Insurance Industry History and Important Acts of Insurance

1. INSURANCE & RISK MANAGEMENT (BBAA04A52)
Unit -2 :
INSURANCE INDUSTRY
Dr. J.Mexon ,
Department of Management,
Kristu Jayanti College, Bengaluru.

2. Contents
Insurance Industry: pre-nationalization and post nationalization
Current scenario of Insurance Industry in India
Legal aspects of Insurance
 Special features of Insurance contract
Insurance laws
Insurance Contract Act
Insurance Act
LIC Act
IRDAAct

3. Insurance Industry
Insurance is defined as a co-operative device to spread the
loss caused by a particular risk over a number of persons
who are exposed to it and who agree to ensure themselves
against the risk.
Insurance has been known to exist in some form or other
since 3000 BC. Various civilizations, over the years, have
practiced the concept of pooling and sharing among
themselves, all the losses suffered by some members of the
community.

4. Insurance in India has evolved over time heavily drawing
from other countries, England in particular.
Brief History:
1. Insurance in different periods
2. History of Insurance in India
a.) Pre-Nationalisation
b.) Post-Nationalisation

5. 1. Insurance in different periods
i. Insurance in the pre-Greek period:
• Chinese and Babylonian traders (2nd and 3rd BC) – Risk
transfer
• Code of Hammurabi text(1750 BC) 6th king, 1st dynasty of
Babylon – Additional sum to cancel stolen shipment loan
• Achaemenian monarch (Persia)- Insured their people
ii. Insurance in roman empire:
• Greeks and romans introduced health and life insurance in
600 AD

6. iii. Insurance in 14th century
• Separate insurance contracts - Genoa
iv. Insurance in 17th Century:
• Mr.Edward Lloyd Coffee house for insurance (1680s) and The
Fire office - London
• First insurance company (fire ) in the US (1732)

7. v. Insurance in 18th Century:
• The New York fire (1835)
• The great Chicago fire (1871)
• Reinsurance concept
• The workmen’s compensation Act 1897
vi. Insurance in 19th Century:
• World war II – Life Insurance
• Single type insurance in US (1950s)
• Prohibited commercial banks from insurance business. Major bank
comes to Insurance arena.

8. 2. History of Insurance in India:
a.) Pre-Nationalisation:
• The Oriental Life Insurance Co.Ltd –The first life insurance
company to be set up in India by English Company in the year
1818 in Calcutta.
• Madras Equitable - In 1829, the Madras Equitable had begun
transacting life insurance business in the Madras Presidency.
The purpose is looking after the needs of European community.
However, later these companies started insuring Indian lives;
but Indian lives were being treated as sub-standard lives and
heavy extra premiums were being charged on them.

9. • Triton Insurance Co. Ltd (1850)– The first non-life insurer to be
established in India.
• Bombay Mutual Assurance Society Ltd – The first Indian
insurance company. It was formed in 1870 in Mumbai. This era,
however, was dominated by foreign insurance offices which did
good business in India.
• National Insurance Ltd- The oldest insurance company in India.
It was founded in 1906 and it is still in business.

10. Many other Indian companies were set up subsequently as a
result of the Swadeshi movement at the turn of the century.
In 1912, the Life Insurance Companies Act and the Provident
Fund Act were passed to regulate the insurance business.
The Insurance Act 1938 was the first legislation enacted to
regulate the conduct of insurance companies in India. This
Act, as amended from time to time continues to be in force.
The controller of insurance was appointed by the
government under the provisions of the Insurance Act.

11. b.) Post-Nationalisation:
• Nationalisation of Life Insurance: Life insurance business was nationalized on
1st September 1956 and the Life Insurance Corporation of India (LIC) was
formed. There were 170 companies and 75 provident fund societies doing life
insurance business in India at that time. From 1956 to 1999, the LIC held
exclusive rights to do life insurance business in India.
• Nationalisation of Non-Life Insurance: With the enactment of General
Insurance Business Nationalisation Act (GIBNA) in 1972, the non-life insurance
business was also nationalized and the General Insurance Corporation of
India(GIC) and its four subsidiaries were set up. At that point of time, 106
insurers in India doing non-life insurance business were amalgamated with
the formation of four subsidiaries of the GIC of India.

12. • Malhotra Committee and IRDAI: In 1993, Malhotra committee was set
up to explore and recommend changes for development of the industry
including the reintroduction of an element of competition. In 1997 the
Insurance Regulatory Authority (IRA) was established. The passing of
the Insurance Regulatory & Development Act, 1999 (IRDAI) led to the
formation of Insurance Regulatory & Development Authority of India
(IRDAI) in April2000 as a statutory regulatory body both for life, non-life
and health insurance industry. IRDA has been subsequently renamed as
IRDAI in 2014.
• Amending the Insurance Act in 2015, certain stipulations have been
added governing the definition and formation of insurance companies
in India.

13. Current Scenario of Indian Insurance Industry
At the end of financial year 2020, there were 68 insurers operating
in India. Out of these, 24 were life insurers, 27 were general insurers
and six were standalone health insurers. Additionally, the country
also had eleven re-insurers including foreign reinsurer branches.02-
Mar-2021.
The life insurance industry is expected to increase at a CAGR
(Compound Annual growth rate) of 5.3% between 2019 and 2023.
• India’s insurance penetration was pegged at 3.76% in FY20, with
life insurance penetration at 2.82% and non-life insurance
penetration at 0.94%.

14. • The market share of private sector companies in the general and
health insurance market increased from 47.97% in FY19 to 48.03%
in FY20.
• In India, gross premiums written of non-life insurers reached US$
26.52 billion in FY21 (between April 2020 and March 2021), from
US$ 26.49 billion in FY20 (between April 2019 and March 2020),
driven by strong growth from general insurance companies.
• In March 2021, health insurance companies in the non-life
insurance sector increased by 41%, driven by rising demand for
health insurance products amid COVID-19 surge.

15. • According to S&P (Standard & Poor’s)Global Market Intelligence
data, India is the second-largest insurance technology market in
Asia-Pacific, accounting for 35% of the US$ 3.66 billion insurtech-
focused venture investments made in the country.
• In FY21, LIC achieved a record first-year premium income of Rs.
56,406 crore (US$ 7.75 billion) under individual assurance business
with a 10.11% growth over last year.
• In May 2021, Max Life Insurance Co. Ltd. launched ‘Max Life Saral
Pension’, a non-linked, individual immediate annuity plan.

16. • In February 2021, Bharti AXA General Insurance launched its
‘Health AdvantEDGE’ health insurance scheme to provide holistic
cover against accelerating costs associated with medical
requirements and other healthcare facilities.
• In February 2021, ICICI Lombard General Insurance, a non-life
insurance firm in the private sector, has been authorised by the
International Financial Services Centre (IFSC) to establish an IFSC
Insurance Office (IIO) in GIFT City in Gandhinagar, Gujarat.

17. Government Initiatives:
• Union Budget 2021 increased FDI limit in insurance from
49% to 74%. IRDAI has announced the issuance, through
Digilocker, of digital insurance policies by insurance firms.
• Under the Union Budget 2021, Finance Minister Nirmala
Sitharaman announced that the initial public offering
(IPO) of LIC will be implemented in FY22, as part of the
consolidation in the banking and insurance sector. LIC’s
IPO has the potential to raise Rs. 1 lakh crore (US$ 13.62
billion).

18. • In February 2021, the Finance Ministry announced to
infuse Rs. 3,000 crore (US$ 413.13 million) into state-
owned general insurance companies to improve the
overall financial health of companies.
• Under Union Budget 2021, fund of Rs. 16,000 crore (US$
2.20 billion) has been allocated for crop insurance
scheme.

19. Legal aspects of Insurance
A contract is an agreement between parties, enforceable at law. The
provisions of the Indian Contract Act, 1872 govern all contracts in India,
including insurance contracts. An insurance policy is a contract into between
parties, viz., the company, called the insurer, and the policyholder, called the
insured and fulfils the requirements enshrined in the Indian Contract Act,
1872. The insurance contract should fulfill the following legal elements.
1. Proposal
2. Acceptance
3. Consideration
4. Competency to contract
5. Consensus ad idem
6. Lawful Object

20. 1. Proposal: When one person signifies to another his
willingness to do or to abstain from doing anything, with a
view to obtaining the assent of that other to such act or
abstinence, he is said to make a proposal (“Promisor”).
2. Acceptance: When a person to whom the proposal is made,
signifies his assent thereto, the proposal is said to be accepted
(“Promisee”). A proposal, when a accepted, becomes a
promise;

21. 3. Consideration: When, at the desire of the promisor, the
promisee or any other person has done or abstained from
doing, or does or abstains from doing, or promises to do or to
abstain from doing, something, such act or promise is called a
consideration for the promise;
4. Competency to contract: Every person is competent to
contract who is of the age of majority according to the law to
which he is subject, and who is sound mind and is not
disqualified from contracting by any law to which he is
subject.

22. 5. Consensus ad idem: Two or more person are said to
consent when they agree upon the same thing in the same
sense. Both the insurance company and the Policyholder must
agree on the same thing in the same sense. Consent is said to
be free when it is not caused by –
• Coercion, or (force)
• Undue influence or (taking advantage of power)
• Fraud, , or (criminal or intention to deceive other)
• Misrepresentation, , or (untrue statement about something)
• Mistake (error or misunderstanding)

23. 6. Lawful object: The consideration or object of an agreement must be
lawful, The consideration or object of an agreement is unlawful under the
following circumstances:
(a) Where a contract is forbidden by law or
(b) Where the contract is of such nature that, if permitted, it would defeat
the provisions of any law or is fraudulent;
(c) Where the contract involves or implies, injury to the person or property
of another; or
(d) Where the Court regards it as immoral, or opposed to public policy.
The object of an insurance contract, i.e. to cover the risk by taking out an
insurance policy, is a lawful object.

24. Special Features of Insurance Contract
1. Aleatory
2. Adhesion
3. Utmost Good faith
4. Executory
5. Unilateral
6. Conditional
7. Personal contract
8. Warranties and Representations
9. Misrepresentation and Concealments
10. Fraud
11. Impersonation

25. 1. Aleatory: One party to a contract might receive considerably
more in value than he or she gives up under the terms of the
agreement.
2. Adhesion: One party draws up the contract in its entirety and
presents it to the other party on a 'take it or leave it' basis; the
receiving party does not have the option of negotiating,
revising, or deleting any part or provision of the document.
3. Utmost Good Faith: Insurance contracts are held based on
higher standard utmost good faith , requiring the utmost of this
quality between the parties. Each party rely upon the
representations and declarations of the other.

26. 4. Executory: The covenants of one or more parties to the contract
remain partially or completely unfulfilled. The insurer will only
perform its obligation after certain events take place (in other
words, losses occur).
5. Unilateral: In unilateral contract, the promise of one party is
exchanged for a specific act of the other party. Insurance contracts
are unilateral; the insured performs the act of paying the policy
premium, and the insurer promises to reimburse the insured for
any covered losses that may occur.

27. 6. Conditional: A condition is a provision of a contract which
limits the rights provided by the contract. Even when a loss is
suffered, certain conditions must be met before the contract
can be legally enforced. (conditions precedent and conditions
subsequent)
7. Personal contract: Insurance contracts are usually personal
agreements between the insurance company and the insured
individual, and are not transferable to another person without
the insurer's consent.

28. 8. Warranties and Representations: A warranty is a statement that is
considered guaranteed to be true and, once declared, becomes an
actual part of the contract. Typically, a breach of warranty provides
sufficient grounds for the contract to be voided.
Conversely, a representation is a statement that is believed to be true
to the best of the other party's knowledge. In order to void a contract
based on a misrepresentation, a party must prove that the information
misrepresented is indeed material to the agreement.
In most circumstances, the responses that a person gives on an
insurance application are considered to be a representations, and not
warranties.

29. 9. Misrepresentations and Concealments: A misrepresentation is a
statement, whether written or oral, that is false. For an insurance
company to void a contract because of this, the information in question
must be material to the decision to extend coverage.
Concealment, on the other hand, is the failure to disclose information
that one clearly knows about. To void a contract, the insurer must
prove that the applicant willfully and intentionally concealed
information that was of a material nature.

30. 10. Fraud: Fraud is the intentional attempt to persuade, deceive, or
trick someone in an effort to gain something of value. For instance, if
an insurance applicant intentionally lies in order to obtain coverage or
make a false claim, it could very well be grounds for the charge of
fraud.
11. Impersonation (False pretenses): When one person assumes the
identity of another for the purpose of committing a fraud, that person
is guilty of the offense of impersonation (also known as false
pretenses).

31. Laws concerning to Insurance
oThe Indian Post Office Act, 1898
oThe Carriers Act, 1865
oThe Indian Stamp Act, 1899
oThe Workman’s Compensation Act,
1923
oThe Carriage of Goods by Sea Act,
1925
oSale of Goods Act, 1930
oInsurance Act 1938
oLife Insurance Companies Act, 1956
oThe Merchant Shipping Act, 1958
oMarine Insurance Act, 1963
oThe Indian Ports Act, 1963
oThe Carriage by Air Act, 1972
oGeneral Insurance Business Act
1972
oConsumer Protection Act, 1986
oThe Motor Vehicles Act, 1988
oIndian Railways Act, 1989
oPublic Liability Insurance Act,
1991
oMultimodal Transportation Act,
1993
oIRDAAct, 1999

32. • The Indian Post Office Act,
1898: The act defines the
liability of the government for
loss, wrong delivery, delay of
or damage to any postal article
in course of transmission of
post.

33. • The Carriers Act, 1865: The act
defines the rights and liabilities
of truck owners or operators who
carry goods for public hire in
respect of loss or damage to
goods carried by them. It also
mentions the time limit within
which notice of loss or damage
must be filed with the road
carriers.

34. • The Indian Stamp Act, 1899:
A policy of insurance must be
stamped as per the schedule of
rates for various classes of
insurance prescribed in the act.
A policy can't be enforced ‘in
a court of law’ if it is not
stamped.

35. • The Workman’s Compensation
Act, 1923: It describes the
payment by employers to their
employee / workmen. The
compensation for injury by
accident or disease, arising out of
and in the course of employment.

36. • The Carriage of Goods by Sea
Act, 1925: The act specifies the
minimum rights, liabilities and
immunities of a ship owner in
respect of loss or damage to cargo
carried. The act deals with three
aspects of a ship owners liabilities
towards cargo owner:
The circumstances when the ship
owner is deemed to be liable for loss.
The circumstances when the ship
owner is exempted from liability.
The limits of liability of a ship owner
for loss of or damage to cargo.

37. • Sale of Goods Act, 1930:
The act relates with the
rights and obligations of
sellers and buyers of goods
like the merchantable quality
of goods, the point or time at
which ownership transfers
from sellers to buyer.

38. • Insurance Act 1938: Insurance
Act 1938, is the primary law that
governs the insurance business in
India. It provides for the
registration and licensing of
insurers, payment of premiums,
alteration and other policy
matters, powers of governments
accounts audit and other reporting
requirements, mode of deposits
and investments, constitution of
claim settlement authorities.

39. • Life Insurance Companies
Act, 1956: Life Insurance
Corporation Act, 1956 and the
regulations made thereunder
deals with the formation of
Life Insurance Corporation –
its functions, powers, capital,
transfer of business, conduct
of business and other related
matters.

40. • The Merchant Shipping Act,
1958: It provides protection to
ship owners. The ship owners
liability arises up to certain
maximum sums for certain
losses, provided the incident
giving rise such claims has
arisen without the actual fault
or priority of the ship owner,
whether the claims relates to
loss of life, personal injury, or
damage to property on land or
water.

41. • Marine Insurance Act, 1963:
The act is specially formulated
for the marine insurance
business. It codifies the law,
rules and regulations relating to
Marine Insurance. There are only
few exception from the
U.K.Marine Insurance Act, 1905

42. • The Indian Ports Act, 1963:
The act described the liability of
port trust- authority for loss of or
damage to goods whilst in their
custody. It also defines the
prescribed time limit for filling
monetary claim on, or suit
against the Port Trust
Authorities.

43. • The Carriage by Air Act,
1972: This act defines the
liability of the air carrier for
death of or injury to passages
and for loss of or damage to
registered luggage and cargo.
It also prescribes the
maximum limits of liability for
death, Injury, damage etc., it
specifies the time limits within
which claims have to be filed
on the air carrier.

44. • General Insurance
Business (Nationalisation)
Act 1972: It deals with the
formation of GIC and
amalgamation of insurers
existing prior to the
promulgation of the Act. It
describes the powers and
functions of GIC, powers of
Central government and
other related issues.

45. • Consumer Protection Act,
1986: The objective to pass this
act is to provide for better
protection of the interests of
consumers and for the settlement
of consumers disputes. It is
applicable to the buyers of goods
and services. Insurances have
been defined as a service, for the
purpose of the act.

46. • The Motor Vehicles Act,
1988: It provides
compulsory insurance for
Motor Vehicles. This policy
covers the insured person’s
liability in the event of
death, bodily injury of
certain persons or damage to
the property of third person.

47. • Indian Railways Act, 1989:
The act deals with various
aspects of railway
administration. The
provisions of the relate to
rights and liabilities of
railways as carries of goods.
The tribunals deal with
claims for cargo loss,
personal injuries, and refund
of excess freight.

48. • Public Liability Insurance
Act, 1991: It deals with the
immediate relief to the
persons affected by
accidents arising of
hazardous substances. If your
business is sued, public liability
insurance will cover the cost of
your legal defence, plus any
compensation or settlement
money you have to pay out.

49. • Multimodal Transportation
Act, 1993: This is the act for
the persons who engage in
more than one mode of
transportation such as rail,
road, sea or air. The act
specifies limits of liability of
the operator, contents of
documents issued by them,
notice of loss etc.

50. • Insurance Regulatory and
Development Authority Act,
1999: The IRDA Act, 1999
provides for the establishment of
an Authority to protect the interest
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
Companies Act 1956 and the
General Insurance Business Act,
1972.

51. Indian Contract Act, 1872
This Act may be called be the Indian Contract Act, 1872. Extent,
commencement - It extends to the whole of except the State of Jammu
and Kashmir; and it shall come into force on the first day of September,
1872. The Act basically identifies the ingredients of a legally
enforceable valid contract.
1. Communication, acceptance and revocation of proposals (chapter-I)
2. Contracts, violable contracts and void agreements (chapter-II)
3. Consequences of breach of contract (chapter-VI)
4. Agency, Appointment and authority of agents (chapter-X)

52. 1. Communication, acceptance and revocation of proposals: Chapter I
• Communication when complete – When it becomes to the knowledge
of the person.
• Revocation of Proposals and acceptance- any time before the
communication of its acceptance is complete
• Revocation how made- by communication notice, lapse of time, fail to
fulfil conditions and death
• Acceptance must be absolute – Complete and expressed in usual and
accepted manner.
• Promise, express and implied – promise by words(express) and other
than that (implied)

53. 2. Contracts, violable contracts and void agreements : Chapter-II
• What agreements are contracts – Agreements fulfils essential
elements of valid contract as per Indian Contract Act.
• Who are competent to contract – Who attained age of majority,
Sound mind and not disqualified by law.
• What is a sound mind for the purposes of contracting?- at the
time when he makes it, he is capable of understanding it and of
forming a rational judgement as to its effect upon his interest.

54. • "Consent" - they agree upon the same thing in the same sense.
• "Free consent" -Consent is said to be free when it is not caused by
Coercion, or (force);
Undue influence or (taking advantage of power);
Fraud, , or (criminal or intention to deceive other);
Misrepresentation, , or (untrue statement about something) and
Mistake (error or misunderstanding)
• Voidability of agreements without free consent -When consent to an
agreement is caused by coercion, fraud or misrepresentation, the
agreement is a contract voidable at the option of the party whose consent
was so caused.

55. • What consideration and objects are lawful, and what not- The
consideration or object of an agreement is lawful, unless -It is
forbidden by law; or it would defeat the provisions of any law or is
fraudulent; of involves or implies, injury to the person or property; or
the Court regards it as immoral, or opposed to public policy.
• Agreements void, if consideration are objects unlawful in part- If any
part of a consideration is unlawful, the agreement is void.
• Agreement in restraint of marriage, void- Every agreement in restraint
of the marriage of any person, other than a minor, is void.
• Agreement in restraint of trade, void- Every agreement by which
anyone is restrained from exercising a lawful profession, trade or
business of any kind, is to that extent void.

56. 3. Consequences of breach of contract : Chapter-VI
• Compensation of loss or damage caused by breach of contract - the
party who suffers by such breach is entitled to receive compensation
for any loss or damage caused to him.
• Compensation of breach of contract where penalty stipulated for-
When a contract has been broken, if a sum is named in the contract
to receive from the party who has broken the contract reasonable
compensation not exceeding the amount so named or, as the case
may be, the penalty stipulated for.
• Party rightfully rescinding contract, entitled to compensation - A
person who rightfully rescinds a contract is entitled to consideration
for any damage which he has sustained through the no fulfillment of
the contract.

57. 4. Agency, Appointment and authority of agents : Chapter – X
• "Agent" and "principal" -An "agent" is a person employed to do any
act for another, or to represent another in dealing with third persons.
The person for whom such act is done, or who is so represented, is
called the "principal".
• Who may employ agent -Any person who is of the age of majority
according to the law to which he is subject, and who is of sound
mind, may employ an agent.
• Who may be an agent -any person may become an agent, but no
person who is not of the age of majority and sound mind can become
an agent,

58. • Extent of agent's authority -An agent, having an authority to do an
act, has authority do every lawful thing which is necessary in order to
do so such act.
• "Sub-agent" - A "sub-agent" is a person employed by, and acting
undue the control of, the original agent in the business of the agency.
• Termination of Agency - An agency is terminated by the principal
revoking his authority, or by the agent renouncing the business of the
agency; or by the business of the agency being completed; or by
either the principal or agent dying or becoming of unsound mind; or
by the principal being adjudicated an insolvent under the provisions
of any Act for the time being in force for the relief of insolvent
debtors.

59. Insurance Act
• An Act to consolidate and amend the law relating to the business of insurance. This Act
may be called the Insurance Act, 1938. It extends to the whole of India . It shall come
into force on such date as the Central Government may, by notification in the Official
Gazette, appoint in this behalf. The long overdue Insurance Laws (Amendment) Act, 2015
was enacted on 23 March, 2015, in one of the first legislative actions of India's new
government led by Narendra Modi. The amendment also underwent a few material
changes since it was first introduced, such as the prescription for Indian control over
insurance joint ventures. However, the head-line objective of increasing the ceiling on
foreign investment from 26% to 49% has been achieved.
i. Major Definitions
ii. Payment of annual fee by insurer.
iii. Requirement as to capital.—
iv. Accounts and balance-sheet
v. Audit
vi. Record of policies and claims.—

60. i. Major Definitions:
• Authority - Insurance Regulatory and Development Authority of India
• Policy-holder - a person to whom the whole of the interest of the
policy-holder in the policy is assigned once and for all
• Controller of Insurance - officer appointed by the Central Government
exercise all the powers, discharge the functions and perform the
duties of the Authority under this Act or LIC Act, 1956 (31 of 1956) or
the General Insurance Business (Nationalisation) Act, 1972 (57 of
1972) or the IRDA Act, 1999 (41 of 1999);
• Fire insurance business - insurance against loss by or incidental to fire

61. • General insurance business - fire, marine or miscellaneous insurance
business, whether carried on singly or in combination with one or
more of them;
• Health insurance business - effecting of contracts which provide for
sickness benefits or medical, surgical or hospital expense benefits,
whether in-patient or out-patient travel cover and personal accident
cover;
• Insurance agent - an insurance agent who receives or agrees to
receive payment by way of commission or other remuneration in
consideration of his soliciting or procuring insurance business

62. • Indian insurance company - means any insurer, being a company
which is limited by shares, and, —
a. which is formed and registered under the Companies Act, 2013 (18
of 2013) as a public company or is converted into such a company
within one year of the commencement of the Insurance Laws
(Amendment) Act, 2015 (5 of 2015);
b. in which the aggregate holdings of equity shares by foreign investors,
including portfolio investors, do not exceed forty-nine per cent of the
paid up equity capital of such Indian insurance company, which is
Indian owned and controlled, in such manner as may be prescribed.
c. whose sole purpose is to carry on life insurance business or general
insurance business or re-insurance business or health insurance
business;

63. • Insurer - “insurer” means—
a. an Indian Insurance Company, or
b. a statutory body established by an Act of Parliament to carry on
insurance business, or
c. an insurance co-operative society, or
d. a foreign company engaged in re-insurance business through a
branch established in India.

64. ii. Payment of annual fee by insurer
(1) An insurer who has been granted a certificate of registration under
section 3 shall pay such annual fee to the Authority in such manner
as may be specified by the regulations.
(2) Any failure to deposit the annual fee shall render the certificate of
registration liable to be cancelled.

65. iii. Requirement as to capital
(1) No insurer not being an insurer as defined in sub-clause (d) of
clause (9) of section 2, carrying on insurance business in India or after
the commencement of the IRDA Act, 1999 (41 of 1999), shall be
registered unless he has, —
• a paid-up equity capital of Rs.100 crore- life insurance or general
insurance; or
• a paid-up equity capital of Rs.100 crore - carrying on exclusively
health insurance business; or
• a paid-up equity capital of Rs.200 crore- carrying on exclusively the
business as a re-insurer:

66. Insurer, may enhance the paid-up equity capital, accordance with the
provisions of the Companies Act, 2013 (18 of 2013), the Securities and
Exchange Board of India Act, 1992 (15 of 1992) and the rules, regulations
or directions issued thereunder or any other law for the time being in
force:
(2) No insurer, as defined in sub-clause (d) of clause (9) of section 2, shall
be registered unless he has net owned funds of not less than Rs.5000
crore.

67. iv. Accounts and balance-sheet.
(1) Every insurer, on or after the date of the commencement of the Insurance
Laws (Amendment) Act, 2015 (5 of 2015), in respect of insurance business
transacted by him and in respect of his shareholders’ funds, prepare balance
sheet, a profit and loss account, a separate account of receipts and
payments, a revenue account in accordance with the regulations as may be
specified.
(2) Every insurer shall keep separate accounts relating to funds of
shareholders and policyholders.
(3) Unless the insurer is a company as defined in clause (20) of section 2 of
the Companies Act, 2013 (18 of 2013), the accounts and statements referred
to in sub-section (1) shall be signed by the insurer, or in the case of a
company by the chairman, if any, and two directors and the principal officer
of the company, or in case of an insurance cooperative society by the person
in charge of the society.

68. v. Audit
The balance sheet, profit and loss account, revenue account and profit
and loss appropriation account of every insurer, in respect of all
insurance business transacted by him, shall, unless they are subject to
audit under the Companies Act, 2013 (18 of 2013), be audited annually
by an auditor, and the auditor shall in the audit of all such accounts
have the powers of, exercise the functions vested in, and discharge the
duties and be subject to the liabilities and penalties imposed on,
auditors of companies by section 147 of the Companies Act, 2013.

69. v. Record of policies and claims
(1) Every insurer, in respect of all business transacted by him, shall
maintain—
(a) a record of policies
(b) a record of claims
(c) a record of policies and claims in accordance with clauses (a) and (b) may
be maintained in any such form, including electronic mode, as may be
specified by the regulations made under this Act.
(2) Every insurer shall, in respect of all business transacted by him,
endeavour to issue policies above a specified threshold in terms of sum
assured and premium in electronic form, in the manner and form to be
specified by the regulations made under this Act.

70. The Life Insurance Corporation Act, 1956
An Act to provide for the nationalization 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.
 This Act may be called the Life Insurance Corporation Act, 1956.
 It shall come into force on such date as the Central Government may, by
notification in the Official Gazette, appoint.
i. Establishment and incorporation of LIC
ii. Constitution of the Corporation
iii. Functions of the Corporation

71. i. Establishment and incorporation of Life Insurance Corporation of
India
• With effect from such date as the Central Government may, by
notification in the Official Gazette, appoint, there shall be established
a Corporation called the Life Insurance Corporation of India.
• The Corporation shall be a body corporate having perpetual
succession and a common seal with power subject to the provisions
of this Act, to acquire, hold and dispose of property, and may by its
name sue and be sued.

72. ii. Constitution of the Corporation
• (1) It consist of such number of persons not exceeding sixteen as the Central
Government may think fit to appoint thereto and one of them shall be appointed
as a Chairman.
• (2) Before appointing a person to be a member, the Central Government shall
satisfy itself that that person will have no such financial or other interest as is
likely to affect prejudicially the exercise or performance by him of his functions as
a member, and the Central Government shall also satisfy itself from time to time
with respect to every member that he has no such interest.
• (3) A member who is in any way directly or indirectly interested in a contract
made or proposed to be made by the Corporation shall as soon as possible after
the relevant circumstances have come to his knowledge, disclose the nature of
his interest to the Corporation.

73. 3. Functions of the Corporation:
(1) Subject to the rules, if any, made by the Central Government in this
behalf, it shall be the general duty of the Corporation to carry on life
insurance business, whether in or outside India, and the Corporation shall so
exercise its powers under this Act as to secure that life insurance business is
developed to the best advantage of the community.
(2) Without prejudice to the generality of the provisions contained in sub-
section (1) but subject to the other provisions contained in this Act, the
Corporation shall have power—
• (a) to carry on capital redemption business(effecting and carrying out
contracts of insurance), annuity certain business(investment that provides
a series of payments for a set period to a person or the person's
beneficiary) or reinsurance business

74. • (b) subject to the rules, if any, made by the Central Government in this behalf, to
invest the funds of the Corporation in such manner as the Corporation may think
fit and to take all such steps as may be necessary or expedient for the protection
or realisation of any investment;
• (c) to acquire, hold and dispose of any property for the purpose of its business;
• (d) to transfer the whole or any part of the life insurance business carried on
outside India, if in the interest of the Corporation it is beneficial so to do;
• (e) to advance or lend money upon the security of any movable property or
otherwise;
• (f) to borrow or raise any money in such manner and upon such security as the
Corporation may think fit;

75. • (g) to carry on either by itself or through any subsidiary any other business
in any case where such other business was being carried on by a subsidiary
of an insurer whose controlled business has been transferred to and vested
in the Corporation under this Act;
• (h) to carry on any other business which may seen to the Corporation to be
capable of being conveniently carried on in connection with its business;
• (i) to do all such things as may be incidental or conducive to the proper
exercise of any of the powers of the Corporation.
(3) In the discharge of any of its functions the Corporation shall act so far as
may be on business principles.

76. IRDA Act, 1999
• This Act may be called the Insurance Regulatory and Development
Authority of India Act, 1999.
• It extends to the whole of India.
• It shall come into force on such date as the Central Government may,
by notification in the Official Gazette, appoint:
i. Establishment and Incorporation of Authority
ii. Composition of Authority
iii. Duties, Powers and Functions of Authority

77. i. Establishment and Incorporation of Authority
• 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".
• 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.
• The head office of the Authority shall be at such place as the Central Government
may decide from time to time.
• The Authority may establish offices at other places in India.

78. ii. 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. 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 (discipline that applies
mathematical and statistical methods to assess risk in insurance, finance,
and other industries and professions) , respectively.

79. iii. 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
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;

80. • (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; (intermediate between the
customer and the insurance company)
• (d) specifying the code of conduct for surveyors and loss assessors
(assess loss of fire or accident etc);
• (e) promoting efficiency in the conduct of insurance business;
• (f) promoting and regulating professional organisations connected
with the insurance and re-insurance business;

81. • (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 insurers in respect of general insurance business not so
controlled and regulated by the Tariff Advisory Committee under section 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;

82. • (k) regulating investment of funds by insurance companies;
• (l) regulating maintenance of margin of solvency; (a minimum excess on an
insurer's assets over its liabilities set by regulators)
• (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 life insurance business and general
insurance business to be undertaken by the insurer in the rural or social
sector; and
• (p) exercising such other powers as may be prescribed.