Laws of Insurance
Motor Vehicle Act 1939 and 1988
The MV Act 1939 incorporated Chapter VIII which became effective from 1st July 1946. This chapter provided for compulsory insurance of motor vehicles. The motor policy issued is required to cover insured’s liability in respect of death and bodily injuries to Third parties and damage to property of the Third parties. The limits of liability required to be covered are also prescribed in the Act.
The MV Act 1939 was amended in 1956 to provide for the constitution of Motor Accident Claims Tribunals (MACT) by State Governments. The object of this amendment was to ensure speedy settlement of claims of persons involved in Motor Vehicle Accidents.
The modified MV Act 1988 introduced further changes which have far reaching consequences. The changes affect TP liability arising out of the use of motor vehicle in a public place.
The Act has introduced section 140(1) and 140 (3) which provide for the concept of No Fault Liability with payment restricted to Rs. 25,000/- in case of permanent disablement and Rs. 50,000/-
in the case of death of the Third Party resulting from an accident arising out of the use of Motor Vehicle.
The right to claim compensation on the basis of no fault liability is in addition to any other right that the victim may have under any other provisions of the Act or any other law for the time being in force.
Section 163 of the Act provides for establishment of a fund known as Solatium Fund by the Central Govt. to be utilized for paying compensation in respect of death or grievous hurt to persons resulting from “Hit and Run” Motor Accidents. The Solatium Fund comprises of contribution from the General Insurance Industry, the State Government and the Central Government.
The compensation payable for death claim is fixed at Rs. 25,000/- and in respect of grievous hurt Rs. 12,500/-
The 1988 MV Act was further amended in 1994 to introduce a new concept of “payment of compensation on structured formula basis”. In other words, it implies payment of fixed compensation to victims of fatal injuries in motor vehicle accidents based on their age, income and dependency.
Workmen’s compensation Act 1923:
This Act came into force on 1st July, 1924 and has been amended time to time. With the growing complexity of industry and consequently more use of machinery, the workmen are more exposed to danger of accidents. The Act provides for compensation for accidental injury or death of a workman out of and in the course of employment. The compensation is payable by the employer
based on multiplier factors incorporated in the Act.
Factor-multiplier system was introduced by way of amendment of Sec. 4 (1) of the WC Act 1923. The actual amount of compensation is arrived at as follows:
For Death – an amount equal to 50% of the monthly wages of the deceased workman multiplied by relevant factor or Rs. 80,000/-, whichever is more.
For permanent total disability – an amount equal to 60% of monthly wages multiplied by relevant factor or Rs. 90,000/- whichever is more.
Half monthly compensation is payable where the disablement is temporary partial or total. Where the monthly wages of the workman is more than Rs. 4000/- his monthly wages would be taken as Rs. 4000/- only for the purpose of computation.
Section 3(2) of the Act fastens liability upon the employer to pay compensation to the workmen for certain occupational diseases also, stating “contracting of the diseases shall be deemed to have arisen out of and in the course of employment.
Employee’s State Insurance Act, 1948:-
This Act provides for certain benefits in case of sickness, maternity and employment injury to the employees whose monthly wages do not exceed Rs. 6500/-(since revised). The scheme is applicable to industrial employees as defined in the Act and extends to the whole of India. Under the scheme, a fund is maintained consisting of contributions from the employees, employers and the Government.
Following expenses are met from the fund:
• Sickness benefits, maternity benefit, disablement benefit, dependent’s benefit (death) and medical treatment.
• Establishment and Maintenance of hospitals, dispensaries etc. for the benefit of the insured persons and their families.
• Administration of the scheme.
Marine Insurance Act, 1963:
A contract of Marine Insurance is an agreement whereby the insurer undertakes to indemnify the assured, in the manner and to the extent thereby agreed, against Marine losses, that is to say, the losses incidental to marine adventure.
The Marine Insurance Act, 1963 closely follows the U.K. Marine Insurance Act, 1906. The Act codifies the laws relating to marine insurance in India. Different sections of the Act are kept under the following headings:
• Marine Insurance
• Insurable Interest
• Insurable Value
• Disclosure and Representations
• The Policy
• Double Insurance
• Warranties Etc.
• The Voyage
• Assignment of Policy
• The Premium
• Loss and abandonment
• Partial Losses (Including salvage and General Average and Particular charges)
• Measure of indemnity
• Rights of Insurers on payments
• Return of Premium
• Schedule (of the policy)
The Indian Stamp Act, 1899:
• The stamp duties are taxes on transaction. The taxes are levied in the shape of stamps on the instruments. Article 47 of the Act deals with the amount of duty chargeable on the policies of insurance.
The Article divides entire insurance business in five parts as follows:
Fire and other classes of insurance not included elsewhere in the article.
Insurance by way of indemnity against liability under WC Act 1923.
Life Insurance, Group Insurances, other insurances not specifically provided for
The Consumer Protection Act, 1986:
The Act provides for setting up of:
a) The Central Consumer Protection Council.
b) The State Consumer Protection Council.
c) Consumer Disputes Redressal Agencies.
The Central and State Consumer Protection Councils are vested with the responsibility of protecting rights of consumers. A three-tier system of Consumer Disputes Redressal Machinery has been established for the purpose of this Act, namely, District Forum, State Commission and National Commission. These For a established under the Act are quasi-judicial authorities. The Act operates in addition to and not in derogation of any other law for the time being in force.
Married Women’s Property Act:
• policy under Married Women’s Property Act 1874.
• there will be neither nomination nor assignment.
• “A policy of insurance effected by any married man on his own life, and expressed on the face of it to be for the benefit of his wife, or his wife and children, or any of them shall ensure and be deemed to be a trust for the benefit of his wife and children, or any one of them according to the interest so expressed, and shall not, so long as any object of the trust remains, be subject to the control of the husband, or to his creditors, or form part of his estate.
• When the sum assured secured by the policy becomes payable, it shall, unless special trustees are duly appointed to receive and hold the same, be paid to the official trustee of the state in which the office at which the insurance was effected is situated, and shall be received and held by him upon the trusts
expressed in the policy, or such of them as are then existing”.
• the term ‘married man’ includes a widower or a divorced man. Similarly the word ‘children’ means issues in the first generation that is sons and daughters and will not include grandchildren. But it includes ‘adopted children’ in case of any one whose personal law permits adoption.
• The beneficiaries may be given equal or specified unequal share of interest, such share would go to his or her legal representatives in case of the death of the beneficiary. It is also possible to provide that the benefit under the policy shall go to the beneficiaries jointly or the survivors or survivor of them.
• A trust may also be created in favour of the wife and children as a class. In such a case, the benefit would go to the person who at the death of the life assured shall become the widow of the assured and those of the children by any marriage and whenever born, who shall survive him. • However, this facility of beneficiaries as a class is not applicable in respect of Mohammedans because as per their personal law, a gift to a person not yet in existence is void. Hence Mohammedan can create a trust under the provisions of MWP Act only in favour of wife and/or children who must be named and who must exist at the date of the policy.
• The procedure to create a trust under the said act is very simple. The policyholder should, at the time
of proposing for insurance, indicate that he wishes to take the policy under Section 6 of MWP Act. He should not however nominate any one under Section 39 of Insurance Act. He will have to complete an addendum to the proposal. The form of addendum depends upon two factors, viz., the type of beneficiaries- named or as a class and the nature of trustees- individuals or corporate bodies like Banks.
• There can be one or more trustees but they must be capable of contracting as per the provisions of Indian Contract Act. Their consent, however, is essential to act as trustees. They should signify their assent by subscribing their signatures in the addendum to the proposal for life insurance. The life assured can give other specific powers to the trustees to raise any loan on the policy for the benefit of the beneficiaries or reserve to himself powers to appoint new trustees in case the appointed trustees become incapable to act or die. Once it is decided to accept the proposal, the insurance company issues the policy document showing on its face that it is taken under ‘MWP Act’.
• Where, therefore, the policy is under the said Act, in case of payment of policy moneys, either on the death of the life assured or on maturity of the policy, the insurance company will have to make the payment to the trustees appointed. If no trustees are appointed by the life assured, then
payment is made to the official trustee of the state. Thus a valid discharge for payment of the
policy moneys is obtained by the insurance company from the appointed trustees or their absence the official trustee of the state. It is for the trustees later on to pass on the benefits to the beneficiaries according to the terms of the trust.
National consumer dispute redressal commission, New Delhi (NS1289) LICI (Appellants) vs. consumer education & research society (respondent):
• Agent of LIC- nature and scope of the authority of the LIC agents in the matter of receiving the
premium from the insured on behalf of the insurer- LIC of India- The Agents Rules framed the LIC act are statutory rules and are binding on the corporation and the policy-holders who are
deemed to have knowledge of the said rules which are admittedly gazetted- held the insurance agent in receiving a bearer cheque from the
• insured towards payment of insurance premium was not acting as the Agent of insurer LIC nor can it be deemed that the insurer LIC had received the premium on the date the bearer cheque towards the premium was received by the insurance Agent viz. the 4th June 1987 even though he deposited the same with the insurer LIC on the 10th august 1987, one day after the death of the insured.
IRDA ACT, 1999:
i) An Act to provide for the establishment of an Authority
ii) To protect the interest of holders of insurance policies,
iii) To regulate, promote and ensure orderly growth of insurance industry and
iv) For matter connected therewith or incidental thereto
v) To amend the Insurance Act, 1938, LIC Act, 1956 and General Insurance Business (Nationalization)
The Act came into force on 19.04.2000. This Act may be called the Insurance Regulatory and Development Authority Act, 1999.It extended to the whole of India,
COMPOSITION OF AUTHORITY
a) The Authority shall consist of the following members viz.,
• A Chairperson
• Not more than five whole time members
• Not more than four part time members
To be appointed by the Central Govt. from amongst persons of ability, integrity and standing who have knowledge or experience in life insurance, gen. insurance, actuarial science, finance, economics, law, accountancy, administration or any other discipline which would in the opinion of the Central Govt. be useful to the Authority. Provided that the Central Govt. 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.
SECTION: 14: DUTIES, POWERS AND FUNCTIONS OF AUTHORITY:
1) Subject to the provisions of this Act and any other law for the time being in force, the authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and reinsurance business.
2) without prejudice to the generality of the provisions contained in sub section (1) the powers and functions of the Authority shall include:
a) Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration;
b) Protection of the interests of the policy holders in matters concerning assigning of policy,
Nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance.
(c) Specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents;
(d) Specifying the code of conduct for surveyors and loss assessors;
(e) Promoting efficiency in the conduct of insurance business;
(f) Promoting and regulating professional organizations connected with the insurance and re-insurance business;
g) Levying fess and other charges for carrying out the purposes of this Act;
(h) Calling for information from, undertaking inspection of, conducting enquiries and
Investigations including audit of the insurers, intermediaries, insurance intermediaries and other
organisations connected with the insurance business.
(i) Control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under Sec.64U of the Insurance Act, 1938(4 of 1938)
(j) Specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries;
(k) Regulating investment of funds by insurance companies; 12
(l) Regulating maintenance of margin of solvency;
(m) Adjudication of disputes between insurers and intermediaries or insurance intermediaries
(n) Supervising the functioning of the Tariff Advisory Committee;
(o) Specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organizations referred to in clause (f)
(p) Specifying the percentage of life insurance business and general insurance business to be
undertaken by the insurer in the rural or social sector and
(q) Exercising such other powers as may be prescribed.
(Total – 17 items)
INSURANCE ACT 1938 [AS AMENDED BY INSURANCE (AMENDMENT) ACT, 2002]
An act to consolidate and amend the law relating to the Business of insurance.
The Act came into force on 1/7/1939
1. This Act may be called the Insurance Act, 1938.
2. It extends to the whole of India.
“Authority” means the Insurance Regulatory and Development Authority established under
Sub-section (1) of Section 3 of the Insurance Regulatory and Development Authority Act,
“Indian Insurance Company” means any insurer being a company –
(a) which is formed and registered under the Companies Act, 1956(1 of 1956);
(b) in which the aggregate holdings of equity shares by a foreign company, either by itself or through its subsidiary companies or its nominees, do not exceed twenty-six per cent paid up equity capital of such Indian insurance company;
(c) whose sole purpose is to carry on life insurance business or general insurance business or reinsurance business.
“Insurance agent” means an insurance agent licensed under Section 42 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]
- Certificate of Registration for the particular class of insurance business in India
- Application for registration shall be made in such a manner as may be determined by the regulations made by the authority in this behalf.
Renewal of registration:
- To be renewed annually for each year after that ending on the 31st of March23 – Application for renewal for every year shall be made to the authority before 31st December of the preceding year.
- Application shall be accompanied by evidence of payment of fees as determined by the Regulations. – Fee not to exceed ¼ of 1% of such Premium Income or Rs.5 crores, whichever is less.
- Minimum fee Rs.50, 000/- for each Class of Insurance.
Requirement as to capital
No insurer ………………………………shall be registered unless he has –
(i) A paid up equity capital of rupees one hundred crores, in case of a person carrying on
The business of life insurance or general insurance; or
(ii) A paid up equity capital of rupees two hundred crores, in case of a person carrying on
Exclusively the business as a reinsurer.
Deposits: Every Insurer shall ……………. deposit or Keep deposited ……………………
(a) In the case of life insurance business, a sum equivalent to one percent of his total gross premium written in India in any financial year commencing after the 31st day of March 2000, not exceeding rupees ten crores;
(b) In the case of general insurance business, a sum equivalent to three per cent of his total gross premium written in India, in any financial year commencing after the 31st day of March 2000, not exceeding rupees ten crores
(c) In the case of re-insurance business, a sum of rupees twenty crores
• Accounts and Balance Sheet (S-11)
Prepare a balance sheet, a profit and loss account, separate account of receipts and payments, a revenue account. Separate accounts relating to funds of shareholders and policy holders.
Register of policy and register of claims:
Every insurer shall maintain –
a. A register or record of policies, in which shall be entered, in respect of every policy issued by the insurer, the name and address of the policy-holder, the date when the policy was effected and a record of any transfer, assignment or nomination of which the insurer has notice, and 31
b. A register or record of claims, in which shall be entered every claim made together with the date of the claim, the name and address of the claimant and the date on which the claim was Discharged, or, in the case of a claim which is rejected, the date of rejection and the ground therefore.
• 27C. Prohibition for investment of funds outside India
– No insurer shall directly or indirectly invest outside India the funds of policy-holders.
• 27D. Manner and conditions of investment
1) Without prejudice to anything contained in sections 27, 27A and 27B, the Authority may, in
The interests of the policy-holders, specify by the regulations made by it, the time, manner and
other conditions of investment of assets to be held by an insurer for the purposes of this Act.
2) The Authority may give specific directions for the time, manner and other conditions subject to which the funds of policy holders shall be invested in the infrastructure and social sector as may be specified by regulations made by the Authority and such regulations shall apply uniformly to all the insurers carrying on the business of life insurance.
Power of authority to issue directions:
(1)Where the [Authority] is satisfied that –
(a) In the public interest; or
(b) To prevent the affairs of any insurer being conducted in a manner detrimental to the interests of the policyholders or in a manner prejudicial to the interests of the insurer; orc) …………….. he may, from time to time, issue such directions as he deems fit, and the insurers or the insurer, as the case may be, shall be bound to comply with such directions; provided that no such direction shall be issued to any insurer in particular unless such an insurer has been given a reasonable opportunity of being heard.
SECTION 38 –
ASSIGNMENT OF POLICIES SUB-SECTION (1) – How made
A transfer or assignment of a policy of life insurance may be made with or without consideration, ONLY
• By endorsement upon the policy itself OR
• By a separate instrument (to be stamped) Signed in either case
• By the transferor OR
• By the assignor OR
• His duly authorized agent and attested by at least one witness specifically setting forth the fact of a transfer or assignment.
SECTION 38 –
SUB-SECTION (2) – When the Assignment is complete the transfer or assignment shall be complete and effectual.
• Upon the execution of such endorsement or instrument
• Duly attested• But except where the transfer or assignment is in favor of the insurer
• Shall not be operative as against an insurer AND
• Shall not confer upon the transferee or assignee or his legal representative, AND
• Right to sue for the amount of such policy OR the moneys secured thereby
SECTION 38 –
SUB-SECTION (2) Notice to insurer
• A notice in writing of the transfer or assignment and
• Either the said endorsement or instrument itself
• Or a copy thereof certified to be correct
• By both transferor and transferee or their duly authorized agents
• Have been delivered to the insurer. Where the insurer maintains one or more places of business in India,
• Such notice shall be delivered
• At the place in India mentioned in the policy for the purpose OR
• At his principal place of business in India.
SECTION 38 –
SUB-SECTION (3) – Priority of claims
The date on which the notice referred to in S.S. (2) is delivered to the insurer
• Shall regulate the priority of all claims under a transfer or assignment
• As between persons interested in the policy.
SECTION 38 –
SUB-SECTION (4) – What insurer should do
Upon the receipt of the notice referred in S.S. (2)
The insurer shall record the fact of such transfer or assignment together with the date
thereof and. the name of the transferee or the assignee and shall on the request of the person by whom the notice was given or of the transferee or assignee, on payment of a fee not exceeding one rupee, grant a written acknowledgment of the receipt of such notice and any such acknowledgement shall be conclusive evidence against the insurer that he has duly received the notice to which such acknowledgement relates.
SECTION 38 –
SUB-SECTION (5) – Recognition
Subject to the terms and conditions of the transfer or the insurer shall, from the date of receipt of the notice referred to in S.S. (2), recognize the transferee or assignee named in the notice• as the only person entitled to benefit under the policy and such person shall be subject to all liabilities
and equities to which the transferor or assignor was subject to at the date of the transfer or assignment and may institute any proceedings in relation to the policy without obtaining the consent of the transferor or assignor or making him a party to such proceedings.
SECTION 38 –
SUB-SECTION (6) – Effect of earlier assignments
Any rights and remedies of an assignee or transferee of a policy of insurance under an assignment transfer effected prior to the commencement of this Act shall not be affected by the provisions of this Section.
SECTION 38 –
SUB-SECTION (7) – Validity of conditional assignment
Any assignment shall be valid first in favour of a person made with the condition that it shall be inoperative; OR that the interest shall pass to some other person on the happening of a specified event during the life time of the person whose life is insured; AND an assignment in favour of the survivor or survivors of a number of persons.
Law Commission S.38
(1) A transfer or assignment of a policy of insurance, wholly or in part, whether with or without consideration, may be made only by an endorsement upon the policy itself or by a separate instrument, signed in either case by the transferor or by the assignor or his duly authorized agent and attested by at least one witness, specifically setting forth the fact of transfer or assignment and the reasons therefore, the antecedents of the assignee and the exact terms on which the assignment is made.
• Provided that an insurer may decline to act upon such endorsement where it has sufficient reason to believe that such transfer or assignment is not bonafide or is not in the interests of the policyholder or in public interest.
• Provided further that the insurer will record in writing such reasons for refusal to act upon the endorsement and communicate the same to the policyholder not later than 30 days from the date of the policyholder giving notice of such transfer or assignment.
• Provided further that any person aggrieved by the decision of an insurer to decline to act upon such transfer or assignment may within a period of not more than 30 days from the date of receipt of the communication from the insurer containing reasons for such refusal, prefer a claim to the Grievance Redressal Authority.
(2) Subject to the provisions in sub-section (1), the transfer or assignment shall be complete and effectual upon the execution of such endorsement or instrument duly attested but except where the transfer or assignment is in favour of the insurer shall not be operative as against an insurer and shall not confer upon the transferee or assignee, or his legal representative, any right to sue for the amount of such policy or the moneys secured thereby until a notice in writing of the transfer or assignment and either the said endorsement or instrument itself or a copy thereof certified to be correct by both transferor and transferee or their duly authorized agents have been delivered to the insurer:
Provided that where the insurer maintains one or more places of business in India, such notice shall be delivered only at the place in India mentioned in the policy for the purpose or at the principal place of business of the insurer in India.
(3) The date on which the notice referred to in sub-section (2) is delivered to the insurer shall regulate the priority of all claims under a transfer or assignment as between persons interested in the policy; and where there is more than one instrument of transfer or assignment the priority
of the claims under such instruments shall be governed by the order in which the notices referred to in sub-section (2) are delivered. Provided that if any dispute as to priority of payment arises as between assignees, the dispute will be referred to the Grievance Redressal Authority.
(4) Upon the receipt of the notice referred to in sub-section (2), the insurer shall record the fact of such transfer or assignment together with the date thereof and the name of the transferee or the assignee and shall, on the request of the person by whom the notice was given, or of the transferee or assignee, on payment of such fee as may be specified by regulations, grant a written acknowledgement of the receipt of such notice; and any such acknowledgement shall be conclusive evidence against the insurer that he has duly received the notice to which such acknowledgment relates.
(5) Subject to the terms and conditions of the transfer or assignment, the insurer shall, from the date of the receipt of the notice referred to in sub-section (2), recognize the transferee or assignee named in the notice as the absolute transferee or assignee entitled to benefit under the policy,
and such person shall be subject to all liabilities and equities to which the transferor or assignor was subject at the date of the transfer or assignment and may institute any proceedings in relation to the policy, obtain a loan under the policy or surrender the policy without obtaining the
consent of the transferor or assignor or making him a party to such proceedings.
• Explanation. Except where the endorsement referred to in sub-section (1) expressly indicates
that the assignment or transfer is conditional In terms of sub-section (7) hereunder, every assignment or transfer will be deemed to be an absolute assignment or transfer and the assignee or transferee as the case may be will be deemed to the absolute assignee or transferee respectively.
(6) Any rights and remedies of an assignee or transferee of a policy of life insurance under an assignment or transfer effected prior to the commencement of this Act shall not be affected by the provisions of this section.
(7) Notwithstanding any law or custom having the force of law to the contrary, an assignment in
favour of a person made upon the condition that
(a) the proceeds under the policy will become payable to the policyholder or the nominee or nominees in the event of either the assignee/ transferee predeceasing the insured; or (b) the insured surviving the term of the policy; shall be valid. Provided that a conditional assignee shall not be entitled to obtain a loan on the policy or surrender a policy.
(8) In the case of the partial assignment or transfer of a policy of insurance under subsection
(1), the liability of the insurer shall be limited to the amount secured by partial assignment or transfer and such policyholder shall not be entitled to further assign or transfer the residual amount payable under the same policy.
• Amendment of section 38
• 7.6 The Committee in its deliberations was of the view that this section dealing with assignments has withstood the test of time, and would not seem to call for any amendment, except for the addition one sub-section to empower the Authority to restrict or regulate certain types of assignments. This is called for to nip in the bud the potential for trading in life insurance policies by certain agencies, and to prevent moral hazards associated with such trading in life insurance policies.
• 7.6.1 Yet, the Law Commission had dealt extensively with the provisions in the Section and
had made recommendations on specific amendments that could help to cover partial transfers of interest and conditional assignments. The Law Commission had also considered and provided for situations of possible conflict with policyholder or public interest when the insurer could decline to act on the endorsement of assignment without further enquiry.
• 7.6.2 While taking note particularly of the last mentioned recommendation, the Committee, being also of the view on the need for circumspection, makes its own recommendation on what the additional provision to Section 38 could be, possibly as sub-section (9). It is suggested that the following sub-section may be inserted as subsection (9) to section 38: “(9) notwithstanding
anything to the contrary contained in any other law for the time being in force, the Authority
may, in the interests of policyholders or of the public prohibit, restrict or regulate certain
types of assignments as may be specified by regulations made by the Authority.”
SECTION 39 –
Nomination by policyholder
SUB-SECTION (1) – When made the holder of a policy of life insurance on his own life may,
• When effecting the policy OR
• At any time before the policy matures for payment
• Nominate the person or persons
• To whom the money secured by the policy shall be paid
SECTION 39 –
SUB-SECTION (1) – When money payable
• In the event of his death
SECTION 39 –
SUB-SECTION (1) – Minor Nominee Appointee
Where any nominee is a minor
• It shall be lawful for the policyholder
• To appoint in the prescribed manner
• Any person to receive the money secured by the policy
• In the event of his death during the minority of the nominee
SECTION 39 –
SUB-SECTION (2) – When the nomination is effectual
Any such nomination in order to be effectual shall,
• Unless it is incorporated in the text of the policy itself
• Be made by an endorsement on the policy communicated to the insurer, AND
• Registered by him in the records relating to the policy
SECTION 39 –
SUB-SECTION (2) – Cancellation or change of nomination AND
• Any such nomination may at any time before the policy matures for payment be cancelled OR
• Changed by an endorsement OR
• A further endorsement OR
• A will, as the case may be
SECTION 39 –
SUB-SECTION (2) – Cancellation or change of nomination BUT UNLESS
• Notice in writing of any such cancellation OR change
• Has been delivered to the insurer,
SECTION 39 –
SUB-SECTION (2) – When not liable to pay
•T he insurer shall not be liable for payment under the policy made bona fide by him
• To a nominee mentioned in the text of the policy OR
• Registered in records of the insurer.
SECTION 39 –
SUB-SECTION (3) – Acknowledgement of Registration
The insurer shall furnish to the policyholder
• A written acknowledgment of having registered a nomination OR
• A cancellation OR
• Change thereof
SECTION 39 –
SUB-SECTION (3) – Registration or cancellation charges AND
• May charge a fee not exceeding one rupee for registering such
• Cancellation or change
SECTION 39 –
SUB-SECTION (4) – When Nomination gets cancelled
A transfer or assignment of a policy made in accordance with Section 38 shall automatically
cancel a nomination.
• Provided that the assignment of a policy to the insurer
• Who bears the risk on the policy at the time of assignment.
• In consideration of a loan granted by that insurer
• On the security of the policy within its surrender value
SECTION 39 –
SUB-SECTION (4) – When Nomination gets cancelled OR
• Its reassignment on repayment of the loan
• Shall not cancel a nomination, BUT
Shall affect the rights of the nominee only to the extent of the insurer’s interest in the policy
SECTION 39 –
SUB-SECTION (5) – MATURITY PAYMENTS
When the policy matures for payment
• During the life time of the person whose life is insured OR
SECTION 39 –
SUB-SECTION (5) – MATURITY PAYMENTS
• Where the nominee or,
• If there are more nominees than one,
• All the nominees die before the policy matures for payment,
SECTION 39 –
SUB-SECTION (5) – MATURITY PAYMENTS
• The amount secured by the policy shall be payable to the policyholder OR
• His heirs OR
• Legal representatives OR
• The holder of succession certificate as the case may be.
SECTION 39 –
SUB-SECTION (6) –When the payment is made to the nominee
Where the nominee or, if there are more nominees than one
• A nominee or nominees survive the person, whose life is insured,
• The amount secured by the policy shall be payable to such
• Survivor or survivors
SECTION 39 –
SUB-SECTION (7) –
When the provisions are not applicable
• The provisions of this section shall not apply to any policy of life insurance to which s.6 of the
Married Women’s Property Act, 1874, applies or has at any time applied:
Law Commission s.39
(1) The holder of a policy of life insurance on his own life may, when effecting the policy or at any time before the policy matures for payment, nominate the person or persons to whom the money secured by the policy shall be paid in the event of his death:
Provided that, where any nominee is a minor, it shall be lawful for the policyholder to appoint in the prescribed manner any person to receive the money secured by the policy in the event of his
Death during the minority of the nominee.
(2) Any such nomination in order to be effectual shall, unless it is incorporated in the text of the
policy itself, be made by an endorsement on the policy communicated to the insurer and registered by him in the records relating to the policy and any such nomination may at any time before the policy matures for payment be cancelled or changed by an endorsement or a further
endorsement or a will, as the case may be, but unless notice in writing of any such cancellation or change has been delivered to the insurer, the insurer shall not be liable for any payment under the policy made bona fide by him to a nominee mentioned in the text of the policy or registered
in records of the insurer.
(3) The insurer shall furnish to the policy-holder a written acknowledgment of having registered a nomination or a cancellation or change thereof, and may charge such fee as may be specified by regulations for registering such cancellation or change.
(4) A transfer or assignment of a policy made in accordance with s.38 shall automatically cancel a nomination:
• Provided that the assignment of a policy to the insurer who bears the risk on the policy at the time of the assignment, in consideration of a loan granted by that insurer on the security of the policy within its surrender value, or its re-assignment on repayment of the loan shall not cancel a nomination, but shall affect the rights of the nominee only to the extent of the insurer’s interest in the policy.
• Provided that the transfer or assignment of a policy, whether wholly or in part, in consideration of a loan advanced by the transferee or assignee to the policyholder, will not cancel the nomination but shall affect the rights of the nominee only to the extent of the interest of the transferee or assignee as the case may be in the policy.
• Provided that the nomination, which has been automatically, cancelled consequent upon the transfer or assignment, the same nomination shall stand automatically revived when the policy is reassigned by the assignee or retransferred by the transferee in favour of the policy holder on repayment of loan other than on a security of policy to the insurer.
(5) Where the policy matures for payment during the lifetime of the person whose life is insured or where the nominee or, if there are more nominees than one, all the nominees die before the policy matures for payment, the amount secured by the policy shall be payable to the policy-holder or his heirs or legal representatives or the holder of a succession certificate, as the
case may be.
(6) Where the nominee or if there are more nominees than one, a nominee or nominees survive the person whose life is insured, the amount secured by the policy shall be payable to such survivor or survivors.
(7) Subject to the other provisions of this section, where the holder of a policy of insurance on his own life nominates his parents, or his spouse, or his children, or his spouse and children, or any of them, the nominee or nominees shall be beneficially entitled to the amount payable by the insurer to him or them under sub-section (6) Unless it is proved that the holder of the policy, having regard to the nature of his title to the policy, could not have conferred any such beneficial title on the nominee.
(8) Subject as aforesaid, where the nominee, or if there are more nominees than one, a nominee or nominees, to whom sub-section (7) applies, die after the person whose life is insured but before the amount secured by the policy is paid, the amount secured by the policy, or so much of the amount secured by the policy as represents the share of the nominee or nominees so dying (as the case may be), shall be payable to the heirs or legal representatives of the nominee or nominees or the holder of a succession certificate, as the case may be, and they shall be beneficially entitled to such amount.
(9) Nothing in sub-sections (7) and (8) shall operate to destroy or impede the right of any creditor to be paid out of the proceeds of any policy of life insurance.
(10) The provisions of sub-sections (7), (8) and (9) shall apply to all policies of life insurance maturing for payment after the commencement of this Act.
(11) Every policyholder shall have an option to indicate in clear terms whether the person or persons being nominated by the policyholder is/ are a beneficiary nominee(s) or a collector nominee(s). Provided where the policyholder fails to indicate whether the person being nominated is a beneficiary nominee or a collector nominee it will be deemed that the person
nominated is a beneficiary nominee. Explanation: For the purposes of this sub-section the expression ‘beneficiary nominee’ means a nominee who is entitled to receive the entire proceeds payable under a policy of insurance subject to other provisions of this Act and the expression
‘collector nominee’ means a nominee other than a beneficiary nominee.
(12) The collector nominee shall make payment the benefits arising out of policy to the beneficiary nominee or his legal heirs or representative in accordance with the regulations made by the Authority.
(13) Where a policyholder dies after the maturity of the policy but the proceeds and benefit of his
policy has not been made to him because of his death, in such a case, his nominee shall be entitled to the proceeds and benefit of his policy.
(Same as S.39 (7) in Insurance Act)
(14) The provisions of this section shall not apply to any policy of life insurance to which s.6 of the Married Women’s Property Act, 1874, applies or has at any time applied:
• Amendment of Section 39 7.7 Like section 38, section 39 governing nominations has also
Withstood the test of time. There has been considerable jurisprudential development in regard
to the rights and obligations of nominees. Therefore, it is suggested that no amendment is called for visà- vis section 39. 7.7.1 The Committee has noted again the extensive treatment given by the Law Commission. It is apprehensive though about recommendations providing for beneficial interests to be acquired by nominees who come possibly within kinship relation either blood or by marriage but might not necessarily fall within heir-ship.
Prohibition of rebates:
No person, either directly or indirectly allow or offer to allow as an inducement to any person
a) To take out or
b) Renew or
Prohibition of rebates:
An insurance in respect of any kind of risk relating to lives or property in India Any rebate of the whole or part of the commission payable
Any rebate of the premium shown on the Policy
Prohibition of rebates:
Nor shall any person taking out or renewing or continuing a policy accept any rebate,
Except such rebate as may be allowed in accordance with the published prospectuses or tables of the insurer.
i) Licensing of insurance agents:
The authority or an officer authorized by it in this behalf, in the manner determined by the Regulations made by it, ………………. Issue ……………….. A License to act as an Insurance Agent ……………….
Issue of license to intermediary or insurance intermediary:
The authority or an officer authorized by it in this behalf shall, in the payment of the fees determined by the regulations made by the authority, issue to any person making an application in the manner determined by the regulations, and not suffering from any of the disqualifications
herein mentioned, a license to act as an intermediary or an insurance intermediary under this Act.
Policy not to be called in question on ground of mis-statement after 2 years :
No policy of life insurance effected before the commencement of this Act shall after the expiry of two years from the date of commencement of this Act AND no policy of life insurance effected after the coming into force of this Act shall, after the expiry of two years from the date on which it was effected, be called in question
By an insurer on the ground
1. That a statement made in the proposal for insurance OR
2. In any report of a (a) Medical officer, or
(b) Referee, or
(c) Friend of the insured, or
In any other document leading to the issue of the policy, was inaccurate or false, unless the insurer shows that,
1. Such statement was on material matter OR Suppressed facts which it was material to disclose
2. That it was fraudulently made by the policyholder And
3. That the policyholder knew at the time of making it that the statement was false Or
That it suppressed facts which it was material to disclose:
Provided that nothing in this section shall prevent the insurer from calling for proof of age at any
Time if he is entitled to do so, And No policy shall be deemed to be called in question merely because the terms of the policy are adjusted on subsequent proof that the age of the life insured was incorrectly stated in the proposal.
Law Commission S.45
(1) No policy of life insurance shall be called in question on any ground whatsoever after the expiry of five years from the date of the policy, i.e. from the date of issuance of the policy or the date of commencement of risk or the date of revival of the policy or the date of the rider to the
policy whichever is later
(2) A policy of life insurance may be called in question at any time within five years
from the date of issuance of the policy or the date of commencement of risk or the date of revival of the policy or the date of the rider to the policy whichever is later on the ground of fraud Provided that the insurer will have to communicate in writing to the insured or the legal representatives / nominees/assignees of the insured the grounds and materials on which such decision is based Explanation I: For the purposes of this subsection, the expression ‘fraud’ means any acts committed by the insured or by his agent, with the intent to deceive the insurer or to induce the insurer to issue a life insurance policy:
Explanation II: Mere silence as to facts likely to affect the assessment of the risk by the insurer is
not fraud, unless the circumstances of the case are such that, regard being had to them, • it is the duty of the insured or his agent, keeping silence to speak, or unless his silence is, in itself, equivalent to speech. (3) Notwithstanding anything contained in sub-section (2) hereinabove,
no insurer shall repudiate a life insurance policy on the ground of fraud if the insured can prove
that the misstatement of or suppression of a material fact was true to the best of his knowledge
and belief or that there was no deliberate intention to suppress the fact or that such misstatement of or suppression of a material fact was within the knowledge of the insurer or the agent of the
insurer. • Explanation: A person who solicits and negotiates a contract of insurance should be
deemed for the purpose of the formation of the contract, to be the agent of the insurer, and that the knowledge of such person should be deemed to be the knowledge of the insurer.
(4) A policy of life insurance may be called in question at any time within five years from the
date of issuance of the policy or the date of commencement of risk or the date of revival of the
policy or the date of the rider to the policy whichever is later on the ground that any statement of or suppression of a fact material to the expectancy of the life of the insured was incorrectly made in the proposal or other document on the basis of which the policy was issued or revived or rider issued Provided that the insurer will have to communicate in writing to the insured or the legal representatives/ nominees/assignees of the insured the grounds and materials on which such decision to repudiate the policy of life insurance is based. Provided further that in case of repudiation of the policy on the ground of misstatement or suppression of a material fact, and not on the ground of fraud, the premiums collected on the policy till the date of repudiation shall be paid to the insured or the legal representatives/ nominees/ assignees of the insured within a period of ninety days from the date of such repudiation.
Explanation: For the purposes of this subsection, the misstatement of or suppression of fact will not be considered material unless it has a direct bearing on the risk undertaken by the insurer; the onus is on the insurer to show that had the insurer been aware of the said fact no life insurance
policy would have been issued to the insured.
(5) Nothing in this section shall prevent the insurer from calling for proof of age at any time
if he is entitled to do so, and no policy shall be deemed to be called in question merely because
the terms of the policy are adjusted on subsequent proof that the age of the life insured
was incorrectly stated in the proposal.
• (KPN committee) Section 45: Policy not to be called in Question on Ground of Misstatement after two years:
The Committee noted the elaborate consideration given in the Law Commission Report and the
recommendations made with regard to amendments to the provisions on the policy of life insurance being called in question on account of any misstatements in the proposal for other papers leading to the issue of the policy. The Law Commission Report has refer to several Court
rulings, including those of the Supreme Court, and the Committee considered that there was a quite well settled case law on the subject that insurers did appreciate, making any amendment of the present Act provisions unnecessary for an equitable and adequate protection of the interest of policyholders or of other beneficiary claimants.
• 7.45.1 A policy of life insurance obtained on false premises constituted a fraud not only on the life insurance company but also on the holders of other policies, in as much as a claim unwarrantedly having to be settled affected the policyholders fund that the insurer carried for its
policyholders as a whole and, additionally, could lead to the insurer having to reconsider its underwriting and pricing norms. The requirement of uberrima fidei that applied in the placement of a policy for life insurance did not relieve an applicant of that requirement by allowing an extended period of five years for the insurance company, by further due enquiry, to check on the correctness of the information furnished for grant of the insurance. The insurer had to take
the proposer on trust beyond whatever information was obtained at the time of the proposal and several practical issues could arise if verifications were left to be undertaken after grant of the insurance, at a cost.
• 7.45.2 It was represented to the Committee that the amendment proposed by the Law Commission to make a policy of life insurance totally immune from being called in question beyond five years of its issue or of revival following any lapsation, would leave a life insurance company vulnerable to fraudulent insurances being taken and in any case to grant of insurances on inappropriate terms.
• 7.45.3 A second representation relating to the possible attribution of complicity to an agent who solicited and procured a policy of life insurance, in respect of any misrepresentation or suppression of material fact contained in the proposal papers, carrying as they did a signed
declaration by the proposer with regard to the veracity of the statements contained in the proposal papers. The seriousness of any misrepresentation in respect of information provided by the proposal did not become any the less by an effort to ascribe possession of correct
information to the soliciting agent – an issue that could come up from the added provision suggested by the Law Commission of deeming such information as then being available to the company – and should not be a mitigation in holding on a breach of warranty by the proposer himself in regard to the correctness of the information that was to be the basis for grant of insurance.
• 7.45.4 The Committee, while accepting in humility the considerations that had led the Law
Commission to recommend amendments to Section 45 of the Act, is of the view, as earlier remarked, that sufficient relief is available, with the section reading as it presently does, supported by case law, against any inequitable efforts by a life insurance company to void a policy on grounds of misstatement or suppression of material facts in the proposal papers leading to the issue of the policy.
Claim on small life insurance policies:
- Dispute relating to small sum assured not exceeding Rs.2, 000/- be referred to authority at the option of the claimant. – The decision of the authority will be final and not be called in question in any court.
Supply of copies of proposals and medical reports :
Every insurer shall, on application by a policy-holder and on payment of a fee not exceeding on rupee, supply to the policy-holder and on payment of a the questions put to him and his answers
thereto contained in his proposal for insurance and in the medical report supplied in connection therewith.
No risk to be assumed unless premium is received in advance :
No insurer shall assume any risk in India ……….until the premium payable is received by him or is guaranteed to be paid by such person in such a manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner.
Power of Central Govt to make rules:
The Central Government may, subject to the condition of previous publication by notification in the Official Gazette, make rules to carry out the purposes of this Act.
Power of Authority to make regulations:
(1)The Authority may, by notification in the Official Gazette, make regulations consistent with this Act and the rules made thereunder, to carry out the purposes of this Act.
Power of Authority to make regulations:
(2)In particular, and without prejudice to the generality of the foregoing power, such regulations may provide for all or any of the following matters, namely: – IRDA REGULATIONS
1. IRDA (Actuarial Report and Abstract) Regulations, 2000.
2. IRDA (Asset, Liabilities and Solvency Margin), Reg.
3. IRDA (Investment) Regulations, 20004. IRDA (Investment) (Amended) Regulations, 2001
5. IRDA (Investment) (Amended) Regulations, 2004 and Investment Guidelines
6. IRDA (Registration of Insurance Companies) Reg.2000.
7. IRDA (Appointed Actuary) Regulations, 2000.
8. IRDA (Life Insurance – Reinsurance) Regulations, 2000.
9. IRDA (Insurance Brokers) Regulations, 2002.
10. IRDA (Advertisement & Disclosure) Regulations, 2000.
11. IRDA (Licensing of Corporate Agents) Regulations, 2002.
12. IRDA (Licensing of Insurance Agents) Regulations, 2000.
13. IRDA (Preparation of Financial Statements etc) Reg.2000/2002.
14. IRDA(Obligation of Insurer to Rural or Social Sectors) Reg.2000/2002. 132
15. IRDA (Protection of policyholders’ interest) Reg.2002.
16. IRDA (Manner of receipt of premium) Regulations 2002.
17. IRDA (Distribution of Surplus) Regulations 2002
18. IRDA ( Qualification of Actuary) Regulation 2004
19. IRDA (Micro Insurance) Regulations, 2005
Some regulations to be covered now
1. IRDA (Protection of policyholders’ interest) Reg.2002.
2. IRDA (Advertisement & Disclosure) Regulations, 2000
3. IRDA (Licensing of Insurance Agents) Regulations, 2000
4. IRDA (Licensing of Corporate Agents) Regulations, 2002
5. IRDA (Insurance Brokers) Regulations, 2002
6. IRDA (Manner of receipt of premium) Regulations, 2002
IRDA (Advertisement & Disclosure) Regulations, 2000.
2. Definitions: 2(b) defines ‘Insurance advertisement’.
“Insurance advertisement means and includes:-
o Newspapers, magazines and sales talks;
o Billboards, hoardings, panels;
o Radio, television, website, e-mail, portals;
o Representations by intermediaries;
o Descriptive literature/circulars;
o Sales aids flyers;
o Illustrations form letters;
o Telephone solicitations;
o Business cards;
o Faxes, or
o Any other communication with a prospect or a policyholder that urges him to purchase,
o renew, increase, retain or modify a policy of insurance.
2 (c). ‘Intermediary or insurance Intermediary’ includes insurance brokers, Reinsurance brokers, insurance consultants, surveyors and loss assessors, or any other person representing or assisting an insurer…..
2(d). ‘Unfair or misleading advertisement’ will means and include any advertisement:
• That fails to clearly identify the product as insurance.
• Makes claim beyond the ability of the policy to deliver or beyond the reasonable expectation of performance.
• Describes benefits that do not match the policy provisions.
• Uses words or phrases in a way which hides or minimizes the costs of the hazard insured against or the risks inherent in the policy.
• Omits to disclose or discloses insufficiently, important exclusions, limitations and conditions of the contract.
• Gives information in a misleading way.
• Illustrates future benefits on assumptions which are neither realistic nor realizable in the light of the insurer’s current performance.
• Where the benefits are not guaranteed, does not explicitly say so as prominently as the benefits are stated or says so in a manner or from that it could remain unnoticed.
• Implies a group or other relationship like sponsorship, affiliation or approval that does not exist.
• Makes unfair or incomplete comparisons with product which are not comparable or disparages competitors.
Reg. 2(e). ‘Prospect’.
“Prospect” means any party that enters or proposes to enter into an insurance contract
directly or through an insurance intermediary. Maintain specimen of all advertisement for a
minimum period of three years. File a copy of each advertisement with the Authority as soon as it is first issued, together with information. (Within 2 business days)
-Reg.4- Changes in Advertisement
Changes in advertisement would be considered as new advertisement.
-Change in original advertisement to be informed to Authority.
Reg.5- Insurance Company
-Disclosure of full particulars of insurance Company and not merely any trade name or
Monogram or logo.
6. Advertisement by Insurance Agents.
- Every advertisement by Insurance Agent must be approved by the insurer in writing prior to its issue.
- It shall be the responsibility to ensure that all such advertisements comply with the Regulations.
7. Advertisements by insurance intermediaries
Only properly licensed intermediaries may advertise or solicit insurance through advertisement.
- Reg.9 – Identity of Advertiser.
-1.Advertisement shall state clearly and unequivocally that “insurance is the subject matter of solicitation.”
-2 Name of the insurer, intermediary/insurance, Agent
Reg.13 – Statutory warning.
(1) Every proposal for an insurance product shall carry the following stipulation, as prescribed in section 41 of the insurance act, 1938(4 of 1938) “No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or review or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the
whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectus or tables of the insurer.
(2) If any person fails to comply with sub-regulation (1) above, he shall be liable to payment of a fine which may extend to rupees five hundred.
IRDA (Licensing of Insurance Agents) Regulations, 2000.
b) Approved Institution means an institution engaged in education and /or training particularly in the area of insurance sales, service and marketing approved and notified by the Authority.
d) Composite insurance agent means an insurance agent who holds a license to act as an insurance agent for a life insurer and a general insurer.
e) Corporate agent means a person other than an individual as specified in clause (i) f) Designated person means an officer normally in charge of marketing operations, as specified by an insurer, and authorised by the Authority to issue or renew licenses under these regulations.
A firm or
A company formed under the Companies Act, 1956(1 of 1956) and includes a banking company as defined in clause (4A) of section 2 of the Act.
• Reg.3 –Issue of Renewal of License:
(1) A person desiring to obtain or renew a license to act as an insurance agent or a composite
insurance agent shall:
a) Make an application to a designated person in the given format, provided that the applicant
who desires to be composite insurance agent shall make two separate applications.
b) Pay the prescribed fees
(2) The designated person may on being satisfied that the applicant –
i) Possess the specified qualification
ii) Possess the specified practical training
iii) Pass the specified examination
iv) Furnish the application complete in all respects
v) Have the requisite knowledge to solicit and procure insurance business and
vi) is capable of providing a necessary service to the policyholders Grant or renew the license with identity card.
Reg. 4- Qualification of the applicant:
The applicant shall possess the minimum qualification of a pass in 12th standard or equivalent
examination conducted by any recognized Board/Institution, where the applicant resides in a
place with a population of five thousand or more as per the last census and a pass in 10th standard or equivalent examination from recognized Board/ Institution if the applicant resides in any other place
Reg.5 – Practical Training:
(1) The applicant shall have completed from an approved institution at least one hundred hours
practical training in life or general insurance business as the case may be which may be spread over 3 to 4 weeks where such applicant is seeking license of the first time to act as insurance agent.
2) Where the applicant refers to under Sub-section 1 is:
a) Associate/Fellow of Insurance Institute of India,
b) Associate/Fellow of Institute of Chartered Accountants of India,
c) Associate/Fellow of Institute of Costs and works Accountants
d) Associate/Fellow of Institute of Company Secretaries of India
e) Associate/Fellow of the Actuarial Society of India.
f) MBA of any recognized institution of University.
g) Any professional qualification in marketing.
He shall complete at least 50 hours practical training from an approved institution.
Reg. 6. Examination
The applicant shall have passed pre recruitment examination in life or general insurance business as the case may conducted by Insurance Institute of India, Mumbai or any other examination body.
Reg.8. Code of Conduct:
1 Every insurance agent shall act:
a) Identify himself and the insurance company whom he is an insurance agent.
b) Disclose his license to the prospect on demand.
c) Disseminate the requisite information in respect of insurance products offered for sale by his insurer and takes into account the need of the prospect while recommending a specific insurance plan.
d) Disclose the scales of commission in respect of the insurance product offered for sale, if asked by the prospect
e) Indicate the premium to be charged by the insurer for the insurance product offered for sale.
f) Explain to the prospect the nature of information required in the proposal form by the insurer, and also the important of disclosure of material information in the purchase of an insurance contact.
g) Bring to the notice of the insurer any adverse habits or income inconsistency of the prospect in the form of a report (called Insurance Agent’s Confidential Report) along with every proposal submitted to the insurer and any material fact that any adversely affect the underwriting
decision of the insurer as regards acceptance of the proposal by making all reasonable enquiries about the prospect.
(h) Inform promptly the prospect about the acceptance or rejection of the proposal by the insurer.
(i) Obtain the requisite documents at the time of filing the proposal form with the insurer and
other documents subsequently asked for by the insurer for completion of the proposal.
(j) Render the necessary assistance to the policyholders of claimants or beneficiary in complying with the requirements for settlement of claims by the insurer.
(k) Advise every individual policy holder to effect nomination or assignment or change of address or exercise of options as the case may be and offer necessary assistance in this behalf
(ii) No insurance agent shall –
a) Solicit or procure insurance business without holding a license.
b) Induce the prospect to omit any material information in the proposal form.
c) Induce the prospect to submit the wrong information in the proposal form or documents
submitted to the insurer for acceptance of the proposal
d) Behave in a discourteous manner with the prospect.
e) Interfere with any proposal introduced by any other insurance agent.
f) Offer different rates, advantages, terms and conditions other than those offered by his insurer.
g) Demand or receive share of proceeds from the beneficiary under an insurance contract.
h) Force a policyholder to terminate the existing policy and to effect a new proposal from him within the 3 years from the date of such termination.
IRDA (Licensing of Corporate Agents) Regulations, 2002.
Reg.2: a) Approved Institution means an Institution engaged in education and /or training particularly in the area of insurance sales, service and marketing approved by the Authority.
d) Certification means the process by which a Specified Person of the Corporate Agent who has
successfully undergone practical training and passed the required examination is issued a certificate entitling him to solicit and procure insurance business on behalf of the Corporate agent.
(e) Composite Corporate Agent means a Corporate Agent who hold a license to act as a insurance agent for a life insurer and a general insurer.
(a) “Corporate Agent” means any person specified in clause (k) and licensed to act as such;
(g) Corporate Insurance Executive in the case of a company or firm means a director or a partner or one or more of its officers or employees so designated by it, and in the case of any other
person, the Chief executive by whatever name called or one or more of his employees designated
by him who possesses the requisite qualifications and practical training and who have passed such an examination as required under clauses (e) and (f) of section 42 of the act.
n) ‘Specified Person’ means a director or a partner or one or more of its officers or other employees so designated by the corporate agent and in the case of any other person, the chief
executive, by whatever name called, or one or more of the employees designated by him, who
has undergone the practical training, examination, certification and who is responsible
for soliciting and procuring insurance business on behalf of the Corporate Agent;
k) “Person” means
o A firm; or
o A company formed under the Companies Act, 1956 (1 of 1956); or
o A banking company as defined in clause (4A) of section 2 of the Act; or
o A corresponding new bank as defined under clause (d(a)) of sub-section (1) of section 5 of the Banking Companies Act, 1949 (10 of 1949); or
o A regional rural bank established under section 3 of the Regional Rural Banks Act, 1976
o (21 of 1976); or
o A co-operative society including a cooperative bank, registered under the Co-operative
o Societies Act, 1912 or under any law for the registration of co-operative societies; or
o A panchayat or a local authority; or
o A Non-Governmental organization or a micro lending finance organization covered under
o the Co-operative Societies Act, 1912 or a Non Banking Financial Company registered with the Reserve Bank of India; or
o Any other institution or organization which on an application to the Authority is pecifically approved by the Authority.
Code of Conduct:
Reg.9) (1) Every Licensed Corporate Agent shall abide by the code of conduct specified below:
Every corporate agent shall:
(a) Be responsible for all acts of omission and commission of its corporate insurance executive and every specified person;
(b) Ensure that the corporate insurance executive and all specified persons are properly trained, skilled and knowledgeable in the insurance products they market.
(c) Ensure that the corporate insurance executive and the specified person do not make to the prospect any misrepresentation on policy benefits and returns available under the policy.
(d) Ensure that no prospect is forced to buy an insurance product.
(e) Give adequate pre-sales and post-sales advice to the insured in respect of the insurance product;
(f) Extend all possible help and co-operation to an insured in completion of all formalities and
documentation in the event of a claim;
(g) Give due publicity to the fact that the corporate agent does not underwrite the risk or act as an
(h) Enter into service level agreements with the insurer in which the duties and responsibilities of
both are defined. The IRDA has issued Guidelines on Licensing of Corporate Agents on 14th July 2005.
IRDA (INSURANCE BROKERS’REGULATIONS) 2002
Reg. 3. Functions of a direct broker: \
The functions of a direct broker shall include any one or more of the following:
a) Obtaining detailed information of the client’s business and risk management philosophy.
b) Familiarizing himself with the client’s business and underwriting information so that this can be explained to an insurer and others.
c) Rendering advice on appropriate insurance cover and terms
d) Maintaining detailed knowledge of available insurance markets, as may be applicable.
e) Submitting quotation received from insurer/s for consideration of a client.
(f) Providing requisite underwriting information as required by an insurer in assessing the risk to
decide pricing terms and conditions for cover.
(g) Acting promptly on instructions from a client and providing him written acknowledgements and progress reports.
(h) Assisting clients in paying premium under Section 64VB of Insurance Act, 1938(4 of 1938)
(i) Providing services related to insurance consultancy and risk management.
(j) Assisting in the negotiation of the claim and
(k) Maintaining proper records of claims.
Reg. 6. Application for grant of license:
1) An application by the person for grant of license as an insurance broker shall be made in Form A to the Authority.
2) The application under sub-reg.(1) shall be made for any one or more of the following categories viz.,
(a) Direct broker
(b) Reinsurance broker
(c) Composite broker
Along with the requisite fees as specified in Regulation 18.
Reg. 10. Requirements of Capital:
(1) Any applicant, seeking to become an insurance broker under these regulations should satisfy
the following conditions:
(i) It shall have a minimum amount of capital as mentioned below:
Category Minimum amount Rupees
Direct broker Fifty lakhs
Reinsurance broker two hundred lakhs
Composite broker Two hundred and fifty lakhs.
(ii) The capital in the case of a company limited by share and a cooperative society shall be in the form of equity shares;
(iii) The capital in the case of other applicants shall be brought in cash;
(iv) The applicant shall exclusively carry on the business of an insurance broker as license under these regulations.
(2) No part of the capital of an applicant shall be held by a non-Indian interest beyond 26% at any time. For the purpose of these regulations, the calculations of non-Indian interest shall be made in the same manner as specified in Insurance Regulatory and Development Authority (Registration of Indian Insurance Companies) Regulations 2000 for an insurer.
Reg. 19. Remuneration:
(1) No insurance broker shall be paid or contract to be paid by way of remuneration (including
royalty or license fees or administration charges or such other compensation) an amount exceeding:
1(B) On direct life insurance business:
(i) Individual insurance
(a) 30% of first year’s premium
(b) 5% of each renewal premium.
(a) Immediate annuity or a deferred annuity in consideration of a single premium or where only one premium is payable on the policy. 2% of premium.
(b) Deferred annuity in consideration of more than one premium
(i) 7 ½% of first year’s premium
(ii) 2% of each renewal premium
(iii) Group insurance and pension schemes.
(a) One year renewable group term insurance, gratuity, superannuation, group savings linked insurance: 7 ½ % of risk premium Note- Under group insurance schemes there will be no remuneration for the savings component.
(b) Single premium: 2% of risk premium
(c) Annual contributions at new business procurement stage. 5% of non-risk premium with a ceiling of rupees three lakhs per scheme
(d) Single premium new business procurement stage 0.5 % with a ceiling of rupees five lakhs per scheme.
(e) Remuneration for subsequent servicing:
(i) one year renewable group term assurance 2% of risk premium with a ceiling of rupees
50,000/- per scheme.
(c) On reinsurance business:
(i) As per market practices prevalent from time to time.
Explanation: For purposes of the procurement of business, an insurer shall not pay an agency commission, allow a special discount and pay remuneration to brokers for the same insurance
(2) The settlement of accounts by insurers in respect of remuneration of brokers shall be done on a monthly basis and it must be ensured that there is no cross settlement of outstanding balances.
Reg.20.Ceiling on business from single client:
(1) The business of the insurance broker shall be carried in such a manner that, not more than 50% of the premium (quantum receipt, etc. as the case may be) in the first year of business, 40% of the premium in the second year of business, and 30% of the premium from the third year of business onwards shall emanate from any one client.
(1) The decision of the Authority as to whether a company, a business or an organization is under the same management shall be final.
Reg. (21) Code of Conduct:
Every insurance broker shall abide by the Code of Conduct as specified in Schedule III.
Reg. (22) Deposit requirements:
(1) Every insurance broker shall before shall before the commencement of his business, deposit and keep deposited with the scheduled bank a sum equivalent to 20% of the initial capital in fixed deposit, which shall not be released to him unless the prior permission of the Authority is obtained. Provided that the Authority may impose a separate limit of deposit in any case not exceeding rupees one hundred lakhs, for a person covered by regulation 2(1)(i)(v)
(2) Every insurance broker shall furnish to the Authority as and when called upon to do so a
statement certified by the Bank in which such fixed deposit is kept.
SCHEDULE – III Code of Conduct:
Every insurance broker shall follow recognised standards of professional conduct and discharge his functions in the interest of policyholders viz.
•Conduct in matters relating to clients relationship.
•Conduct in matters relating to Sales practices.
•Conduct in relation to furnishing of information.
•Conduct in relation to explanation of insurance contract.
•Conduct in relation to renewal of policies.
•Conduct in relation to claim by client.
•Conduct in relation to receipt of complaints.
•Conduct in relation to documentation
•Conduct in matters relating to advertising
•Conduct in matters relating receipt of remuneration.
•Conduct in relation to matters relating to training
IRDA (Manner of receipt of premium) Regulations 2002.
Reg. 3:- Manner of premium payments:
The premium to be paid by any person proposing to take an insurance policy (hereinafter referred to as the proposer) or by the policyholder to an insurer may be made in any one or more of the following manner(s), viz.,
• Any recognized banking negotiable
• Instrument such as cheques, including Demand drafts pay orders, bankers Cheques drawn on any scheduled bank in India;
• Postal money orders;
• Credit or Debit Cards held in his name;
• Bank Guarantee or Cash Deposit;
• Direct credits via standing instructions of proposer or the policyholder or the life insured through bank transfers; and
• Any other method of payment as may be approved by the Authority from time to time.
Reg. 4. Commencement of Risk:
In all cases of risks covered by the policies issued by an insurer, the attachment of risk to an insurer will be in consonance with the terms of Section 64VB of the Act and except in the cases
where the premium has been paid in cash, in all other cases the insurer shall be on risk only after the receipt of the premium by the insurer. Provided that in the case of a policy of life insurance, the continuance of the risk or otherwise shall depend on the terms and conditions of the policy already entered into.
Reg 5: Recovery of collection charges:
The insurer may at its option recover the collection charges of the instrument from the proposer.
IRDA (Protection of Policyholders’ Interests) Regulations,2002
Reg. 3. POINT OF SALE
3(1) notwithstanding anything mentioned in regulation 2(e) above, a prospectus of any insurance
product shall clearly state the scope of benefits, the extent of insurance cover and in an explicit manner explain the warranties, exceptions and conditions of the insurance cover and in case of life insurance, whether the product is participating ( With-profit) or non- participating ( without – profits). The allowable rider or riders on the product shall be clearly spelt out with regard to their scope of benefits, and in no case, the premium relatable to Health related or critical illness riders in the case of term, or group products shall exceed 100% of the premium under the product. All other riders put together shall be subject to a ceiling of 30%
Explanation: – The rider or riders attached to a life policy shall bear the nature and character of the main policy, viz. participating or non- participating and according the life insurer shall make provisions, etc., it its books.
Reg. 4. Proposal for Insurance:
(1) Except in case of a marine insurance cover, where current market practices do not insist on a written proposal form, in all cases, a proposal for grant of a cover, either for life business or for general business, must be evidenced by a written document. It is the duty of an insurer to furnish to the insured free of charge, within 30 days of the acceptance of a proposal, a copy of the proposal form
Forms and documents used in the grant of cover may, depending upon the circumstances of each case, be made available in languages recognized under the Constitution of India.
In filling the form of proposal, the prospect is to be guided by the provisions of section 45 of the Act. Any proposal form seeking information for grant of life cover may prominently state therein the requirements of section 45 of the Act.
Wherever the benefit of nomination is available to the proposer, in terms the Act or the conditions of policy, the insurer shall draw the attention of the proposer to it and encourage the
prospect to avail the facility.
Reg. 5. Grievance Redressal procedure
Every insurer shall have in place proper procedures and effective mechanism to address complaints and grievances of policyholders efficiently and with speed and the same along
with the information in respect of Insurance Ombudsman shall be communicated to the
policyholder along with the policy document and as may be found necessary.
Reg. 6. Matters to be stated in life insurance policy:
A life insurance policy shall clearly state:-
(a) The name of the plan governing the policy, its terms and conditions;
(b)Whether it is participating in profits or not;
(c) The basis of participation in profits such as cash bonus, deferred bonus, simple or
compound reversionary bonus;
(d) The benefits payable and the contingencies upon which these are payable and the other terms and conditions of the insurance contract;
(e) The details of the riders attaching to the main policy;
(f) The date of commencement of risk and the date of maturity of date(s) on which the benefits are payable
(g) The premiums payable, periodicity of payment, grace period allowed for payment of
the premium, the date of the last installment of premium, the implication of the discontinuing the payment of an installment(s) of premium and also the provisions of a guaranteed surrender value.
(h) The age at entry and whether the same has been admitted.
(i) The policy requirements for (a) conversion of the policy into paid up policy,
(b) Surrender & no forfeiture and (d) revival of lapsed policies;
(j) Contingencies excluded from the scope of the cover, both in respect of the main policy and riders;
(k) The provisions for nominations, assignment and loan on security of the policy and a statement that the rate of interest payable on such loan amount shall be prescribed by the insurer at the time of taking the loan;
(l) Any special clauses or conditions, such as, first pregnancy clause, suicide clause etc. and
(m) The address of the insurer to which all communications in respect of the policy shall be sent;
(n) The documents that are normally required to be submitted by a claimant in support of a claim under the policy
While acting under regulation 6(1) in forwarding the policy to the insured, the insurer shall inform by the letter forwarding the policy that he has a period of 15 days from the date of receipt of the policy document to review the terms and conditions of the policy and where the insured disagrees to any of those terms or conditions, he has the option to return the policy stating the reason for his objection, when he shall be entitle to a refund of the premium paid, subject only to a deduction of a proportionate risk premium for the period on cover and the expenses incurred by the insurer on medical examination of the proposer and stamp duty charges.
In respect of a unit linked policy, in addition to the deductions under sub regulation (2) of this regulation, the insurer shall also be entitled to repurchase the unit at the price of the units on
the date of cancellation.
In respect of a cover, where premium charged is dependent on age, the insurer shall ensure that the age is admitted as far as possible before issuance of the policy document. In case where age has not been admitted by the time the policy is issued, the insurer shall make efforts to obtain proof of age and admit the same as soon as possible.
Matters to be stated in General Insurance Policy
• (a) the name(s) and address (es) of the insured and of any bank(s) or any other person having
financial interest in the subject matter of insurance.
• (b) Full description of the property or interest insured
• (c) The location or locations of the property or interest insured under the policy and where
appropriate, with respective insured values
• (d) Period of insurance
• (e) Sums insured
• (f) Perils covered and not covered
• (g) Any franchise or deductible applicable
• (h) Premium payable and where the premium is provisional subject is adjustment, the basis of
adjustment of premium be stated; 207
• (i) Policy terms, conditions and warranties
• (j) Action to be taken by the insured upon occurrence of a contingency likely to give rise to a
claim under the policy
• (k) The obligations of the insured inrelation to the subject-matter of insurance upon occurrence
of an event giving rise to a claim and the rights of the insurer in the circumstances;
• (l) Any special conditions attaching to the policy
• (m) Provision for cancellation of the policy on grounds of misrepresentation, fraud, non-
disclosure of material facts or noncooperation of the insured
• (n) The address of the insurer to which all communications in respect of the insurance
contract should be sent
• (o) The details of the riders attaching to the main policy
• (p) Performa of any communication the insurer may seek from the policyholders to service the
Reg. 8. Claims procedure in respect of a life insurance policy:
1. A life insurance policy shall state the primary documents which are normally required to be
submitted by a claimant in support of a claim.
2. A life insurance company, upon receiving a claim, shall process the claim without delay. Any queries or requirement of additional documents, to the extent possible, shall be raised all at once and not in a piece- meal manner, within a period of 15 days of the receipt of the claim.
A claim under a life policy shall be paid or be disputed giving all the relevant reasons, within 30 days from the date of receipt of all relevant papers and clarifications required. However, where the circumstances of a claim warrant an investigation in the opinion of the insurance company, it shall initiate and complete such investigation at the earliest. Where in the opinion of the insurance company the circumstances of a claim warrant an investigation, it shall initiate and complete such investigation at the earliest, in any case not later than 6 months from the time of lodging of the claim.
Subject to the provision 47 of the Act, where a claim is ready for payment but the payment cannot be made due to any reasons of a proper identification of the payee, the life insurer shall hold the amount for the benefit of the payee and such an amount shall earn interest at the
rate applicable to a savings bank account with a scheduled bank ( effective from 30 days following the submission of all papers and information)
Where there is a delay on the part of the insurer in processing a claim for a reason other than the one covered by sub-regulations (4), the life insurance company shall pay interest on the claim amount at a rate which is 2% above the bank rate prevalent at the beginning of the financial year in which the claim is reviewed by it.
Claims Procedure in General Insurance:
• The claimant shall give notice to the insurer of any loss at the earliest. The insurer will intimate the claimant all the procedure involved. If a surveyor is to be appointed to assess the loss he shall give his reports within 30 days. Based on the survey report and other relevant information the insurer will make an offer of settlement to the insured within 30 days. In case of any delay in settlement of claims, the insurer will pay an interest @2% above the bank rate.
Reg. 10. Policyholders’ Servicing
(1)An insurer carrying on life or general business, as the case may be, shall at all times, respond within 10 days of the receipt of any communication from its policyholders in all matters, such as:
(a) Recording change of address;
(b)Noting a new nomination or change of nomination under a policy;
(c)Noting an assignment on the policy
(d) Providing information on the current status of a policy indicating matters, such as,
accrued bonus, surrender value and entitlement to a loan;
(e) Processing papers and disbursal of a loan on security of policy;
(f) Issuance of a duplicate policy;
(g) Issuance of an endorsement under the policy; noting a change of interest or sum
assured or perils insured, financial interest of a bank and other interest; and
(h) Guidance on the procedure for registering a claim and early settlement thereof.
Reg. 11. General:
(1) The requirements of disclosure of “material information” regarding a proposal or policy apply, under these regulations, both to the insurer and the insured.
(2) The policyholder shall assist the insurer, if the latter so requires, in the prosecution of a proceeding or in the matter of recovery of claims which the insurer has against third parties.
(3) The policyholder shall furnish all information that is sought from him by the insurer and also any other information which the insurer considers as having a bearing on the risk to enable the latter to assess properly the risk sought to be covered by a policy.
(4) Any breaches of the obligations cast on an insurer or insurance agent or insurance intermediary in terms of these regulations may enable the Authority to initiate action against each or all of them, jointly or severally, under the act and/or the Insurance Regulatory and
Development Authority Act, 1999.
THE REDRESSAL OF PUBLIC GRIEVANCE RULES, 1998
In exercise of the powers conferred by sub-section (1) of Section 114 of the Insurance Act, 1938 (4 of 1938), the Central Government hereby frames the following rules, namely:-
1. Short title – These rules may be called the Redressal of Public Grievances Rules, 1998.
2. Application – These rules shall apply to all the insurance companies operating in general insurance business and in life insurance business: Provided that the Central Government may
exempt an insurance company from the provisions of these rules, if it is satisfied that an insurance company has already grievance Redressal machinery which fulfills the requirements of these rules.
3. The objects of these rules are to resolve all complaints relating to settlement of claim
on the part of insurance companies in cost-effective, efficient and impartial manner.
(1) The governing body shall appoint one or more persons as Ombudsman for the purpose of these rules.
(2) The Ombudsman selected may be drawn from a wider circle including those who have
experience or have been exposed to the industry, civil service, administrative service, etc., in addition to those drawn from judicial service.
12. Power of Ombudsman–
(1) The Ombudsman may receive and consider–
(a) Complaints under Rule 13;
(b) Any partial or total repudiation of claims by an insurer;
(c) Any dispute in regard to premium paid or payable in terms of the policy;
(d) Any dispute on the legal construction of the policies in so far as such disputes relate
(e) Delay in settlement of claims;
(f) Non-issue of any insurance document to customers after receipt of premium.
(2) The Ombudsman shall act as counselor and mediator in matters which are within his terms of reference and, if requested to do so in writing by mutual agreement by the insured person and insurance company.
(3). The Ombudsman’s decision whether the complaint is fit and proper for being considered by it or not, shall be final.
13. Manner in which complaint is to be made –
(1) Any person who has a grievance against an insurer, may himself or through his legal heirs make a complaint in writing to the Ombudsman within whose jurisdiction the branch or office of the insurer complained against is located.
(2) The complaint shall be in writing duly signed by the complainant or through his legal heirs and shall state clearly the name and address of the complainant, the name of the branch or office of the insurer against which the complaint is made, the fact giving rise to complaint supported by
documents, if any, relied on by the complainant, the nature and extent of the loss caused to the
complainant and the relief sought from the Ombudsman.
(3) No complaint to the Ombudsman shall lie unless –
(a) The complainants had before making a complaint to the Ombudsman made a written
representation to the insurer named in the complaint and either insurer had rejected the
complaint or the complainant had not received any reply within a period of one month after the insurer concerned received his representation or the complainant is not satisfied with the reply given to him by the insurer;
(b) The complaint is made not later than one year after the insurer had rejected the representation or sent his final reply on the representation of the complainant; and
(c) The complaint is not on the same subject-matter, for which any proceedings before any court, or Consumer Forum or arbitrator is pending or were so earlier.
14. Ombudsman to act fairly and equitably-
(1) The Ombudsman may, if he deems fit, adopt a procedure other than mentioned in sub-rules (1) and (2) of Rule 13 for dealing with a claim:
Provided that the Ombudsman may ask the parties for necessary papers in support of their respective claims and where he considers necessary, he may collect factual information available with the insurance company.
(2) The Ombudsman shall dispose of a complaint fairly and equitably.
15. Recommendations made by the Ombudsman
1) When a complaint is settled, through mediation of the Ombudsman, undertaken by him in pursuance of request made in writing by complainant and insurer through mutual agreement, the Ombudsman shall make a recommendation which he thinks fair in the circumstances of the case. The copies of the recommendation shall be sent to the complainant and the insurance company
concerned. Such recommendation shall be made not later than one month, from the date of the
receipt of the complaint.
(2) If a complainant accepts the recommendation of the Ombudsman, he will send a communication in writing within 15 days of the date of receipt of the recommendation. He will confirm his acceptance to Ombudsman and state clearly that the settlement reached is acceptable to him, in totality, in terms of recommendations made by the Ombudsman in full and final settlement of complaint.
(3) The Ombudsman shall send to the insurance company a copy of the recommendation along with the acceptance letter received from the complainant. The insurer shall thereupon comply with the terms of the recommendations immediately not later than 15 days of the receipt of such
recommendation and the insurer shall inform the Ombudsman of its compliance.
(1) Where the complaint is not settled by agreement under Rule 15, the Ombudsman shall pass an award which he thinks fair in the facts and circumstances of a claim.
(2) An award shall be in writing and shall state the amount awarded to the complainant:
Provided that Ombudsman shall not award any compensation in excess of which is necessary
to cover the loss suffered by the complainant as a direct consequence of the insured peril, or for an amount not exceeding rupees twenty lakhs (including ex gratia and other expenses),
whichever is lower.
(3) The Ombudsman shall pass an award within a period of three months from the receipt of the complaint.
(4) A copy of the award shall be sent to the complainant and the insurer named in the complaint.
(5) The complainant shall furnish to the insurer within a period of one month from the date of receipt of the award, a letter of acceptance that the award is in full and final settlement of his claim.
(6) The insurer shall comply with the award within 15 days of the receipt of the acceptance letter under sub-rule (5) and it shall intimate the compliance to the Ombudsman.
17. Consequences of non-acceptance of award
If the complainant does not intimate the acceptance under sub-rule (5) of Rule 16, the award may not be implemented by the insurance company.
18. Power to make ex-gratia payment
If the Ombudsman deems fit, he may award an ex gratia payment.
Law Commission in regard to Grievance Redressal Mechanism
Adjudicating Officers/ Investigating Officers
(i) The IRDA will appoint Adjudicating Officers/ Investigating Officers to adjudicate/investigate violations of the Act, Rules and Regulations by insurers, insurance intermediaries and insurance agents and levy penalties
• As provided in the Act. Any person aggrieved by the decision of the Adjudicating/ investigating Officers can appeal to the Insurance Appellate Tribunal (IAT).
• In house mechanism (ii) every insurer will set up an in-house grievance Redressal mechanism
under the overall supervision of the IRDA. It will be incumbent for every person seeking to file a
claim before the Grievance Redressal Authority (GRA) to
• First approach the in-house mechanism. Where the decision of the in-house mechanism is not
satisfactory to the claimant or where no decision is given within the period of 60 days from the date of making such claim to the in-house mechanism, it will be open to the claimant to approach the GRA within a period of 60 days from the date of receipt of the decision of the in-house mechanism and of the expiry of 60 days after the making of the claim whichever is later.
Grievance Redressal Authority (GRA)
• (iii) The present system of having Ombudsmen under the 1998 Rules at the major metropolises be replaced by the GRA constituted by appropriate amendments to the Insurance Act, 1938 itself. These would thus be statutory authorities exercising statutory functions. The GRA will not exercise any jurisdiction in relation to the levy of fines and penalties in relation to offences under the Act. (iv) The jurisdiction of the GRA will be to hear: (a) Disputes between the insured and the insurer that pertain to personal lines of insurance on the following matters:
(1) Any partial or total repudiation of claims by an insurer;
(2) Any dispute in regard to premium paid or payable in terms of the policy;
(3) Any dispute on the legal construction of the policies in so far as such disputes relate to claims;
(4) Delay in settlement of claims;
(5) Non-issue of any insurance document to customers after receipt of premium; and
(6) Any other complaint against an insurer.
(b) Disputes between Insurer and the Intermediaries;
(c) Disputes between Insurer and Insurer; and
(d) Disputes between the assignees of a policy as to priority of assignment.
• Location of GRA
(v) The GRAs should be dispersed as geographically widely as possible. For instance, there could be GRAs in each of the major cities in the country. This is necessary given the large number of policyholders at present and the prospect of this growing in the future. There could be
more than one GRA in a State depending on the number of cases in that State.
• Powers and jurisdiction of GRA
(vi) The powers and jurisdiction of the GRAs would include all the powers and functions of the civil court and would involve adjudication of issues of fact and law. (vii) In addition to the above, it could be provided that all pending disputes arising under the Insurance Act, 1938 before the consumer fora would be transferred to the GRAs for disposal in accordance with the provisions of the Insurance Act, 1938. To this extent an amendment may have to be made in
the Consumer Protection Act, 1986 to provide that disputes arising under the Insurance Act, 1938 will not be entertained under the Consumer Protection Act, 1986.
• Exclusion of Civil Courts
(viii) There will be a clause expressly excluding the jurisdiction of civil courts and other tribunal/ for a in regard to such matters that form the subject matter of the jurisdiction of the GRA. Every
claimant before the GRA will be required to make an express declaration that no similar claim has been made before any other for a or tribunal and further that he has availed the in-house mechanism of the insurer as indicated in para (ii) above.
• Alternate dispute resolution
(ix) With a view to encouraging alternate dispute resolution (ADR) by way of mediation or conciliation, it may be provided that a claimant may have the choice to opt for mediation or conciliation, in which case the GRA will refer the dispute for mediation or conciliation by a person or body agreed upon, or where there is no agreement, by a person or body nominated by the GRA from a panel prepared by it. Further, the GRA may itself refer the pending dispute before it to an ADR process at any stage of the proceedings, with the consent of the parties.
• Powers of GRA regarding enforcement of decisions
(x) The decision of the GRA, or the final decision on appeal, will be enforceable by the GRA which pass the initial order and for that purpose the GRA will exercise all the powers of a civil court. Composition of GRA (xi) The GRA should be a multi-member body comprising of one
judicial member who will be the President and two technical members. The President and Members of the GRA will hold office till the age of 65 years. The President of the GRA should be a retired Judicial Officer not below the rank of a senior Civil Judge or a lawyer with not less than 20 years of experience nominated in consultation with the Chief Justice of the High Court.
(xii) As regards, appointment of technical members to the GRA is concerned, consultation with the Chief Justice of the High Court is not necessary. A panel of names of persons of not less than 15 years experience in the insurance industry can be prepared by the Central Government and
sent to a Selection Committee comprising the members of the Insurance Councils.
• constituted under s.64C of the Act. The said Selection Committee will recommend the names
from among the panel of technical members to be appointed to the GRA. The Central government will make rules in relation to the salaries and allowances and other terms and conditions of service of the President and Members of the GRA.
(xiii) The GRA will formulate rules of procedure to cover matters relating to filing of claims,
completion of pleadings, evidence on affidavits or otherwise, passing of awards and furnishing copies. These rules of procedure will also deal with matters relating to enforcement of the decisions of the GRA as finally determined in appeals there from.
• Removal of President and Members of GRA
(xiv) The President or Members of GRA shall not be removed from office except by an order made by the President on ground of proved misbehavior or incapacity after enquiry made by a Judge of the High Court in which such President or Member has been informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges. The Central Government will make rules to regulate the procedure for the investigation of misbehavior or incapacity of the President and Members of the GRA.
• Insurance Appellate Tribunal (IAT)
(xv) An appeal will lie from the decision of the GRA to an Insurance Appellate Tribunal (IAT) the jurisdiction of which will extend to hearing: (a) Appeals from the GRA; (b) Appeals against the orders passed by the Adjudicating/ Investigating Officers appointed by the IRDA; (c) Appeal
against any order passed by the IRDA. With the constitution of the IAT, the appellate authority
constituted by a notification of the Central Government (as noticed in para 4.2.9 infra) will
have to be wound up and the appeals pending before it will stand automatically transferred to the
IAT; (d) Making of interim orders, conditional or otherwise, in relation to the above matters.
• Composition of IAT
(xvi) The IAT should be a multi-member body of a judicial member as President and two technical members. The IAT should be presided over by a retired High Court Judge nominated in consultation with the Chief Justice of India. A certain degree of transparency should be induced in the process of selection of such members. The appointments of technical members to the IAT should also be done in consultation with the Chief Justice of India. For this purpose, a panel of names of persons of not less than 20 years experience in the insurance industry should be sent by the Insurance Councils (constituted under s.64C of the Act) to the Chief Justice of India.
• The names of technical members will be chosen with the concurrence of the Chief Justice of India. The Central Government will make rules in relation to the salaries and allowances and other terms and conditions of service of the President and Members of the IAT.
• Term and removal of President and Members of IAT
(xvii) The President and Members of the IAT will hold office till the age of 68 years. The removal of the President and the Members of the IAT for proven misbehavior or incapacity will be upon enquiry by a Judge of the Supreme Court in which such President or Member has been
Informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges. The Central Government will make rules to regulate the procedure for the investigation of misbehavior or incapacity of the President and Members of the IAT.
• Location and Benches of IAT
(xviii) The Principal Bench of the Insurance Appellate Tribunal (IAT) should be in New Delhi. It is preferable that there is one IAT in each State. However, there can be one IAT for one or more
States as may be decided by the Central Government, or by agreement between State Governments on the pattern of s.4(3) of the Administrative Tribunals Act, 1985. (xix) The
IAT will formulate rules of procedure to cover matters relating to filing of appeals, completion of
pleadings, making of orders both interim and final and furnishing copies.
• Expenditure of GRA and IAT
(xx) The expenditure for the constitution of the GRAs and the IATs and their maintenance must be borne by the Central Government in as much as they are to adjudicate disputes arising under a central statute. Further appeal to Supreme Court (xxi) There will be a further statutory appeal to the Supreme Court from the decision of the IAT. The appeal will have to be filed within 60 days of the decision of the IAT.
• Adjudication fee
(xxii) There should be an adjudication fee levied in respect of a claim before the GRA and an appeal before the IAT. However, any individual policyholder, may upon showing sufficient cause, be exempt by the GRA or the IAT, as the case may be, from paying such adjudication fee.
KPN Committee Grievance Redressal Mechanism:
7.18 The Law Commission has extensively reviewed the existing grievance redressal mechanism and it has recommended a scheme under which the disputes arising out of insurance contracts presently under the purview of consumer for and ombudsman are settled by Grievance
Redressal Authority (GRA) to be constituted exclusively to deal with insurance disputes. Provision has also been made for an appellate process under which the appeals against the orders of the GRA are heard and disposed of by an Insurance Appellate Tribunal (IAT) with its
Headquarters at New Delhi and conducting business in four metros. The recommendations made by the Commission cover broadly the following aspects:
(a) Grievance of policyholders vis-à-vis the insurance companies;
(b) Redressal of grievances of insurers, intermediaries and insurance agents vis-à-vis the
(c) Modifications in sections 102 to 105C of Insurance Act to bring them under the purview of the IRDA. 7.19 The recommendations relating to grievances of policyholders against the decisions of the insurance companies flow from the assumption that the existing systems of
adjudication of disputes through the consumer for and the institution of ombudsman have not fully addressed the problem of early resolution of disputes. Hence, the suggestion to create GRA and an Appellate Body to deal with insurance disputes. The proposal of Law Commission to create a parallel judicial hierarchy to address this issue has the following shortcomings:
(i) The Consumer Courts are now located at every District Headquarters and are within the easy reach of the policyholders. If it is replaced by GRA which is located only in major cities and towns, the consumers would be at a disadvantage. It is not established in statistical terms that the
Consumer Courts are so overburdened that they cannot handle the additional burden imposed by
the insured approaching them for grievance Redressal. The facility of approaching a forum available at District Headquarters would be lost if GRAs are established at major cities only.
(ii) Appeals against the orders of the GRA would lie to ITA with its headquarters at New Delhi and holding court in four metros. As of now, if the insured is not satisfied with the orders of District Consumer Forum, he could approach the State Commission. This facility would be lost in the proposed scheme. (iii) The existing scheme of Ombudsman has the merit of bringing finality and provides relief to the insured as the insurer is debarred from appealing against the order of Ombudsman. Some of the insured may prefer this route and this facility would be denied to the insured.
• 7.20 considering that the need for exclusive courts to deal with insurance claims has not been
established statistically and issues relating to access to the dispute Redressal mechanism in the
proposed scheme, the Committee suggests that it may be desirable to continue and refine the
existing system rather than replace it by a costly parallel mechanism. It is, however, desirable that in those District Fora and State Fora where there is a large number of cases relating to insurance, an additional member who is well versed with insurance matters may be inducted as a measure to hasten the process of disposal and to provide expert Counsel to such fora.
• 7.21 There is also need to continue with the system of Ombudsman to act as an alternate Redressal mechanism. However, this institution, which was established in 1998, is still to make an impact. This is partly due to lack of awareness about the existence of this system and mostly due to the vast jurisdiction covered by the Ombudsman. There may be a case for creating this
post in each State Headquarters and give wide publicity about the role of the Ombudsman.
• 7.22 The second issue raised by the Law Commission relates to the Redressal of grievances
arising out of the orders passed by the Authority against insurers, intermediaries and insurance
agents. The suggestion of the Commission that IRDA should appoint adjudicatory officers to
adjudicate the violations of the Act, Regulations and Rules by insurers, insurance agents and
intermediaries and levy penalties provided for in the Act needs to be implemented. As regards
provision of appeals against the orders of
• Adjudicatory officers, it is suggested that the SAT may be given the authority to deal with this aspect, by inducting a member familiar with the provisions of the Insurance Laws, instead of the
IAT as recommended by the Commission. Since we have suggested that the existing grievance
redressal should address the disputes between the insured and the insurer, the IAT would not have adequate work if it were to deal with appeals arising out of the orders of the Adjudicating
Officers of the IRDA.
• 7.23 The Committee welcomes the suggestion of the Law Commission to make a statutory provision to ensure that every insurer sets up an in-house grievance redressal mechanism under the overall supervision of the IRDA. It may also be stipulated therein that the claimant should first approach this institution before taking recourse to any legal recourse for redressal of grievances. 7.24 The third issue raised by the Law Commission relates to amendments to section 102 to 105C of the Act to enable Adjudicating Officers of the IRDA to deal with and impose penalties for violation of provisions of the Act. This would set at rest any doubt about the jurisdiction of criminal courts as these provisions deal with imposition of fines. This aspect has already been dealt with by the Committee in para 7.13.
• 7.25 The Committee feels that the existing grievance redressal mechanism is within easy
reach of people and implementation of the recommendations of the Law Commission would not only result in additional expenditure, but also cause inconvenience to the policyholders. Hence,
it is recommended that the existing mechanism with suitable strengthening as suggested in the
Preceding paras may serve the overall interests of the insured.
CONSUMER PROTECTION ACT, 1986
OBJECT – To provide for better protection of interest of consumers and for that purpose to
make provision for establishment of Consumer Councils and other authorities for settlement of
consumers’ disputes and for matters connected therewith.
Salient Features of the Act
i) It covers all goods and services
ii) It covers all the sectors – private, public and co-operative.
iii) Remedy available is simple, speedy and inexpensive.
iv) Provisions of the Act are in addition to and not in derogation of any other law.
C P A
• CONSUMER: is defined as any person who buys goods for a consideration or avails any
services for consideration.
• It doesn’t include a person purchasing goods for commercial purposes.
• SERVICE includes banking; insurance etc but DOES NOT includes the rendering of any service free of cost.
• Deficiency in service means any fault, imperfection or inadequacy in the quality, nature and manner of performance in relation to any service. Deficiency in service may relate to issuance of Receipts, transfer of files, quick settlement of maturity & death claims
• A complaint can be made to the appropriate Forum in writing within two years from the date on which cause of action arose.
• The Policyholder, a nominee, an assignee, a beneficiary under MWP Act policies are all
Composition: – President – Dist. Judge and 2 other members (1 lady member).
Jurisdiction: – Pecuniary value of services and compensation claimed does not exceed Rs.20 lakhs.
Composition: – President – High Court Judge, Members not less than 2 – 1 lady member.
Jurisdiction: – Complaints of value claimed if exceeds Rs.20 lakhs but does not exceed Rs.1
Composition: – President – Judge of Supreme Court, Members – not less than 4, 1 lady
Jurisdiction: – Original complaint where the value of services and compensation exceeds Rs.1
Before the State Comm. (Sec. 15) – Against the order of the Dist. Forum within a period of 30
Days -subject to deposit of 50% of the amount awarded or Rs.25,000/- whichever is less
Before National Comm. (Sec 19) – Against the order of the State Commission – Appeal period
30 days – subject to deposit of 50% of the amount awarded or Rs.35,000/- whichever is less
Before the Supreme Court (Sec. 23) – Against the order of the National Comm. – Appeal period
30 days – subject to the deposit of 50% of the amount awarded or Rs.50,000/- whichever is
What Is Money Laundering?
• moving illegally acquired cash through financial systems so That it appears to be legally acquired.
• An act of cleansing the dirty money.
Common Four factors in ML
• True ownership & real source of money must be concealed. There is no sense in
laundering money if everyone knows who owns it when it comes to other end.
• The form it takes must be changed.
• The trail left by the process must be obscured. The very purpose is defeated if someone can follow the money from beginning to end.
• Constant control must be maintained over the money because many people who come into the
picture while money is being laundered understand that it is dirty money & if they steal it
there is little the original owner can legally do about it.
A M L Program:
1. Internal policies, Procedures and Control
2. Appointment of PCO
3. Recruitment and Training of Employees and Agents.
4. Internal Control/Audit
Internal Policies, Procedures and Controls
2. When Should KYC Be Done?
3. KYC and risk profile of the customer
4. Products to be covered
5. Sources of Fund
6. Defining suspicious transactions
7. Reporting of suspicious transactions
8. Monitoring and reporting of cash transactions:
9. Verification at redemption/ surrender
10. Record keeping.
11. Compliance arrangements.
APPOINTMENT OF PCO
A. Effective implementation.
B. Training of Employees/Agents
1. Selection process to be monitored effectively.
2. Monitoring the sales practices
3. Periodic risk management reviews.
4. Adequate screening procedures while recruiting employees.
• Concept of in-house training curriculum for agents.
• Training requirements of employees:
1. New employees
2. Sales/advisory staff
3. Processing staff
4. administration/operations supervisors and managers
5. Ongoing training
6. Records of training imparted
• Audit/Inspection Depts. to verify compliance with policies, procedures and controls on regular basis.
• The reports should comment on internal policies and processes and make constructive suggestions wherever necessary.
• Exception reporting should be to Audit Committee of the BOARD.
Illustrative list of suspicious transactions:
1. Customer reluctance to provide identifying information, or providing minimal, seemingly fictitious information.
2. Cash based suspicious transactions for payment of premium and top ups over and above Rs.5 lakhs per person per month. It should also consider multiple DDs each denominated for less than Rs.50, 000/-.
3. Frequent free look surrenders by customers.
4. Assignments to unrelated parties without valid consideration.
5. Request for a purchase of policy in amount considered beyond his apparent need.
6. Policy from a place where he does not reside or is employed
7. Unusual terminating of policies and refunds
8. Frequent request for change in addresses
9. Borrowing the maximum amount against a policy soon after buying it
10. Overpayment of premiums with a request for a refund of the amount overpaid.