insurance - association of india

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


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.

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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

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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

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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

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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

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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

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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


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

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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

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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:

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


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


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.

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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

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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

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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

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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

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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

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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


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


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.

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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

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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.

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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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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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