Insurance Law – An Indian perspective

introduce a "must buy insurance to protect you against misfortune, which would otherwise be financially devastating."

In simple terms, insurance allows someone who suffers a loss or accident should be compensated for the effects of the disaster. This allows you to defend yourself from everyday risks to health, home and financial situation.

Insurance in India started without the control of the nineteenth century. This is a typical story of a colonial epoch: few British insurance companies dominate the market in the best cities. After it became independent, it took a theatrical turn of events. Insurance was nationalized. First, the life insurance companies were nationalized in 1956, and then in the general insurance business was nationalized in 1972, only in 1999 that private insurers were released back into the business of insurance, up to 26% foreign holding.

"The insurance industry is vast and can be quite daunting. Insurance is sold almost anything and everything you can imagine. Determining what is good for you can be a very daunting task."

had gone beyond the terms of insurance coverage of fixed assets. Now, because of the risk of losses sudden changes in exchange rates, political disturbance, negligence and liability covers damages as well.

But if a person thoughtfully invests in insurance assets prior to any unexpected contingency then he will be able to compensate for the loss, as shall be determined by the extent of the damage.

entry to the State Bank of India with its proposal to guarantee bank brings a new dynamic to the game. The common experience of other Asian countries have already deregulated markets and allowed foreign companies to participate. If the experience of other countries any guide, the dominance of the Life Insurance Corporation and General Insurance Corporation will not disappear anytime soon.

The aim of all insurance to offset losses from the owner against a variety of risks, we expect that the life, property and business. Insurance is mainly of two types: life insurance and general insurance. General insurance means Fire, Marine and Miscellaneous insurance which includes insurance against burglary or theft, fidelity guarantee, insurance and employer's liability insurance for motor vehicles, livestock and crops.

Life insurance INDIA

"life insurance is the heartfelt love letter ever written.

This calms the crying of a hungry baby at night. Relieves the heart of a grieving widow.

This is the comforting whisper in the dark silent hours of the night. "

Life insurance made its debut in India more than 100 years ago. Salient features of our country is not as widely known as it should. There is no statutory definition of life insurance, but it has been defined in the insurance contract, in which the insured agrees to pay said specific amounts prizes at the specified time, and taking into account these insurance agreed to pay certain amounts of money to certain conditions sand, as laid down occurs at a specific event depending on the duration of human life.

Life insurance is superior to other forms of savings!

"there is no death. Life Insurance exalts life and defeats death.

This premium we pay after the free living death."

Savings life insurance guarantee full protection against the risk of death in savior. In life insurance, the death, the total amount of insurance paid (bonuses where applicable) and other savings plans, only the amount saved (with interest) to be paid.

The essential features of life insurance a) human life of the contract, which b) provides for the payment of a lump sum and c) the amount to be paid after the expiry of a certain period or on death of the insured. The very objective and policies of the insured life insurance companies participating in the interests of your dependents. The wife and children as the case may be, the result of an early death of the insured on the happening of any event. A life insurance policy is generally recognized as safe, even for a commercial loan.


"value and the business of general insurance related to protecting all assets are economic assets."

is not outside of life insurance is a life insurance of insurance, such as fire, marine, accident, medical, motor vehicles and home insurance. Tools have been created through the efforts of the owner, which can be in the form of buildings, vehicles, machinery and other tangible properties. Since tangible property has a physical shape and consistency, it will fire a lot of risks, allied perils of theft and robbery.

There are few general insurance policies

Property Insurance: The home is the most valuable possession. The policy is designed to cover various risks under a single policy. It protects the property and interests of the insured and the family.

Health insurance: provides coverage that takes care of the medical costs of hospital following a sudden illness or accident.

Personal Accident Insurance: This insurance provides compensation danger of death or injury caused by an accident (partial or permanent) by. This includes reimbursement of the costs of treatment, and the use of hospital medical care.

Accident Insurance: This policy covers the insured against various eventualities during travel abroad. This includes against the insured accident, medical expenses and repatriation, loss of checked baggage, passport etc.

Liability Insurance: This policy does not compensate for loss claims arising against the Directors or Officers or other professionals against any unlawful act in an official capacity.

Motor Insurance: motor vehicles Act states that every motor vehicle plying on the road has been connected to at least liability only policy. Two types of policy one of the law on liability, while other covers insurers all liability and damage caused to one's vehicle.

through adolescence baby!

Historical Perspective

The history of life insurance in India dates back to 1818, when he was born as a tool to make the British widows. It is interesting then to pay a higher premium Indian lives than the non-Indian lives as Indian lives was considered riskier coverage.

The Bombay Mutual Insurance Association began its activities in 1870 was the first company to spend the same support for both Indian and non-Indian life. The Oriental Assurance Company was founded in 1880, the general insurance business in India, on the other hand, can trace its roots to the Triton (Tital) Insurance Company Limited, the first general insurance company established in the year 1850 in Calcutta by the British. Almost completely by the end of the nineteenth century insurance business in the hands of foreign companies.

Insurance regulation formally began in India goes by the Life Insurance Act 1912 and the Provident Fund Act of 1912. A number of scams during the 20's and 30's desecrated insurance business in India. In 1938, 176 insurance companies. The first comprehensive legislation was introduced under strict state control of the Insurance Act 1938 required insurance business. The insurance business grew at a faster pace after independence. Indian companies confirmed on hold in the enterprise, but in spite of that growth was observed, insurance remained an urban phenomenon.

The Indian government in 1956 brought together more than 240 life insurance companies and was nationalized monopoly corporation and Life Insurance Corporation (LIC) in the period. Nationalization was justified on the grounds that it created the necessary resources for rapid industrialization. This was in line with the government's chosen path of the state's leading design and development.

The (non-life) business will continue to prosper in the private sector in their operation till 1972 was limited to organized trade and industry in large cities. In 1972 the general insurance was nationalized and merged four companies grouped in nearly 107 insurers – National Insurance Company, New India Assurance Company, Oriental Insurance and United India Insurance. These were subsidiaries of General Insurance Corporation (GIC).

The life insurance industry was nationalized Life Insurance Corporation (LIC) Act of India. In some ways, the LIC has been very prosperous. Whether it is a monopoly, there are a few 60-70000000 bondholders. Given the fact that the Indian middle class of 250-300 million LIC has managed to capture around 30 percent is strange. About 48% of the customers of the LIC are in rural and semi-urban areas. This probably would not have happened had the charter of the LIC not specifically defined purpose to serve in rural areas. The high savings rate in India is one of the external factors that have helped the LIC to grow rapidly in recent years. Despite the high savings rate in India (as in other countries with similar levels of development), Indians display high degree of risk aversion. Thus, nearly half of the investments in physical assets (such as property and gold). Around twenty three percent are in (low yielding but safe) bank deposits. In addition, about 1.3 percent of GDP in savings life insurance vehicles. This number has doubled

from the perspective of the world between 1985 and 1995 – Life Insurance in India

Many countries already providing the same savings. In many developed countries, a significant part of domestic savings in the form of donation insurance plans. This is not surprising. In the foreground, some developing countries is even more surprising. For example, the area of ​​South Africa in the number two spot. India is nestled between Chile and Italy. This is all the more surprising because of the level of economic development in Chile and Italy. Thus it can be said that there is an insurance culture in India despite a low per capita income. This promises well for future growth. Specifically, when the income level improves, insurance (especially life) is likely to grow rapidly.

reform of the insurance sector

Commission reports an unknown, an anonymous!

Although Indian markets were privatized and opened to foreign firms in several sectors in 1991, he left the security of the borders on both counts. The government wanted to proceed with caution. The pressure of the opposition, the government (at that time dominated by the Congress Party) decided to set up a committee headed by Mr. RN Malhotra (the then Governor of the Reserve Bank of India).

Malhotra Committee

liberalization of the Indian insurance market suggested the report was released in 1994, the Committee Malhotra, indicating that the market should be opened to private competition, and ultimately, the foreign private sector competition. He also studied the satisfaction level of the customers of the LIC. Curiously, customer satisfaction was that big.

In 1993, Malhotra Committee – headed by former Finance Secretary and RBI Governor Mr. RN Malhotra – was formed to evaluate the Indian insurance industry, and we recommend that in the future, of course. The Malhotra committee was set up with the aim of which is complementary to the initiated reforms in the financial sector. The aim of the reforms is suitable for a more efficient and competitive financial system, bearing in mind the needs of the economy, structural changes currently taking place and, realizing that insurance is an important part of the entire financial system, which was necessary to address the need for such reforms. In 1994, the committee submitted its report and some key recommendations:

o structure

government's stakes in insurance companies must be brought down, 50%. Government take over of farms GIC and its subsidiaries, affiliates responsible for these independent companies. All insurance companies are given greater freedom to operate.


private enterprise as a minimum paid-up capital of Rs.1 billion should be allowed to participate. No Company should be addressed by both Life and General Insurance in a single unit. Foreign companies may be in cooperation with the industry, the domestic companies. Postal Life Insurance should be allowed to work in the rural market. A single state-level Life Insurance Company should be allowed to operate in each state.

o regulatory body

The insurance law should be changed. An Insurance Regulatory body should be established. Controller Insurance – a part of the Finance Ministry- should be independent.

o Investments


Mandatory Investments LIC Life Fund in government securities decreased by 75% to 50%. GIC and its subsidiaries do not hold more than 5% for each company (there current holdings brought down this level for a while).

o Customer Service

LIC should pay interest on delayed payments beyond 30 days. Insurance companies should be encouraged to set up unit linked pension plans. Computerization of operations and updating technology to carry out the insurance sector. The committee emphasized that in order to improve their customer services and increased insurance policies, industry should be opened up to competition. But at the same time, the Committee felt the need to be cautious, as any failure on the part of new competitors could damage the public's confidence in the industry. It was therefore decided to compete in a limited way, may have the minimum capital requirement of RS.100 crores.

The committee felt the need to provide greater autonomy to companies in order to improve their performance and their economic motive which is responsible for independent companies. For this purpose, he suggested setting up an independent regulatory body – the Insurance Regulatory and Development Authority.

Reforms in the insurance sector started in the passage of the IRDA Bill in Parliament since December 1999. IRDA installation of the statutory body in April 2000, has been meticulously stuck to its schedule of framing regulations and registering the private sector insurance companies.

as set up as a separate legal entity under the IRDA has globally compatible regulations. The other decision taken however, that the support systems of the insurance industry, especially life insurance companies was the launch of the issue and renewal of licenses to IRDA online service agents. The approval of the transfer agent training institutions also ensured that the insurance companies have a skilled workforce of insurance agents in place to sell their products.

The Government of India to liberalize the insurance sector in March 2000 with the passage of Authority, the Insurance Regulatory and Development (IRDA) Bill, lifting all entry restrictions on private players and allowing foreign players to the market some limits on direct foreign ownership It is. The current directives, there is a 26 percent equity cap foreign partners in an insurance company. There is a proposal to increase this limit to 49 percent.

The opening of the sector are more likely to spread and deepening of insurance in India and it is also the restructuring and revitalization of public sector companies. In the private sector 12 life insurance and 8 general insurance companies have been registered. operating in a number of private insurance companies, both life and non-life insurance segment started selling insurance since 2001

Mukherjee Commission

Immediately after the publication of the report of the Malhotra Committee, a new committee, Mukherjee Committee was set up to make specific plans for the requirements of the newly formed companies. Recommendations of the Committee Mukherjee will never be made public. But it became clear that the information that filtered the Committee recommended that in order to ensure a certain proportion of the company's balance sheet to ensure transparency in accounting. But the Finance Minister objected and claimed him, perhaps on the advice of some potential competitors, it could affect the prospects for developing the insurance company.

Law Commission of India REVISION OF Insurance Act 1938 – 190th Law Commission Report

Committee on Legal Affairs June 16, 2003 published a consultation paper on the review of the Insurance Act 1938, the current practice is to adjust the insurance Act, 1938, conducted in 1999 at the time of enactment of the insurance regulatory Development Authority Act, 1999 (IRDA Act).

the Commission has undertaken this exercise in the context of the political changes made it possible for private insurers both life and non–Life sectors. This was felt to tighten the regulatory mechanism, while simplifying the existing legislation in order to eliminate the parts that have become obsolete as a result of the recent changes.

Changes in the main areas, the consultation document suggested that the next

a. Merging the provisions of the IRDA Act, the Insurance Act to avoid multiplicity of proceedings;

b. deleting unnecessary and transitional provisions of the Insurance Act 1938

c. Amendments reflect the changed policy allows private insurance companies and strengthen the regulatory mechanisms

d. 'Own funds' investments and imposing strict standards by maintaining both the public and private sector insurance companies

e. It provides a full range of grievance redressal mechanism that includes the following:

o the Constitution Grievance redressal authorities (GRAS), which is a judicial and two technical Member complaints management / claims against customers' insurance (GRAS is expected to replace the current appointed Ombudsman insurance system)

by officers acting

o appointment of determination and fees IRDA penalties on defaulting insurers, insurance brokers and insurance agents,

o Provides appeal IRDA, grass and examined against decisions an appellate court security officers (IAT), a judge (sitting or retired) of the Supreme Court / chief Justice of the High Court presiding officer and two members with experience of insurance matters;

o Provides a legal appeal against the decisions of the Supreme Court of the IAT.

LIFE + NON-LIFE INSURANCE – Development and Growth!

of 2006 turned out to be a year for the insurance industry regulator the Insurance Regulatory Development Authority Act, established the free pricing general insurance in 2007, while many companies announced to attack the sector.

both domestic and foreign players vigorously strive to increase the long-pending demand for FDI limit of 26 per cent to 49 per cent, and towards the end of the year, the government sent a comprehensive insurance Bill Group of Ministers amid considered strong reservations from the left parties. The Bill is likely to pick up the budget session of Parliament.

The extent of the infiltration of health and other non-life insurance in India is much the international level. These facts show enormous growth potential of the insurance sector. A tour of the FDI limit was 49 percent last year, as proposed by the government. This is not operationalized, legislative changes are needed for such tours. Since the opening of the insurance sector in 1999, foreign investment of Rs. 8700000000 would have been poured into the Indian market and 21 private companies were allowed.

The involvement of the private insurance industry in different segments increased due to both capture a part of the business, which was previously undertaken by the public sector insurers, as well as create additional business avenue. To this effect, the public sector insurers have been unable to draw upon the inherent strengths accept additional premium. In 2004-05, 66.27 per cent growth in premium has been captured by the private insurers despite a 20 percent market share.

recorded a premium income of the life insurance industry Rs.82854.80 crore for the current financial year 2004-05 against Rs.66653.75 crore in the previous financial year, recording an increase of 24.31 percent. The contribution of the first year premium, single premium and renewal fee of the total insurance premium was Rs.15881.33 crore (19.16 per cent); Rs.10336.30 crore (12.47 per cent); and Rs.56637.16 crore (68.36 per cent). In the year 2000-01, when the industry was opened to private players, the life insurance premium was Rs.34,898.48 crore which constitutes Rs. 6996.95 crore of first year premium of Rs. 25191.07 crore of renewal premium and Rs. 2740.45 crore one-time fee. Post opening, one-time fee is reduced Rs.9, 194.07 crore in the year 2001-02 to Rs.5674.14 crore in 2002-03 withdrawal of the guaranteed return policies. Although slightly from Rs.5936.50 crore in 2003-04 (4.62 percent growth) 2004-05, however, witnessed a significant shift in the single premium income rising Rs. 10336.30 crore showing growth of 74.11 per cent in 2003-04.

The size of the life insurance market has increased the strength of economic growth and at the same time increasing income per capita. Consequently, the favorable growth and a total premium LIC (18.25 percent) and the new (147.65 percent) 2004-05. Higher growth should be seen in the context of the low base in 2003- 04. However, the new insurers have improved market share in 2003-04 to 4.68 in 2004-05 to the new 9:33 insurers.

segment wise break-up of the fire, marine and other segment for the public sector insurers was Rs.2411.38 crore and Rs.982.99 crore Rs.10578.59 crore, that is, increase (-) 1.43 per cent, 1.81 per cent and 6.58 per cent. The public sector insurers reported growth in Motor and Health segments (9 to 24 percent). These segments accounted for 45 and 10 percent of business undertaken by the public sector insurers. Fire and "Others" accounted for 17.26 and 11 per cent premium underwritten. Aviation, responsible for "Other" and fire a negative growth of 29, 21, 3.58 and 1.43 percent. No other country, which opened in time for India's foreign companies were able to capture 22 percent market share in the life segment, around 20 per cent in the general insurance segment. Foreign insurers competing Asian markets is no more than 5.10 percent.

The life insurance sector grew new premium at a rate not seen before while the general insurance sector grew at a faster pace. Two new players entered into life insurance – Shriram Life and Bharti Axa Life – taking the total living Player 16 was a new entrant in the form of non-life branch standalone health insurers – Star Health and Allied Insurance, taking the non-life players 14

a number of companies, mostly nationalized banks (about 14), such as Bank of India and Punjab National Bank, announced that to enter the insurance sector and some of them have also formed joint ventures.

the proposed amendment of the FDI cap is part of a comprehensive amendment of insurance laws – the Insurance Act 1999, LIC, 1956 and IRDA Act, 1999, after the proposed amendments in the insurance laws LIC would be able to maintain reserves while insurance companies are able to would not raise equity funds.

About 14 bank queue to enter the insurance sector and during 2006, several joint venture announcements others scout partners. Bank of India has teamed up with Union Bank and Japanese insurance major Dai-ichi Mutual Life while PNB tied foraying into life insurance, Vijaya Bank and the driver. Allahabad Bank, Karnataka Bank, Indian Overseas Bank, Dabur Investment Corporation and Sompo Japan Insurance Inc. has been contracted to develop non-life insurance company, while Bank of Maharashtra tied Shriram Group and South Africa Sanli group of non-life insurance venture.


It seems cynical that the LIC and GIC will wither and die in the next two decades. The IRDA has "a snail's pace" approach. It has been very cautious in issuing permits. It has set up fairly strict standards in all aspects of the insurance business (with the possible exception of the disclosure requirements). The regulators always walk a fine line. Too many regulations kill the motivation of the newly; too loose can induce regulatory failure and fraud, leading to nationalization in the first place. India is not unique to developing countries where insurance business is opened to foreign competitors.

a critical stage in the insurance business in India. Over the next few decades are likely to witness significant growth in the insurance sector, namely for two reasons; financial deregulation always speeds up the development of the insurance industry and the growth of GDP per capita will help the insurance business to grow.

Source by Sowmya Suman

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