INSURANCE LAW AND REGULATIONS IN INDIA
Insurance refers to a legal contract between the insurer (insurance company) and the insured (individual person) wherein the insured is compensated for the financial losses arising out of the unforeseeable events, for which premiums were paid by the insured person.
The insurance industry in India can be mainly classified into:
(i) Life Insurance; and
(ii) Non-life Insurance.
FDI and Insurance Industry in India
The Foreign Direct Investment (“FDI”) regime promoted by the Department of Industrial Policy and Promotion(DIPP) allows the Insurance sector in India to invite private participation from foreign players as well. The insurance industry in India at present consists of 52 insurance companies of which 24 are in life insurance business and 28 are in non-life insurance business.
Herein we discuss various Acts, Rules and Regulations governing the Insurance Law regime in India:
Insurance Act, 1938 of India
It is the basic law relating to insurance in India which prescribes the procedures and requirements to comply with by insurance companies while doing the business of insurance and re-insurance. It also prescribes the provisions relating to insurance associations, councils and committees.
The Insurance Rules, 1939
The Rules provide for licensing of various intermediaries and appointment of various committees and the compliances to be observed by insurance companies while operating in the business of insurance.
The Insurance Laws (Amendment) Act, 2015
This amendment has been brought about with an aim to boost the insurance sector in India. The most important amendment brought forth by the Act, its aim is to increase the FDI cap in insurance companies in India from 26% to 49%.
The General Insurance Business (Nationalization) Act, 1972 in India
This Act nationalized the general insurance business in India where 107 insurers were amalgamated and grouped into four companies namely, National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. which were owned by the Government.
The Redressal of Public Grievances Rules, 1998
Provides for constitution of grievance redressal machinery for the redressal of grievances of policyholders against the insurance companies. Also states the procedures for redressal and grievances.
Foreign Exchange Management (Insurance) Regulations, 2000
Permits a person resident in India to take or continue to hold a life insurance policy issued by an insurer outside India, provided that the policy is held under a specific or general permission of the Reserve Bank of India.
It also permits a person resident in India to continue to hold any life insurance policy by an insurer outside India when such person was resident outside India, without any permission of the RBI.
Insurance Regulatory and Development Authority (IRDA) in India
The Insurance Regulatory and Development Authority (IRDA) is the regulatory authority for the Insurance industry in India. It was set up as an autonomous body under the IRDA Act, 1999. It frames regulations for the insurance industry in terms of Section 114A of the Insurance Act, 1938. It functions as an arm under the Ministry of Finance in India.
Motor Vehicle Insurance in India
The Motor Vehicles Act, 1988 in India
It prescribes provisions relating to third party insurances to be obtained by motor vehicle owners and also the duties of the insurers towards third parties in cases of accidents.