Insurance is a federal subject in India. All policy issues relating to Life Insurance and General Insurance in the country, including Insurance Regulatory Authority, fall within the domain of Insurance Division
in the Ministry of Finance
. Its functions include, administration of the Acts relating to insurance, monitoring of the performance of the nationalised insurance companies, framing of rules and regulations in respect of service conditions of employees of nationalised insurance companies,etc.
The primary legislation's that deal with insurance business in India are:-
- Insurance Act,1938 :- An Act to consolidate and amend the law relating to the business of insurance.
- Insurance Regulatory & Development Authority Act,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.
- The Life Insurance Corporation Act, 1956 :- An Act to provide for the nationalisation of life insurance business in India by transferring all such business to a Corporation established for the purpose and to provide for the regulation and control of the business of the Corporation and for matters connected therewith or incidental thereto.
- General Insurance Business (Nationalisation) Act, 1972 :- An Act to provide for the acquisition and transfer of shares of Indian insurance companies and undertakings of other existing insurers in order to serve better the needs of the economy by securing the development of general insurance business in the best interests of the community and to ensure that the operation of the economic system does not result in the concentration of wealth to the common detriment, for the regulation and control of such business and for matters connected therewith or incidental thereto.
- The Marine Insurance Act, 1963 :- An Act to codify the law relating to marine insurance.
- The General Insurance Business (Nationalisation) Amendment Act, 2002 :- An Act to further amend the General Insurance Business (Nationalisation) Act, 1972.
- The Insurance (Amendment) Act, 2002 :- An Act to further amend the Insurance Act, 1938.
Life Insurance Corporation of India (LIC)
Life Insurance Corporation of India (LIC) was formed by the Life Insurance Corporation Act,1956 , with the objective of spreading life insurance much more widely and in particular to the rural areas, providing them adequate financial cover at a reasonable cost. LIC has built up a vast network of 2,048 branches, 100 divisions and 7 zonal offices spread over the country. The Life Insurance Corporation of India also transacts business abroad and has offices in Fiji , Mauritius and United Kingdom . Besides the branch operations, the Corporation has established overseas subsidiaries jointly with reputed local partners in Bahrain, Nepal and Sri Lanka. LIC continues to be the dominant life insurer even in the liberalized scenario of Indian insurance and is moving fast on a new growth trajectory surpassing its own past records.
General Insurance Corporation of India (GIC)
General Insurance Corporation of India (GIC) was formed in pursuance of the General Insurance Business (Nationalisation) Act, 1972(GIBNA), for the purpose of superintending, controlling and carrying on the business of general insurance or non-life insurance. Initially,GIC had four subsidiary branches,namely:- National Insurance Company Ltd.,The New India Assurance Company Ltd.,The Oriental Insurance Company Ltd. and United India Insurance Company Ltd. But these branches were delinked from GIC in 2000 to form an association known as 'GIPSA' (General Insurance Public Sector Association).
Now, GIC has been approved as the 'Indian Reinsurer' and provides reinsurance support to various public sector and private General Insurance Companies. When insurance companies spread their risk by an arrangement with other underwriters or other insurance companies in order to protect themselves against losses that may incur in the course of writing insurance business, it is called re-insurance. This situation arises because at times the amount of total insurance becomes very high, thus leading to excessive liability on insurer. So,they transfer a part of the risk to other insurer by getting the subject matter insured again. Thus, its a contract between the two insurers and has no connection with the original party insured.
Insurance Regulatory and Development Authority (IRDA)
Insurance sector was opened up for competition from Indian private insurance companies with the enactment of Insurance Regulatory and Development Authority Act, 1999 (IRDA Act). As per the provisions of IRDA Act,1999, Insurance Regulatory and Development Authority (IRDA) was established on 19th April 2000 to protect the interests of holder of insurance policy and to regulate, promote and ensure orderly growth of the insurance industry. IRDA Act 1999 paved the way for the entry of private players into the insurance market which was hitherto the exclusive privilege of public sector insurance companies/corporations.
IRDA has the responsibility of protecting the interest of insurance policy holders. Towards achieving this objective, the Authority has taken the following steps:-
- IRDA has notified Protection of Policyholders Interest Regulations 2001 to provide for:- policy proposal documents in easily understandable language; claims procedure in both life and non-life; setting up of grievance redressal machinery; speedy settlement of claims; and policyholders' servicing. The Regulation also provides for payment of interest by insurers for the delay in settlement of claim.
- The insurers are required to maintain solvency margins so that they are in a position to meet their obligations towards policyholders with regard to payment of claims.
- It is obligatory on the part of the insurance companies to disclose clearly the benefits, terms and conditions under the policy. The advertisements issued by the insurers should not mislead the insuring public.
- All insurers are required to set up proper grievance redress machinery in their head office and at their other offices.
- The Authority takes up with the insurers any complaint received from the policyholders in connection with services provided by them under the insurance contract.