INTRODUCTION
The Insurance Regulatory and Development Authority Act, 1999 is an Act to provide for the
establishment of an authority to protect the interests of holders of insurance policies, to
regulate, promote and ensure orderly growth of an insurance industry and for matters
connected therewith or incidental thereto and further to amend the Insurance Act, 1938,
the Life Insurance Corporation Act, 1956 and the General Insurance Business
(Nationalization) Act, 1972.
The Parliament ratified the Insurance Regulatory and Development Authority Bill, 1999 on
7-12-1999, thus stigmatizing the monopoly of the Life Insurance Corporation and General
Insurance Corporation over the insurance sector. The Bill, adopted by the Lok Sabha on
December 2, was passed in the Rajya Sabha on 7-12-1999.
The Insurance Regulatory & Development Authority Act, 1999 seeks to open up the
insurance sector for private companies with a foreign equity of 26 per cent. It is also
aimed at ending the monopoly of the Life Insurance Corporation (LIC) and General
Insurance Corporation (GIC) in the insurance sector of the country.
ANALYSIS
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IRDA Act: As I Understand It
An Act to provide for the establishment of an Authority to protect the interests of holders
of insurance policies, to regulate, promote and ensure orderly growth of the insurance
industry and for matters connected therewith or incidental thereto and further to amend
the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the General
Insurance Business (Nationalisation) Act, 1972.
BE it enacted by Parliament in the Fiftieth Year of the Republic of India as follows:--
(1) This Act may be called the Insurance Regulatory and Development Authority Act, 1999.
(2) It extends to the whole of India.
(3) It shall come into force on such date as the Central Government may, by notification in
the Official Gazette, appoint:
PROVIDED that different dates may be appointed for different provisions of this Act and
any reference in any such provision to the commencement of this Act shall be construed as
a reference to the coming into force of that provision.
Definitions
COMMENTS: Appointed day - Appointed day is the date as the Central Government may,
by notification, shall appoint an authority to be called "the Insurance Regulatory and
Development Authority".
Insurance - The act of providing against a possible loss, by entering into a contract with
one who is willing to give assurance--that is to bind himself to make good such loss should
it occur. In this contract the chances of benefit are equal to the insurer and the insured.
The first actually pays a certain sum and the latter undertakes to pay a larger if an accident
should happen. The one renders his property secure; the other receives money with the
probability that it is a clear gain. The instrument by which he contract is made is called a
policy, the stipulated consideration a premium.--Wharton's Law Lexicon
(iii) with the object of obtaining insurance business employs a representative or maintains
a place of business in India;
(b) any body corporate (not being a person specified in sub-cl. (c) of this clause) carrying
on the business of insurance, which is a body corporate incorporated under any law for the
time being in force in India; or stands to such body corporate in the relation of a subsidiary
company with the meaning of the Indian Companies Act, 1913, as defined by sub-s. (2) of
s. 2 of that Act; and
(c) any person who in India has a standing contract with under-writers who are members
of the Society of Lloyd's whereby such person is authorized within the terms of such
contract to issue protection notes, cover notes or other documents granting insurance
cover to others on behalf of the underwriters, but does not include a principal agent,
special agent or an insurance agent or a provident society as defined in Part III.--
Insurance Act, 1938, s. 2(9)
`Insurer' means an insurer as defined in the Insurance Act who carries on life insurance
business in India and includes the government and a provident society as defined in s. 65
of the Insurance Act.--Life Insurance Corporation Act, 1956, s. 2(6)
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IRDA Act: As I Understand It
Insurance company - A company which carries on the business of insurance either solely or
in conjunction with any other business or businesses.--Companies Act, 1956, s. 2(21)
Insurance company means any insurer being a company, association or partnership which
may be wound up under the Indian Companies Act, 1913, or to which the Indian
Partnership Act, 1932, applies.--Insurance Act 1938, s. 2(8)
Insurance policy - The word `policy' of insurance' in s. 6 of the Married Women's Property
Act, 1874, means a document or documents evidencing the contract between the parties.
If the document known as the policy stands alone and does not incorporate in it any other
document, only that document can be looked at, but if it does expressly incorporate
another document, the document must be deemed to be part of the policy.
Insurance agent - An insurance agent licensed under s. 32, who receives or agrees to
receive payment by way of commission or other remuneration in consideration of his
soliciting or procuring insurance business (including business relating to the continuance,
renewal or revival of policies of insurance).--Insurance Act, 1938, s. 2(10)
Fund - Under s. 16, there shall be constituted a fund to be called "the Insurance Regulatory
and Development Authority Fund" and there shall be credited thereto--
(a) all government grants, fees and charges received by the authority;
(b) all sums received by the authority from such other source as may be decided upon by
the Central Government;
(c) the percentage of prescribed premium income received from the insurer.
(a) the salaries, allowances and other remuneration of the members, officers and other
employees of the authority;
(b) the other expenses of the authority in connection with the discharge of its functions
and for the purposes of this Act.
Composition of Authority
science, finance, economics, law, accountancy, administration or any other discipline which
would, in the opinion of the Central Government, be useful to the Authority:
PROVIDED that the Central Government shall, while appointing the Chairperson and the
whole-time members, ensure that at least one person each is a person having knowledge
or experience in life insurance, general insurance or actuarial science, respectively.
Explanation - The assets of the Interim Insurance Regulatory Authority shall be deemed to
include all rights and powers, and all properties, whether movable or immovable, including,
in particular, cash balances, deposits and all other interests and rights in, or arising out of,
such properties as may be in the possession of the Interim Insurance Regulatory Authority
and all books of account and other documents relating to the same; and liabilities shall be
deemed to include all debts, liabilities and obligations of whatever kind.
Sec. 64U of the Insurance Act, 1938 providing for the establishment of Tariff Advisory
Committee with effect from the commencement of the Insurance (Amendment) Act, 1968
was to control and regulate the rates, advantages, terms and conditions that may be
offered by insurers in respect of general insurance business. The Advisory Committee is a
body corporate having perpetual succession and a common seal, with power, subject to the
provisions of that Act, to acquire, hold and dispose of property, both movable and
immovable, and to contract and may, by the said name, sue and be sued.
Sec. 64UA of the Insurance Act, 1938 provides for the composition of the Advisory
Committee. Under that section, the Advisory Committee shall consist of the following
members, namely,--
(b) a senior officer of the office of the Controller nominated by the Controller nominated
by the Controller, who shall be the Vice-Chairman;
(c) not more than ten representatives of Indian insurers, elected (in their individual
capacities) by such insurers in such manner, from such areas and from among such
insurer or groups of insurers as may be prescribed;
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IRDA Act: As I Understand It
(d) not more than four representatives of insurers incorporated or domiciled elsewhere
than in India but registered in India, elected (in their individual capacities) by such
insurers in such manner, and from among such insurers or groups of insurers as
may be prescribed.
The Secretary to the Advisory Committee shall be an officer of the office of the Controller,
nominated by the Controller.
In making any appointment under this section, the Central Government shall have due
regard to the following considerations, namely, whether the person to be appointed has
had experience in industrial, commercial or insurance matters and whether such person
has actuarial qualification.
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IRDA Act: As I Understand It
The Chairperson, members, officers and other employees of the Authority shall be deemed,
when acting or purporting to act in pursuance of any of the provisions of this Act, to be
public servants within the meaning of section 21 of the Indian Penal Code.
COMMENTS: Sec. 21 of the Indian Penal Code, 1860 defines the term "public servant".
Under that section "public servant" denotes a person falling under any of the descriptions
hereinafter following, namely--
(1) Every Commissioned Officer in the Military, Naval or Air Forces of India;
(2) Every Judges including any person empowered by law to discharge, whether by
himself or as a member of any body of persons, any adjudicatory functions;
(5) Every arbitrator or other person to whom any cause or matter has been referred for
decision or report by any Court of Justice or by any other competent public
authority;
(6) Every person who holds any office by virtue of which he is empowered to place or
keep any person in confinement;
(7) Every officer of the government whose duty it is, as such officer, to prevent offences,
to give information of offences, to bring offenders to justice, or to protect the public
health, safety or convenience;
(8) Every officer whose duty it is, as such officer, to take, receive, keep or expend any
property on behalf of the government, or to make any survey, assessment or
contract on behalf of the government or to execute any revenue process, or to
investigate, or to report on any matter affecting the pecuniary interests of the
government, or to make, authenticate or keep any document relating to the
pecuniary interests of the government, or to prevent the infraction of any law for the
protection of the pecuniary interests of the government;
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IRDA Act: As I Understand It
(9) Every officer whose duty it is, as such officer, to take, receive, keep or, expend any
property, to make any survey or assessment or to levy any rate or tax for any
secular common purpose of any village, town or district, or to make, authenticate or
keep any document for the ascertaining of the rights of the people of any village,
town or district.
(10) Every person who holds any office by virtue of which he is empowered to prepare,
publish, maintain or revise an electoral roll or to conduct an election or part of an
election; and
(a) in the service or pay of the government or remunerated by fees or commission for
the performance of any public duty by the government;
`Public servant' includes any public servant as defined in the Indian Penal Code (45 of
1860) and any servant of any local authority and any person engaged in any employment
or class of employment which the State Government may, from time to time, declare to be
employment or class of employment essential to the life of the community.
A pubic servant is one who is to discharge some public duty. The absence of formal
appointment is immaterial where a person is in actual possession of a situation as a public
servant.
Public servants are following: Chief Minister, Minister of a State, Officer in charge of a
Police Station, Pradhan of Gram Sabha, Members of Panchayat Adalat, Chief Officer of
Panchayat, and the Public Prosecutors.
Following are not public servants: Headmaster, teachers, principals of aided schools, civil
servants working on deputation with co-operative society, President and Secretary of Co-
operative Society, an M.L.A's. and the Mukhias.
The Central Government may, by notification, make rules for carrying out the provisions of
this Act.
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IRDA Act: As I Understand It
COMMENTS: Sec. 7(1) provides for the salary and allowances payable to, and other terms
and conditions of service of, the members other than part-time members, and s. 7(2) deals
with the allowances to be received by part-time members.
Under s. 17(1), the authority shall maintain proper accounts and other relevant records
and prepare an annual statement of accounts in such form as may be prescribed by the
Central Government in consultation with the Comptroller and Auditor-General of India.
(1) The Authority may, by notification, establish with effect from such date as it may
specify in such notification, a Committee to be known as the Insurance Advisory
Committee.
(2) The Insurance Advisory Committee shall consist of not more than twenty-five members
excluding ex officio members to represent the interests of commerce, industry, transport,
agriculture, consumer fora, surveyors, agents, intermediaries, organisations engaged in
safety and loss prevention, research bodies and employees' association in the insurance
sector.
(3) The Chairperson and the members of the Authority shall be the ex officio Chairperson
and ex officio members of the Insurance Advisory Committee.
(4) The objects of the Insurance Advisory Committee shall be to advise the Authority on
matters relating to the making of the regulations under section 26.
(5) Without prejudice to the provisions of sub-section (4), the Insurance Advisory
Committee may advise the Authority on such other matters as may be prescribed.
Power to remove difficulties
(1) If any difficulty arises in giving effect to the provisions of this Act, the Central
Government may, by order published in the Official Gazette, make such provisions not
inconsistent with the provisions of this Act as may appear to be necessary for removing the
difficulty:
PROVIDED that no order shall be made under this section after the expiry of two years
from the appointed day.
(2) Every order made under this section shall be laid, as soon as may be, after it is made,
before each House of Parliament.
Regulator as Developer
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IRDA Act: As I Understand It
- Agri labourers
- Rural assets
- Informal sector
3) Micro Insurance Products subject to File and Use procedure – Expected to be self
supportive
Insurance Education
(a) IIRM
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