Irda Act

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LAW COMMISSION OF INDIA

CONSULTATION PAPER ON REVISION OF THE INSURANCE ACT 1938 & THE INSURANCE REGULATORY & DEVELOPMENT ACT 1999

June 2003

consultation paper can also be downloaded from http://lawcommissionofindia.nic.in Comments and suggestions on the consultation paper can be sent to vnathan@nic.in Member-Secretary before 10th July 2003 by by email to or mail to Room No 730 ‘A’ Wing Law Commission of India 7th Floor, Shastri Bhavan New Delhi-110001

INDEX TO CONSULTATION PAPER 1 2. 3. 3.2 4. 4.1 4.4 5. 6. 6.3 7. 8. 8.1 8.2 8.3 8.4 8.5 8.5.1 8.5.2 8.5.3 8.5.4 8.5.5 8.5.6 8.5.7 8.5.8 8.5.9 Introduction Legislative Regime Background to recent legislative changes Malhotra Committee Report Regulatory Legal Regime Insurance Regulatory and Development Authority Act, (IRDA) 1999 Powers and functions of IRDA Legislative developments after 1999 Need for and grounds of revision of the Insurance Act, 1938 Some tentative grounds of revision Plan of revisions of the provisions of the Insurance Act, 1938 Proposals for revision Merger of the provisions of IRDA Act into the Insurance Act Changes in definitions, deletions and other amendments Powers of the IRDA Obligations of the insurers under the Act Interests of the policyholders Supply of copies of proposal and medical reports Notice to given of the options on the lapsing of the policy Policy not to be called in question on the ground of misstatement after three years Policy holders to elect directors of insurers Life Insurance agents not to be appointed as directors of life insurance companies Assignment and transfer of policies Proposal for partial assignment of policies Nomination by policyholder Payment of money into court 5–6 6 6 7 7 7-8 8-9 9 9-10 10-13 13 13 13-15 15 15-26 26 26 26 27-28 28-29 29-30 30 30-31 31-32 32-35 35

8.6 8.6.4 8.6.7 8.6.7.1 8.6.7.5 8.6.7.9 8.6.7.10 8.6.8 8.7 8.7.5 8.7.6 8.7.8 8.7.12 8.8 8.9 8.9.1 8.9.2 8.9.7 8.9.8 8.9.10 8.9.15 8.9.18 8.9.19 8.9.20 8.9.22 8.9.23 8.9.26 8.9.27 8.9.28

Tariff Advisory Committee – composition and powers Composition of TAC Powers of the TAC (i) Power to control rates, advantages, terms and conditions in respect of risk other than life (general insurance) (ii) Power of TAC to require information (iii) Power of the TAC to constitute Regional committee (iv) Power to make rules Need for repeal of certain provisions relating to TAC in part IIB of the principal Act Machinery for redressal of grievances/ claims 1998 Rules The protection of policyholders interests Regulations Other mechanisms SEBI model Proposed Suggestions Penal provisions Miscellaneous provisions Investments Winding up under the Companies Act 1956 (S. 53) Voluntary winding up (S.54) Scheme for partial winding up Management by administrator (Ss.52A-52G) Powers of the administrator respecting property (S. 52BB) Termination of appointment of administrator (S.52 D) Penalty for withholding documents Protection of action in Good faith (S. 52G) Finality of decision appointing Administrator (S. 52E) Powers of the central government to acquire the undertaking of insurers in certain cases (Sections 52 H- 52 N) Return of deposits (section 59) Special provisions relating to external companies (Ss. 6264) Insurance Councils & power of the Executive Committee (S.64-I)

35-36 36 36 36-37 37 37 38 38-39 39 40 40 40-41 41-43 43 43 43 43-44 44 44 44-45 45 45-46 46 46 46 46-47 47 47 47

8.9.29 8.9.30 8.9.32

Power to remove difficulties (S. 64 UL) Acquisition of surrender values by policy (S.113) Exemptions (s.118) Appendix I – Table of provisions to be amended Appendix II – Table of provisions to be deleted

47-48 48 48 48-60 61-69

CONSULTATION PAPER OF THE LAW COMMISSION OF INDIA ON REVISION OF THE INSURANCE ACT 1938 & THE INSURANCE REGULATORY AND DEVELOPMENT ACT 1999 1. 1.1 Introduction A reference has been made to the Law Commission of India by the Insurance Regulatory and Development...
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