to receive due payment is not clear.
- Section 48B restricts common directorship in case of insurers carrying same class or sub-class of business.
- Cost of providing copies of proposal forms and medical reports to customers enhanced from Rs. 1 rupee to Rs. 250.
- Composition of executive committees of Life insurance council (LIC) and General Insurance Council (GIC) enhanced. The proposed constitution of the GIC is as below:
- 7 elected representatives from members (4 as per existing prescription)
- 2 eminent non-insurance persons nominated by the Authority (1 as per existing prescription)
- 3 persons from among insurance agents, intermediaries and policyholders as may be nominated by the Authority (4 as per existing prescription)
- 1 representative each from self-help groups and insurance co-operative societies as may be nominated by the Authority (new addition); and
- 1 representative of the Central Government (new addition)
- Sec 64K and 64M relating to advisory functions of Executive Committee of Life Insurance Council and General Insurance Council in controlling expenses of management of insurers has been omitted
- Limits of penalty has been enhanced
- In case of any default, not exceeding one lakh rupees for each day during which such failure continues or not exceeding ten crore rupees, whichever is less.
- Where separate penalty has not been provided, defaulter shall be liable to a penalty which shall not exceed one lakh rupees for each day during which such failure continues or not exceed one crore rupees, whichever is less.
- If any person makes a statement, or furnishes any document, statement, account, report or return which is false and which he either knows or believes to be false or does not believe to be true, he shall be liable to a penalty not exceeding five crore rupees for each such failure.
Source category: Others
Attachments
- /2022/120_2022-11-29_Proposed_Amendments_to_the_Insurance_Act_1938.pdf
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