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INSURANCE ASSOCIATION OF INDIA 2010
P R O J E C T O N
R O L E O F I N S U R A N C E A S S O C I A T I O N O F
I N D I A
SUBMITTED BY: SHAILENDRA PAL SINGH
Roll no. 61
VIIIth Semester (B.A.LLB Hons.)
SUBMITTED TO: PROF. Dr. S.C.Roy
Faculty for Insurance Law
SUBMITTED ON – 15TH OF APRIL , 2010
C H A N A K Y A N A T I O N A L L A W
U N I V E R S I T Y
I N D I A , P A T N A
L A W O F I N S U R A N C E
INSURANCE ASSOCIATION OF INDIA 2010
S T R U C T U R E
RESEARCH METHODOLOGY
The research methodology adopted for this project is entirely doctrinal in nature
wherein books in the CNLU law library have been used. Information from websites has
also been relied upon by the researcher.
RESEARCH SCHEME
The project has been primarily divided into 4 parts. The first part deals with the general
introduction to the insurance sector in India. The second part talks about the evolution
of the insurance industry. It deals with the nationalization of the insurance sector and
then liberalization and entry of private players. The third part which is the core of the
project deals with the various regulatory bodies in India which regulate the business of
insurance, including the insurance association of India. The fourth part deals with the
two councils under the insurance association of India. The last part deals with the
conclusion where the views of the researcher are expressed.
Page | II
INSURANCE ASSOCIATION OF INDIA 2010
A C K N O W L E D G E M E N T
I TAKE THIS OPPORTUNITY TO EXPRESS MY HUMBLE GRATITUDE AND PERSONAL REGARDS TO PROF. DR.
S.C.ROY FOR INSPIRING ME AND GUIDING ME DURING THE COURSE OF THIS PROJECT WORK AND ALSO
FOR HIS COOPERATION AND GUIDANCE FROM TIME TO TIME DURING THE COURSE OF THIS PROJECT WORK
ON THE TOPIC “INSURANCE ASSOCIATION OF INDIA”
“I EXPRESS MY GRATITUDE TO THE FACULTY OF, ‘COMPANY LAW’ FOR THE CONCEPTS GIVEN BY HIM IN THE SUBJECT WHICH HAS BEEN THE BASE FOR
THIS SMALL PIECE OF WORK.”
YOURS SINCERELY
SHAILENDRA PAL SINGH ROLL NO. 61
Page | III
INSURANCE ASSOCIATION OF INDIA 2010
T a b l e o f C o n t e n t s
1. LIST OF ABBREVIATIONS……………………………………………………....V
2. INTRODUCTION......................................................................................................1.
3. EXPANSION OF INSURANCE INDUSTRY IN INDIA – NATIONALISATION
OF INSURANCE BUSINESS........................................................................................8
4. INSURANCE REGULATORY AUTHORITIES..................................................10
Insurance Regulatory and Development Authority (IRDA):......................................10
Tariff Advisory Committee:........................................................................................11
Insurance Association of India:...................................................................................12
5. COUNCILS OF INSURANCE ASSOCIATION OF INDIA................................14
Life Insurance Council:...............................................................................................14
General Insurance Council:.........................................................................................17
6. CONCLUSION..........................................................................................................20
7. BIBLIOGRAPHY....................................................................................................XX
Page | IV
INSURANCE ASSOCIATION OF INDIA 2010
List Of Abbreviations
AIR All India Reporter
All Allahabad
Bom Bombay
Cal Calcutta
Co. Company
ed. Edition
ER England reporter
Ibid Ibidum
KB Kings bench
KLT Kerala Law Times
LJ Law Journal
Ltd. Limited
Mad Madras
n. note
p. page
Pvt./(P) Private
SC Supreme Court
v. versus
LIST OF STATUTES
Insurance Regulatory and Development Authority (IRDA) Act, 1999 Insurance Act of 1938
Life Insurance Companies Act, 1912 & Life Insurance Corporation Act, 1956
Page | V
INSURANCE ASSOCIATION OF INDIA 2010
1. Introduction
“What the insurance companies have done is to reverse the business so that the public at large
insures the insurance companies”1
- Garry Spence
The past few decades have witnessed growth in insurance business. Day by day more and
more people are taking insurance policies to give themselves a sense of security. Now they
value their life and their property more than they did some five decades ago. Simply put,
insurance can be defined as some form of risk management which is used to block or nullify
certain contingent/ possible loss to life or property. Insurance law in India had its origins in the
establishment of a British firm, the Oriental Life Insurance Company in 1818 in Calcutta. These
firms in India were established primarily for safeguarding the interest of English widows. Up
until the beginning of 20th century the foreign insurance companies dominated in the scene of
business of insurance. These companies were investing in the insurance sector in India.
Interestingly in the 19th century, the premiums charged for insuring Indian lives was far more
than that charged for insuring an English person’s life, because Indian lives were considered to
be riskier.2
The Indian Life Assurance Companies Act, 1912 (which was based on the English Act of 1909)
was the first statute to regulate the life insurance business in India. However other classes of
insurance business were not covered under the sweep of the Act of 1912. This was so because
other kinds of insurance were still in nascent stage for which legislative controls were not
considered necessary.3 The first general insurance company established by an Indian was
1 http://thinkexist.com/quotes/with/keyword/insurance/2.html , last visited on 14th April, 2009.2 http://www.indiahousing.com/insurance-companies-india.html last visited on 1st March, 20093 Ibid
Page | 1
INSURANCE ASSOCIATION OF INDIA 2010
Indian Mercantile Insurance Company Ltd. in Bombay in 1907.4 With the growth of fire,
accident and marine insurance, eventually the need was felt to bring such kinds of insurance
within the purview of the Indian Life Assurance Companies Act, 19125
Non-life insurance was finally regulated in 1938 through the passing of the Insurance Act,
1938. This Act of 1938 along with various amendments over the years continues till date to be
the definitive piece of legislation on insurance and controls both life insurance and general
insurance.6
The insurance sector plays the socio-economic role in our nation. Not only does it provide
security but also it plays important role in the mobilization of capital. The premiums paid by
the insured to the insurance companies accumulate to form a large pool of capital. To achieve
the full potential of this sector there is a need of constant and effective regulation of insurance
business.7
4 General insurance has its origins in the United Kingdom.5 M.N. Srinivasan, “Principles of Insurance Law”, 8th ed. 2006, p.926 Ibid7 Ibid
Page | 2
INSURANCE ASSOCIATION OF INDIA 2010
Expansion Of Insurance Industry In India – Nationalisation Of
Insurance Business
The central government in 1956 decided to take over the management of 245 Indian and
foreign insurers and provident societies. The Life Insurance Corporation (“LIC”) was formed in
the later half of 1956 by the Life Insurance Corporation Act, 1956 (“LIC Act”). This act granted
the corporation exclusive privilege to conduct life insurance business in India. However, an
exception was made in the case of any company, firm, or persons intending to carry on life
insurance business in India in respect of the lives of “persons ordinarily resident outside India”
provided prior approval of the Central Government was obtained by the insurer for the same.8
The general insurance business was also nationalised with effect from January 1, 1973,
through the introduction of the General Insurance Business (Nationalisation) Act, 1972 (“GIC
Act”). Under the provisions of the GIC Act, the shares of the existing Indian general insurance
companies and undertakings of other existing insurers were transferred to the General
Insurance Corporation (GIC) to secure the development of the general insurance business in
India and to regulate and control such business. The general insurance business insurance
businesses of fire, marine, motor and miscellaneous insurance.9
Both LIC and GIC have played a significant role in the development of the insurance market in
India and in providing insurance coverage in India through an extensive network. With
liberalization of economy in 1991 the insurance sector also witnessed the benefits of
liberalization coming its way. In 1993, the Government of India set up an eight-member
committee chaired by Mr. R. N. Malhotra, a former Governor of the Reserve Bank of India to
8 www.nishithdesai.com, “Insurance law regulation in India”, report prepared by Nishith Desai Associates, Legal and Tax Counseling, 2002 last visited on 28 February, 2009.
9 IbidPage | 3
INSURANCE ASSOCIATION OF INDIA 2010
review the prevailing structure of regulation and supervision of the insurance sector and to
make recommendations for strengthening and modernizing the regulatory system. The
Committee submitted its report to the Indian Government in January 1994. Two of the key
recommendations of the Committee were, namely,
(a) The privatization of the insurance sector by permitting the entry of private players to enter
the business of life and general insurance, and
(b) The establishment of an Insurance Regulatory Authority.
The Malhotra Committee report was not implemented by the Government of India
immediately but it took years to implement its recommendations. The Parliament passed the
Insurance Regulatory and Development Act, 1999 (“IRDA Act”) on December 2, 1999 with the
aim “to provide for the establishment of an Authority, to protect the interests of the policy
holders, to regulate, promote and ensure orderly growth of the insurance industry and to
amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the General
Insurance Business (Nationalization) Act, 1972”.10
10 Malhotra Committee Report on Reforms in the Insurance Sector, April, 1993
Page | 4
INSURANCE ASSOCIATION OF INDIA 2010
1. Insurance Regulatory Authorities
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA):
IRDA is a statutory body which regulates and promotes the insurance industry in India and to
protect the interests of holders of insurance policies. The Insurance Regulatory and
Development Act, 1999 (IRDA Act) was passed in December, 1999 to protect the interests of
the policy holders, to regulate, promote and ensure orderly growth of the insurance industry
and to amend the Insurance Act, 1938, Life Insurance Corporation Act, 1956 and the General
Insurance Business (Nationalization) Act, 1972.11 The IRDA Act carried out a series of
amendments to the Act of 1938 and conferred the powers of the Controller of Insurance on
the IRDA.12
The Central Government appoints the members of IRDA from amongst persons of ability,
integrity and standing who have knowledge or experience in life insurance, general insurance,
actuarial science, finance, economics, law, accountancy, administration etc. The Authority
consists of a chairperson, not more than five whole-time members and not more than four
part-time members.13 The duty of the IRDA is to regulate, promote and ensure the orderly
growth of the insurance and re-insurance business in India. In furtherance of this
responsibility, it has been conferred with numerous powers and functions which include
prescribing regulations on the investments of funds by insurance companies, regulating
maintenance of the margin of solvency, adjudication of disputes between insurers and
intermediaries, supervising the functioning of the Tariff Advisory Committee, specifying the
percentage of premium income of the insurer to finance schemes for promoting and regulating
11 www.nishitdesai.com last visited on 10th March, 2009. 12 www.irdaindia.org last visited on 10th March, 2009.13 Ibid
Page | 5
INSURANCE ASSOCIATION OF INDIA 2010
professional organizations and specifying the percentage of life insurance business and general
insurance business to be undertaken by the insurer in the rural or social sector.14
TARIFF ADVISORY COMMITTEE:
The Tariff Advisory Committee is controls and regulates the rates, advantages, terms and
conditions offered by insurers in the general insurance business. The Advisory Committee has
the authority to require any insurer to supply such information or statements necessary for
discharge of its functions. Any insurer failing to comply with such provisions is deemed to have
contravened the provisions of the Insurance Act. Every insurer is required to make an annual
payment of fees to the Advisory Committee of an amount not exceeding- in case of
reinsurance business in India, 1% of the total premiums in respect of facultative insurance
accepted by him in India; and in case of any other insurance business, 1% of the total gross
premium written direct by him in India.15
14 Ajit Ranade, Rajeev Ahuja, “Issues in Regulation of Insurance”, EPW, January 29, 2000
15 http://www.tac.org.in/ last visited on 01-04-2008 at 04:25pmPage | 6
INSURANCE ASSOCIATION OF INDIA 2010
INSURANCE ASSOCIATION OF INDIA:
Like the above two bodies Insurance Association of India is also one of the important
regulatory bodies in the insurance sector. It was incorporated in the in the Insurance Act of
1938, by way of amendment in 1950 in the Act as a result of which Part II-A was inserted into
the Act. This part has Sections 64-A to 64-T.16 The Insurance Association of India is a statutory
body, with the characteristics of a corporate body like perpetual succession, common seal,
independent existence, power to hold acquire or dispose property and power to sue or be
sued in its own name.17 Basically, all insurers who carry on the business of insurance in India
are members of the Insurance Association of India. Even all provident societies carrying on
insurance business in India are members of it, if the Central Government declares so by
notification in the Official Gazette. All insurers and provident societies incorporated or
domiciled in India are members, whereas all those incorporated or domiciled outside India, are
associate members.18
The Insurance Association of India has two main councils:19
(a) The Life Insurance Council
(b) The General Insurance Council
16 B.N. Banerjee, “Law of Insurance”, 4th ed. 1994, vol.1, p.55917 Section 64-A(3) of the Insurance Act18 Rajiv Jain, “Insurance Law & Practice”, 2001 ed., p.4.35919 Section 64-C of the Insurance Act, 1938: There shall be two Councils of the Insurance Association of India, namely:(a) the Life Insurance Council consisting of all the members and associate members of the Association, who carry on life insurance business in India, and (b) the General Insurance Council consisting of all the members and associate members of the Association who carry on general insurance business in India.
Page | 7
INSURANCE ASSOCIATION OF INDIA 2010
Both these councils function through executive committees. The authorities of the Life
Insurance Council and the General Insurance Council constitute these Executive
Committees.20Following is the constitution of executive committee of both the councils:21
2 Nominated Officials
8 representatives of members of Insurance Association of India from Life
Insurance/General Insurance business
1 non-official nominated by the Central Government
5 persons connected with Life Insurance/General Insurance business from areas
without sufficient representation in Executive Committee
Any member of the Life Insurance Council or the General Insurance Council can lawfully
authorize any individual (whether an officer of the insurer or not), to act as the representative
of such member at any meeting of the Council concerns or to stand as a candidate for any
election held by that Council.22 The councils have the power to form committees with prior
delegation of power from authorities, for the purpose of performing various functions in
relation to the business of insurance.23 The Executive Committees of both the councils perform
the following functions on behalf of the Councils:24
to aid, advise and assist insurers carrying on life/general insurance business in the
matter of setting up standards of conduct and sound practice and in the matter of
rendering efficient service to holders of life insurance policies
to render advice to the Authority in the matter of controlling the expenses of insurers
in respect of their life/general insurance business in India
20 Section 64E of Insurance Act, 193821 Section 64-F(4) of Insurance Act, 193822 Section 64-D of Insurance Act, 193823 Section 64-F(5) of Insurance Act, 193824 S. 64J & L of Insurance Act, 1938 for Life Insurance Council & General Insurance Council respectively
Page | 8
INSURANCE ASSOCIATION OF INDIA 2010
to bring to the notice of the Authority the case of any insurer acting in a
manner prejudicial to the interests of holders of life/general insurance policies
It is a duty of both the Executive Committees to meet once every year to advise the Authority
in fixing limits prescribed under the proviso to subsection (2) of Section 40-B in case of life
insurance and subsection (1) of Section 40-C in case of General Insurance.
Page | 9
INSURANCE ASSOCIATION OF INDIA 2010
2. Councils Of Insurance Association Of India
LIFE INSURANCE COUNCIL:Life insurance council as the name suggest has to do with the life insurance business and not
the other insurances like fire, marine aviation etc. This council has an Executive Committee of
16 members. Out of these 14 are from licensed life insurers and the rest two from the IRDA.
The Committee strives to set up standards of conduct and practices for efficient customer
service, advices IRDA on controlling insurers’ expenses and serves as a forum that helps
maintain healthy market conduct. It creates and manages a process for agent examination and
certification. The Life Insurance Council is funded by the Life Insurers in India.25
The life insurance council has been set up with the following mandate:26
Advise the supervisory authority in the matter of controlling expenses
Actively participate in spreading insurance awareness in India .
To function as an active forum to aid, advise and assist insurers in maintaining high
standards of conduct and service to policyholders.
Take steps to develop education and research to be able to help bring to India the
benefit of the best practices in the world.
Interact with the Government and other bodies on policy matters
25 http://www.lifeinscouncil.org/aboutus.htm last visited on 05-04-2008 at 08:50pm26 Ibid
Page | 10
INSURANCE ASSOCIATION OF INDIA 2010
The following are the broad range of main functions and duties performed by the Life
Insurance Council within the broader framework of its role as provided for in the Insurance
Act:27
a) Assist the industry in maintaining high standards of ethics and governance.
b) Promote awareness regarding the role and benefits of life insurance .
c) Strives for a positive image of the industry through media, forums and opinion- makers
and enhancement consumer confidence in the industry
d) Set up the Mortality and Morbidity Information Bureau (MMIB) and take an active role
in its functioning
e) Provide help and guidance to members when necessary
f) Be an active link between the Indian life insurance industry and the global markets.
g) Organize structured, regular and proactive discussions with Government, lawmakers
and Regulators on matters relevant to the contribution by the life insurance industry
and act as an effective liaison between them
h) Conduct research on operational, economic, legislative, regulatory and customer-
oriented issues in life insurance, publish monographs on current developments in life
insurance and contribute to the development of the sector
i) Set up similar organizations for the benefit of the life insurance industry
j) Act as a forum of interaction with organizations in other segments of the financial
services sector
k) Play a leading role in insurance education, research, training, discussion forums and
conferences.
l) It also performs various quasi-judicial functions.28
27 Ibid28 Ibid
Page | 11
INSURANCE ASSOCIATION OF INDIA 2010
For the purpose of Training & Certification the Life insurance Council performs following
functions:29
The council takes up the work relating to the training, examination and certification of
Agents as provided in the Insurance Act. Play a positive role in establishing standards,
training of officials and intermediaries not only in products and sales but also other aspects
relevant to the life insurance industry and lift the level of professionalism Conduct
professional development programs in collaboration with international councils and life
insurance institutes.
The following paragraph discusses the steps taken by the Council to spread Education &
Awareness:30
The council seeks to provide structured regular information to the public about the
industry
Launch an interactive website/Life Insurance Journals/newsletters
Launch regular insurance awareness programs
Facilitate the conducting of Continuous Development Programs for intermediaries.
Elevate the profession of insurance selling and that of the Advisor, to that of financial
analysts and planners through certification programs developed in conjunction with Indian
and International institutions
Establish a consumer relations cell
Organise / participate in major conferences, seminars, workshops and lectures by
Indian/visiting experts on insurance and related areas
Organise / participate in major conferences, seminars, workshops and lectures by
Indian/visiting experts on insurance and related areas
Co-ordinate with educational institutions in India and overseas to encourage research,
professional development courses etc
29 Ibid30 Ibid
Page | 12
INSURANCE ASSOCIATION OF INDIA 2010
GENERAL INSURANCE COUNCIL:
There are currently 17 members of the General Insurance Council of India. All non- life insurers
can become the member of general insurance council. Invitation to become the member is
extended to the said insurers automatically. The General Insurance Council is an industry body
funded by contribution from member companies.31 The General Insurance Council represents
the collective interests of the Non-life Insurance companies in India. The Council speaks out on
issues of common interest; helps to inform and participate in discussions related to policy
formation; and acts as an advocate for high standards of customer service in the insurance
industry. General Insurance Council leads a number of initiatives by bringing together experts
from its member companies, the national re-insurers and the regulator in a common forum for
debating specific issues from time to time and help resolve them in a structured manner.32
Among other objectives The General Insurance Council endeavors to provide leadership on
issues having a bearing on the industry's collective strength and image and to shape and
influence decisions made by the Government, regulator and other public authorities, within
the country, in order to benefit the industry collectively. It tries to achieve the same by taking
the following measures:
It analysis and make representations in response to initiatives from others which
affect the industry.
pro-active analysis and lobbying to secure improvement in the legal and regulatory
framework
31 http://gicouncil.in last visited on 26th February, 2009. 32 Ibid
Page | 13
INSURANCE ASSOCIATION OF INDIA 2010
being recognised as a leading contributor to public policy thinking on issues relevant to
non-life insurance industry
maintaining a core secretariat with staff of high calibre and relevant skills drawn from
the industry on project to project basis, working under the guidance of the Board and
its committees, focussed on delivering the mission
presenting a positive image of the industry to the public, the media and other opinion-
formers
providing leadership and guidance to the industry on issues which may affect its public
image and reputation33
The primary functions of the General insurance Council can be summarized as follows:34
a) Promotion of sound development and maintenance of the reliability of the non-life
insurance industry: Developing codes of conduct for member companies,
strengthening non-life insurance companies' disclosure, developing compliance
programs to observe laws and regulations.
b) Presentation of requests and proposal: Representing the non-life insurance industry
in the presentation of regulatory reform requests, and of opinions to insurance
administration
33 Ibid.34 http://gicouncil.in last visited on 28-03-2008 at 01:20am
Page | 14
INSURANCE ASSOCIATION OF INDIA 2010
c) Promotion of a better understanding of non-life insurance amongst the public:
Providing inputs to the media about the developments in the non-life insurance
industry.
d) Response to social issues: Combating automobile theft, taking measures to prevent
insurance fraud, etc.
e) International activities: Promoting dialogue and information exchange with overseas
insurance associations, participating in international organizations' activities and
international meetings.
f) Requests and Proposals: The General Insurance Council carries out activities to realize
the establishment and revision of laws and regulations beneficial to the general
insurance industry and society by making requests and proposals to the related parties
g) Promotes international cooperation: Cooperation with other Insurance Associations
h) Consumer Services: The General Insurance Council promotes consumers'
understanding of insurance, and the presence of the general insurance industry in
society
i) Social Responsibility: The General Insurance Council undertakes activities having far
reaching social implications in association with law enforcement agencies, such as- (i)
Automobile Theft Prevention, (ii) Prevention of Uninsured Driving, (iii) Response to
Fraudulent Claims
The amendment brought about in the Insurance Act in 1968 as a result of which the functions
of the Tariff Advice Committee came to be defined in Part II-B. One of the provisions relating to
Tariff Advice Committee is Section 64-UF, which deals with the transfer of various assets and
liabilities of the General Insurance Council to the Tariff Advisory Committee. This provision has
the effect of limiting the powers exercised by the General Insurance Council to a certain
Page | 15
INSURANCE ASSOCIATION OF INDIA 2010
extent, because some of the assets and liabilities are transferred to the TAC instead of the GIC
holding them and this has lead to a shift of hands for such powers and functions etc.35
35 Section 64-UF of Insurance Act, 1938Page | 16
INSURANCE ASSOCIATION OF INDIA 2010
3. Conclusion
With the opening up of economy after liberalization Indian Insurance Company too has
expanded by leap and bounds. The insurance Companies now are offering lucrative policies to
lure the customers. Therefore to protect the interest of customers and ensuring proper
mobilization of savings there is a need of regulation to keep a tab on these insurers. For this
purpose only, regulatory bodies like the Insurance regulator and development authority and
Insurance Association of India have been set up. With the insurance sector in India finally
having opened to private players, a heated debate has ensued on the need for a regulated
tariff regime in the sector as against a self-regulated, free pricing, market driven regime.
Where on one hand, an open, self-regulated, free-pricing regime has its own advantages; it
also comes with its own high risks. Thus the regulated insurance sector is the more practical
option which only goes to underscore the existence of Insurance Association of India.
The contract of insurance is a contract of utmost good faith. Thus, in a contract of such nature,
it is necessary to have regulation up to a certain extent and that is where bodies like the
Insurance Association of India come into play. Regulation is required not only to facilitate
proper functioning of the insurers, but also helps in safeguarding the interests of the insured,
thus creating a certain degree of stability in the economy as a whole, with regard to the
insurance sector. The role played by the Insurance Association of India, with respect to the
Insurance Act in preventing such criticisms from arising in the insurance sector is of great
importance. Through its two councils, i.e. the Life Insurance Council and the General Insurance
Council, it performs various vital functions and exercises important powers. Both these
councils are highly active and strive towards achieving excellence in their respective areas of
insurance.
Page | 17
INSURANCE ASSOCIATION OF INDIA 2010
The Insurance Association of India is a very systematic set-up as a whole. It has clearly
branched out into two Councils dealing with life and non-life insurance and taking care of
regulating the insurers in their respective areas of insurance.36 Thus, as a regulatory body, it is
a very practical and convenient one. Also, it is given the character of a corporate body by the
Act and therefore an advantage would be that the principle of ‘lifting of corporate veil’ would
be applicable to it for the purpose of determining of liability in case of any suit against it. Also,
the Act gives the Insurance Association of India an independent and separate legal personality
from that of its members.37 This is also very thoughtful, because the Association would not be
held liable for each and every fault or offence committed by its members. Therefore, the
members are individually responsible for their actions and they also carry a collective
responsibility. This clearly justifies the reason for such an Association to be in existence.
Basically, in such a situation, each member is not only responsible for itself, but is also
responsible at a collective level along with all other members.
Both the Councils under the Insurance Association of India actively engage in performing their
functions and as a result, reduce the burden of regulatory authorities like the IRDA. Apart from
regulatory functions, both the Councils lay special emphasis on spreading education and
awareness in the industry with regard to various aspects of insurance. This is a unique
endeavor on the part of the Association. Insurance contracts are generally quite complicated
because they comprise of various clauses which are not clearly understandable by everyone.
Therefore, the Councils play a vital role in this aspect by making people aware of such
contracts and the linked advantages as well as risks involved. The Councils indulge in training
as well. Training is necessary to enhance the standard, quality and level of skill prevalent in the
insurance sector. The insurance market in India is huge and to be able to upgrade its standards
on a constant basis, a lot of training is required and the Councils of the Association are
definitely doing a commendable job by indulging in the same. Training also helps bring in a
more professional approach to the market of insurance.
36 Section 64-C of Insurance Act37 Section 64-A of Insurance Act
Page | 18
INSURANCE ASSOCIATION OF INDIA 2010
Apart from spreading awareness, education and training, the Councils also do a difficult job of
trying to ensure high standards of ethics and governance. For any economy to progress, these
high levels of ethics and governance are a must. Also, the two Councils actively interact with
regard to policy making of the Government and thus act as a bridge or channel between the
insurers and the Government. The Insurance Association of India also stays in constant touch
with the developments in the global insurance market through its Councils. This helps it
analyse its own standards with respect to global standards and determine the missing aspects
to be able to reach the global standards successfully.
The NAIC (National Association of Insurance Commissioners) is a similar organization which
exists in the USA and regulates the insurance sector there. The National Association of
Insurance Commissioners (NAIC) is the organization of insurance regulators from the 50 states,
the District of Columbia and the five U.S. territories. The NAIC also lays emphasis on factors
other than regulation of the industry alone. NAIC helps promote protection of public interest,
facilitate fair and equitable treatment of insurance consumers.38 Another similar regulatory
authority in the United Kingdom is Lloyd’s. Lloyd’s comprises of a Council, which is further
branched out into various bodies which help in regulating various parts of the insurance sector
in UK. It began with marine insurance in 1688. Lloyd’s is in turn regulated by the UK Financial
Services Authority (FSA) under the Financial Services and Markets Act, 2000.39
Also, it is interesting to note that apart from usual insurances, the General Insurance Council
has also started indulging in re-insurance and aviation insurance. Re-insurance helps the
primary insurers to accept risks that are normally beyond their capacity and also in
38 http://www.naic.org/index_about.htm last visited on 7th March, 2009.39 http://www.lloyds.com/About_Us/What_is_Lloyds/ last visited 7th March, 2009.
Page | 19
INSURANCE ASSOCIATION OF INDIA 2010
maintaining the financial stability in case of losses due to mass settlement cases in catastrophic
events. The general insurance company (GIC) is the major player in re-insurance in India. It
assumes the role of national reinsurer and all the insurance companies in India are supposed
to pay 20% of their re-insurance businesses to GIC. Both, re-insurance as well as aviation
insurance are comparatively new and upcoming fields of insurance and the General Insurance
Council will certainly play a vital role in the coming years with respect to the same.
Also, the Executive Committees formulated under each of the Councils perform an important
function of advising and guiding the insurers constantly, so that they are able to maintain high
standards of conduct and service to policy-holders.40 This is essential and helpful for the
insurers. The Executive Committees also charge some fee from its members (insurers) for
effectively performing its functions.41 But the Government has also kept a check on the
functioning of these Committees by keeping a check on delegation of authority by it to sub-
committees formed by it for the purposes of carrying on activities on the insurance business.
Such delegation of authority to sub-committees can be done, but only with prior permission of
the Central Government.42 This helps keep a check on the unnecessary and improper
delegation of authority, which might be problematic.
In the final analysis it can be said that the Insurance Association of India plays a very vital role
in the Insurance Act. It not only ensures proper regulation of the insurance sector but also
engages itself in other activities like promoting awareness, education, training, ethics,
standards etc. Thus it can be safely concluded that Insurance Association of India is must for
the regulation of insurance sector and protecting the interest of customers.
40 Section 64-J of Insurance Act41 Ibid42 Section 64-N of Insurance Act
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INSURANCE ASSOCIATION OF INDIA 2010
Bibliography
BOOKS:
Avtar Singh (ed.), “MN Srinivasan’s Principles of Insurance Law”, 17th ed. 2002, Wadhwa
Publications, Nagpur.
B.N.Banerjee, “Law of Insurance”, 4th ed. 1994, vol.1, The Lane Book Company (P) Ltd.,
Allahabad, U.P.
Rajiv Jain, “Insurance Law & Practice”, 2001 ed., Vidhi Publishing Pvt. Ltd., New Delhi
Prof. K.S.N. Murthy & K.V.S. Sarma, “Modern Law of Insurance in India”, 3rd ed. 1995
M.N. Srinivasan, “Principles of Insurance Law”, 8th ed. 2006, Wadhwa & Co., Nagpur
WEBSITES:
http://www.lifeinscouncil.org
http://gicouncil.in
http://www.indiahousing.com
www.nishithdesai.com
www.irdaindia.org
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