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INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY ACT, 1999
41 of 1999
29th December, 1999
An Act to provide for the establishment of an Authority to protect the interests of holders of insurance policies to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto and further to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the General Insurance Business (Nationalisation) Act, 1972. Be it enacted by Parliament in the Fiftieth Year of the Republic of India as follows:
STATEMENT OF OBJECTS AND REASONS 1. The insurance industry requires a high degree of regulation. The Insurance Act, 1938 provides for the institution of the Controller of Insurance to act as a strong and powerful supervisory and regulatory authority with powers to direct, advise, caution, prohibit, investigate, inspect, prosecute, search, seize, fine, amalgamate, authorise, register and liquidate insurance companies. However, after the nationalisation of the life insurance industry in 1956 and the general insurance industry in 1972, the role of the Controller of Insurance diminished in significance over a period of time. 2. In April, 1993, the Government set up a high-powered Committee headed by Shri R.N. Malhotra, former Governor, Reserve Bank of India, to examine the structure of the insurance industry and recommend changes to make it more efficient and competitive keeping in view the structural changes in other parts of the financial system of the economy. The Committee which submitted its report on 7th January, 1994 felt that the insurance regulatory apparatus should be activated even in the present set-up of nationalised insurance sector and recommended, inter alia, the establishment of a strong and effective Insurance Regulatory Authority (IRA) in the form of a statutory autonomous board on the lines of Securities and Exchange Board of India. 3. The recommendations of the Committee were discussed at different forums including the Consultative Committee of the Parliament attached to the Ministry of Finance, Managements of Life Insurance Corporation, General Insurance Corporation and its subsidiary companies, trade unions, Chambers of Commerce and Consumer interest groups. The recommendations to set up an autonomous Insurance Regulatory Authority found wide support. In view of the general support received, the then Government decided to bring in a legislation to establish an independent regulatory authority for the insurance industry. Since enacting legislation for creating the Insurance Regulatory Authority would take time, the then Government constituted through a Government resolution an Interim Insurance Regulatory Authority pending the enactment of a comprehensive legislation. The Chairman, Insurance Regulatory Authority has been notified as Controller of Insurance under the Insurance Act, 1938. The said Interim Regulatory Authority at present is discharging certain functions and exercising powers of the Controller. 4. In pursuance of the Budget Speech in July, 1996 the then Government introduced on the 20th December, 1996, the Insurance Regulatory Authority Bill, 1996 for establishment of an Authority to protect the interests of holders of insurance policies and to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. The Bill was referred to the Department related Standing Committee on the Ministry of Finance. The Committee submitted its report on 9th May, 1997. However, the said Bill incorporating therein the recommendations of the said Standing Committee was taken for consideration but could not be passed and Bill was withdrawn by the then Government. 5. In the Budget Speech, 1998 the Finance Minister announced that alongwith the reforms of the Banking Sector, it is necessary to move forward with reforms in insurance which has hitherto been a public sector monopoly. In order to provide better insurance coverage to our citizens and also to augment the flow of long term resources for financing infrastructure, it has been proposed by the Government to open the insurance sector to competition from private Indian companies. The Insurance Regulatory Authority will also be converted into a statutory body. Accordingly, it is now proposed to give a statutory character to the Interim Insurance Regulatory Authority by enacting a legislation in this regard and amend Sec. 30 of the Life Insurance Corporation Act, 1956 and Sec. 24 of General Insurance Business (Nationalisation) Act, 1972 to permit the entry of private Indian companies into the insurance sector and to make certain consequential amendments to the Insurance Act, 1938. 6. The proposed Authority shall be a body corporate having perpetual succession and a common seal with power to acquire, hold and dispose of property and to contract. It will consist of a Chairperson and other members not exceeding nine in number, of whom not more than five shall serve full time, to be appointed by the Central Government from amongst person of ability, integrity and standing who have knowledge or experience of life insurance, general insurance, acturial science, finance, economics, law, accountancy, administration or any other discipline which in the opinion of the Central Government shall be useful to the Authority. The Chairperson and other whole-time Members shall hold office for a term of 5 years or until the age of 65 years in the case of Chairperson and 62 years in the case of other whole-time Members, whichever is earlier and they shall be eligible for re-appointment subject to age consideration. A part-time Member shall hold office for a term not exceeding 5 years. 7. The duties, powers and functions of Authority, inter alia, are :- (a) to issue to the applicant a certificate of registration, to 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 and practical training for 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 organisations connected with the insurance and re-insurance business; (g) levying fees and other charges for carrying out the purposes of this Act; (h) calling for information from, undertaking inspection of, conducting enquiries and investigations includings audit of the insurers, 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. 64-U of the Insurance Act, 1938; (j) prescribing the form and manner in which books of account shall be maintained and statement of accounts will be rendered by insurers and insurance intermediaries; (k) regulating investment of funds by insurance companies; (l) regulating maintenance of margin of solvency; (m) adjudication of disputes between insurers and intermediaries; (n) exercising such other powers as may be prescribed. 8. The powers and functions mentioned above would enable the Authority to perform the role of an effective watchdog and regulator for the insurance sector in India. To enable the Authority to function in a truly independent manner and discharge its assigned responsibilities effectively, it is proposed to vest the Authority with statutory status. 9. The Bill seeks to achieve the above objects.
SECTION 01:. SHORT TITLE, EXTENT AND COMMENCEMENT
- (1) This Act may be called the Insurance Regulatory and Development Authority Act, 1999.
(2) It extends to the whole of India.
(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint:
Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.
SECTION 02:. DEFINITIONS
- (1) In this Act, unless the context otherwise requires,-
(a) "appointed day" means the date on which the Authority is established under sub-section (1) of Sec. 3;
(b) "Authority" means the Insurance Regulatory and Development Authority established under sub-section (1) of Sec. 3;
(c) "Chairperson" means the Chairperson of the Authority;
(d) "Fund" means the Insurance Regulatory and Development Authority Fund constituted under sub-section (1) of Sec. 16;
(e) "Interim Insurance Regulatory Authority" means the Insurance Regulatory Authority set up by the Central Government through Resolution No. 17 (2)/94-Ins. V. dated the 23rd January, 1996;
(f) "intermediary or insurance intermediary" includes insurance brokers, re-insurance brokers, insurance consultants, surveyors and loss assessors;
(g) "member" means a whole-time or a part-time member of the Authority and includes the Chairperson;
(h) "notification" means a notification published in the Official Gazette; (i) "prescribed" means prescribed by rules made under this Act; (j) "regulations" means the regulations made by the Authority.
(2) Words and expressions used and not defined in this Act but defined in the Insurance Act, 1938 (4 of 1938) or the Life Insurance Corporation Act, 1956 (31 of 1956) or the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972) shall have the meanings respectively assigned to them in those Acts.
SECTION 03:. ESTABLISHMENT AND INCORPORATION OF AUTHORITY
- (1) With effect from such date as the Central Government may, by notification, appoint there shall be established, for the purposes of this Act, an Authority to be called the Insurance Regulatory and Development Authority.
(2) The Authority shall be a body corporate by the name aforesaid having perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to contract and shall, by the said name, sue or be sued.
(3) The head office of the Authority shall be at such place as the Central Government may decide from time to time.
(4) The Authority may establish offices at other places in India.
SECTION 04:. COMPOSITION OF AUTHORITY
-The Authority shall consist of the following members, namely:- (a) a Chairperson; (b) not more than five whole-time members;
(c) not more than four part-time members, to be appointed by the Central Government from amongst persons of ability, integrity and standing who have knowledge or experience in life insurance, general insurance, acturial science, finance, economics, law, accountancy, administration or any other discipline which would, in the opinion of the Central Government, be useful to the Authority :
Provided that the Central Government shall, while appointing the Chairperson and the whole-time members ensure that at least one person each is a person having knowledge or experience in life insurance, general insurance or acturial science, respectively.
SECTION 05:. TENURE OF OFFICE OF CHAIRPERSON AND OTHER MEMBERS
- (1) The Chairperson and every other whole-time member shall hold office for a term of five years from the date on which he enters upon his office and shall be eligible for re-appointment:
Provided that no person shall hold office as such Chairperson after he has attained the age of sixty-five years :
Provided further that no person shall hold office as a whole-time member after he has attained the age of sixty-two years.
(2) A part-time member shall hold office for a term not exceeding five years from the date on which he enters upon his office.
(3) Notwithstanding anything contained in sub-section (1) or sub-section (2), a member may-
(a) relinquish his office by giving in writing to the Central Government notice of not less than three months; or
(b) be removed from his office in accordance with the provisions of Sec.6.
SECTION 06:. REMOVAL FROM OFFICE
- (1) The Central Government may remove from office any member who- (a) is, or at any time has been, adjudged as an insolvent; or (b) has become physically or mentally incapable of acting as a member; or
(c) has been convicted of any offence which, in the opinion of the Central Government, involves moral turpitude; or
(d) has acquired such financial or other interest as is likely to affect prejudicially his functions as a member; or
(e) has so abused his position as to render his continuation in office detrimental to the public interest.
(2) No such member shall be removed under Cl. (d) or Cl. (e) of subsection (1) unless he has been given a reasonable opportunity of being heard in the matter.
SECTION 07:. SALARY AND ALLOWANCES OF CHAIRPERSON AND MEMBERS
- (1) The salary and allowances payable to, and other terms and conditions of service of, the members other than part-time members shall be such as may be prescribed.
(2) The part-time members shall receive such allowances as may be prescribed.
(3) The salary, allowances and other conditions of service of member shall not be varied to his disadvantage after appointment.
SECTION 08:. BAR ON FUTURE EMPLOYMENT OF MEMBERS
-The Chairperson and the whole-time members shall not, for a period of two years from the date on which they cease to hold office as such, except with the previous approval of the Central Government, accept-
(a) any employment either under the Central Government or under any State Government; or
(b) any appointment in any Company in the Insurance sector.
SECTION 09:. ADMINISTRATIVE POWERS OF CHAIRPERSON
-The Chairperson shall have the powers of general superintendence and direction in respect of all administrative matters of the Authority.
SECTION 10:. MEETINGS OF AUTHORITY
- (1) The Authority shall meet at such times and places, and shall observe such rules and procedures in regard to transaction of business at its meetings (including quorum at such meetings) as may be determined by regulations.
(2) The Chairperson, or if for any reason he is unable to attend a meeting of the Authority, any other member chosen by the members present from amongst themselves at the meeting shall preside at the meeting.
(3) All questions which come up before any meeting of the Authority shall be decided by a majority of votes by the members present and voting, and in the event of an equality of votes, the Chairperson, or in his absence, the person presiding shall have a second or casting vote.
(4) The Authority may make regulations for the transaction of business at its meetings.
SECTION 11:. VACANCIES, ETC., NOT TO INVALIDATE PROCEEDINGS OF AUTHORITY
-No Act or proceeding of the Authority shall be invalid merely by reason of-
(a) any vacancy in, or any defect in the constitution of, the Authority; or
(b) any defect in the appointment of a person acting as a member of the Authority; or
(c) any irregularity in the procedure of the Authority not affecting the merits of the case.
SECTION 12:. OFFICERS AND EMPLOYEES OF AUTHORITY
- (1) The Authority may appoint officers and such other employees as it considers necessary for the efficient discharge of its functions under this Act.
(2) The terms and other conditions of service of officers and other employees of the Authority appointed under sub-section (1) shall be governed by regulations made under this Act.
SECTION 13:. TRANSFER OF ASSETS, LIABILITIES, ETC., OF INTERIM INSURANCE REGULATORY AUTHORITY
-On the appointed day,-
(a) all the assets and liabilities of the Interim Insurance Regulatory Authority shall stand transferred to, and vested in, the Authority;
Explanation.-The assets of the Interim Insurance Regulatory Authority shall be deemed to include all rights and powers, and all properties, whether movable or immovable, including, in particular, cash balances, deposits and all other interests and rights in, or arising out of, such properties as may be in the possession of the Interim Insurance Regulatory Authority and all books of account and documents relating to the same; and liabilities shall be deemed to include all debts, liabilities and obligations of whatever kind;
(b) without prejudice to the provisions of Cl. (a), all debts, obligations and liabilities incurred, all contracts entered into and all matters and things engaged to be done by, with or for the Interim Insurance Regulatory Authority immediately before that day, for or in connection with the purpose of the said Regulatory Authority, shall be deemed to have been incurred, entered into or engaged to be done by, with or for, the Authority;
(c) all sums of money due to the Interim Insurance Regulatory Authority immediately before that day shall be deemed to be due to the Authority; and
(d) all suits and other legal proceedings instituted or which could have been instituted by or against the Interim Insurance Regulatory Authority immediately before that day may be continued or may be instituted by or against the Authority.
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 re-insurance business.
(2) Without prejudice to the generality of the provisions contained in subsection (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 organisations connected with the insurance and re-insurance business;
(g) levying fees 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 insurer in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under Sec. 64-U 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;
(l) regulating maintenance of margin of solvency;
(m) adjudication of disputes between insurers and intermediaries or insurance intermediaries;
(n) supervising the functions of the Tariff Advisory Committee;
(o) specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in Cl. (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.
SECTION 15:. GRANTS BY CENTRAL GOVERNMENT
-The Central Government may, after due appropriation made by the Parliament by law in this behalf, make to the Authority grants of such sums of money as the Government may think fit for being utilised for the purposes of this Act.
SECTION 16:. CONSTITUTION OF FUNDS
- (1) There shall be constituted a fund to be called "The Insurance Regulatory And Development Authority Fund" and there shall be credited thereto-
(a) all Government grants, fees and charges received by the Authority;
(b) all sums received by the Authority from such other source as may be decided upon by the Central Government;
(c) the percentage of prescribed premium income received from the insurer.
(2) The Fund shall be applied for meeting-
(a) the salaries, allowances and other remuneration of the members, officers and other employees of the Authority;
(b) the other expenses of the Authority in connection with the discharge of its functions and for the purposes of this Act.
SECTION 17:. ACCOUNTS AND AUDIT
- (1) The Authority shall maintain proper accounts and other relevant records and prepare an annual statement of accounts in such form as may be prescribed by the Central Government in consultation with the Comptroller and Auditor-General of India.
(2) The accounts of the Authority shall be audited by the Comptroller and Auditor-General of India at such intervals as may be specified by him and any expenditure incurred in connection with such audit shall be payable by the Authority to the Comptroller and Auditor-General.
(3) The Comptroller and Auditor-General of India and any other person appointed by him in connection with the audit of the accounts of the Authority shall have the same rights, privileges and authority in connection with such audit as the Comptroller and Auditor-General generally has in connection with the audit of the Government accounts and, in particular, shall have the rights to demand the production of books of accounts, connected vouchers and other documents and papers and to inspect any of the offices of the Authority.
(4) The accounts of the Authority as certified by the Comptroller and Auditor- General of India or any other person appointed by him in this behalf together with the audit-report thereon shall be forwarded annually to the Central Government and that Government shall cause the same to be laid before each House of Parliament.
SECTION 18:. POWER OF CENTRAL GOVERNMENT TO ISSUE DIRECTIONS
- (1) Without prejudice to the foregoing provisions of this Act, the Authority shall, in exercise of its powers or the performance of its functions under this Act, be bound by such directions on questions of policy other than those relating to technical and administrative matters as the Central Government may give in writing to it from time to time : Provided that the Authority shall, as far as practicable, be given an opportunity to express its views before any direction is given under this sub-section.
(2) The decision of the Central Government, whether a question is one of policy or not, shall be final.
SECTION 19:. POWER OF CENTRAL GOVERNMENT TO SUPERSEDE AUTHORITY
- (1) If at any time the Central Government is of the opinion-
(a) that, on account of circumstances beyond the control of the Authority, it is unable to discharge the functions or perform the duties imposed on it by or under the provisions of this Act; or
(b) that the Authority has persistently defaulted in complying with any direction given by the Central Government under this Act or in the discharge of the functions or performance of the duties imposed on it by or under the provisions of this Act and as a result of such default the financial position of the Authority or the administration of the Authority has suffered; or
(c) that circumstances exist which render it necessary in the public interest so to do, the Central Government may, by notification and for reasons to be specified therein, supersede the Authority for such period, not exceeding six months, as maybe specified in the notification and appoint a person to be the Controller of Insurance under Sec. 2-B of the Insurance Act, 1938 (4 of 1938), if not already done :
Provided that before issuing any such notification, the Central Government shall give a reasonable opportunity to the Authority to make representations against the proposed supersession and shall consider the representations, if any, of the Authority.
(2) Upon the publication of a notification under sub-section (1) superseding the Authority,-
(a) the Chairperson and other members shall, as from the date of supersession, vacate their offices as such;
(b) all the powers, functions and duties which may, by or under the provisions of this Act, be exercised or discharged by or on behalf of the Authority shall, until the Authority is re-constituted under sub-section (3), be exercised and discharged by the Controller of Insurance; and
(c) all properties owned or controlled by the Authority shall, until the Authority is re-constituted under sub-section (3), vest in the Central Government.
(3) On or before the expiration of the period of supersession specified in the notification issued under sub-section (1), the Central Government shall re-constitute the Authority by a fresh appointment of its Chairperson and other members and in such case any person who had vacated his office under Cl. (a) of sub-section (2) shall not be deemed to be disqualified for re-appointment.
(4) The Central Government shall cause a copy of the notification issued under sub-section (1) and a full report of any action taken under this section and the circumstances leading to such action to be laid before each House of Parliament at the earliest.
SECTION 20:. FURNISHING OF RETURNS, ETC., TO CENTRAL GOVERNMENT
- (1) The Authority shall furnish to the Central Government at such time and in such form and manner as may be prescribed, or as the Central Government may direct to furnish such returns, statements and other particulars in regard to any proposed or existing programme for the promotion and development of the insurance industry as the Central Government may, from time to time, require.
(2) Without prejudice to the provisions of sub-section (1), the Authority shall, within nine months after the close of each financial year, submit to the Central Government a report giving a true and full account of its activities including the activities for promotion and development of the insurance business during the previous financial year.
(3) Copies of the reports received under sub-section (2) shall be laid, as soon as may be after they are received, before each House of Parliament.
SECTION 21:. CHAIRPERSON, MEMBERS, OFFICERS AND EMPLOYEES OF AUTHORITY TO BE PUBLIC SERVANTS
-The Chairperson, members, officers and other employees of Authority shall be deemed, when acting or purporting to act in pursuance of any of the provisions of this Act, to be the public servants within the meaning of Sec. 21 of the Indian Penal Code (45 of 1860).
SECTION 22:. PROTECTION OF ACTION TAKEN IN GOOD FAITH
-No suit, prosecution or other legal proceedings shall lie against the Central Government or any officer of the Central Government or any member, officer or other employee of the Authority for anything which is in good faith done or intended to be done under this Act or the rules or regulations made thereunder :
Provided that nothing in this Act shall exempt any person from any suit or other proceedings which might, apart from this Act, be brought against him.
SECTION 23:. DELEGATION OF POWERS
- (1) The Authority may, by general or special order in writing, delegate to the Chairperson or any other member or officer of the Authority subject to such conditions, if any, as may be specified in the order such of its powers and functions under this Act as it may deem necessary.
(2) The Authority may, by a general or special order in writing, also form Committees of the members and delegate to them the powers and functions of the Authority as may be specified by the regulations.
SECTION 24:. POWER TO MAKE RULES
- (1) The Central Government may, by notification, make rules for carrying out the provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely :
(a) the salary and allowances payable to, and other conditions of service of the members other than part-time members under sub-section (1) of Sec. 7;
(b) the allowances to be paid to the part-time members under sub-section (2) of Sec. 7;
(c) such other powers that may be exercised by the Authority under Cl.(q) of sub-section (2) of Sec. 14;
(d) the form of annual statement of accounts to be maintained by the Authority under sub-section (1) of Sec. 17;
(e) the form and the manner in which and the time within which returns and statements and particulars are to be furnished to the Central Government under sub-section (1) of Sec. 20;
(f) the matters under sub-section (5) of Sec. 25 on which the Insurance Advisory Committee shall advise the Authority;
(g) any other matter which is required to be, or may be, prescribed, or in respect of which provision is to be or may be made by rules.
SECTION 25:. ESTABLISHMENT OF INSURANCE ADVISORY COMMITTEE
- (1) The Authority may, by notification, establish with effect from such date as it may specify in such notification, a Committee to be known as the Insurance Advisory Committee.
(2) The Insurance Advisory Committee shall consist of not more than twenty- five members excluding ex-officio members to represent the interests of commerce, industry, transport, agriculture, consumer fora, surveyors, agents, intermediaries, organisations engaged in safety and loss prevention, research bodies and employees' association in the insurance sector.
(3) The Chairperson and the members of the Authority shall be the ex-officio Chairperson and ex-officio members of the Insurance Advisory Committee.
(4) The objects of the Insurance Advisory Committee shall be to advise the Authority on matters relating to the making of the regulations under Sec
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