In India, insurance incorporates the private sector enterprises as well as the public institutions. In the Constitution of India, the Seventh Schedule includes insurance conferring power exclusively on Central Government to enact laws. The Insurance in India is administered by a number of legislation for the purpose of standardizing the insurance zone.
The first attempt of the Central Government to legalize and control insurance sector was the by enacting the Insurance Act in 1938. In 1956, Life Insurance Corporation Act was passed to nationalize the Life Insurance division. Further in the year 1972, General Insurance Business Act was concluded for the purpose of nationalizing the general insurance companies. In order to introduce private insurance company and foreign investment, the Government of India enforced Insurance Regulatory and Development Authority Act. The insurance profession was given statutory recognition with other professions in India by the Actuaries Act, 2006.
The Insurance Act, 1938 defines ‘insurer’ as a person or group of persons not included under the overseas law, who performs insurance business in India. An insurer also includes a body corporate added on any law in India, performing the business of insurance and other bodies included under the Act. An ‘insurance agent’ refers to person obtained license under the provisions of the Act and obtains payment in the form of commission or recompense as a return for soliciting the business.
The Controller of Insurance, having knowledge in industrial, marketing, or insurance dealings and possess the eligibility of an actuary, is appointed by the Central Government by notification. The Act prohibits certain persons from practicing the insurance profession unless it is a public company, society incorporated under the Co operative Societies Act, 1912 or a body corporate. The insurer has to obtain a certificate of registration from the controller of insurance for practicing the insurance profession. For the purpose of registration the insurer has to submit such documents as specified under the Act. The registration certificate shall be granted by the controller after conducting an inquiry and completing the formalities described by the present legislation. The Act also provides for the renewal of registration every year by submitting the application with the prescribed fee.
The name of the insurer shall not be similar or resembling to that of another insurer registered under the Act and such similarity or resemblance shall be treated as deceit. The insurance company shall audit the accounts either by an auditor under the Indian Companies Act, 1913 or can appoint another auditor as per the terms of the Act. The insurer shall maintain a register of policies which shall contain the details of the policy holder and a register of claims in which details of the claimant shall be entered as stipulated by the 1938 Act.
The Act provides provision for investment of assets, prohibition of loans, liability of the directors etc. The Controller shall be ordered by the Central Government to conduct necessary inquiry and investigation and submit the records regarding such inquiry. The controller is empowered to issue directions in national interest, safeguard the interest of policy holders and proper management of the insurer. The controller shall have powers to remove managers, appoint added directors, prevent the insurer from entering certain transactions, call meeting of directors, close foreign branches etc.
Where the controller is of the opinion that the insurer is acting contrary to the interests of the insurance holders, the controller shall appoint an administrator for inquiry after obtaining approval from the Central Government and the decisions of the administrator shall not be questioned in any court. For the purposes of the Act, the Central Government shall constitute a tribunal entrusted with the powers of a civil court. The Act empowers the Central Government to comprise a Life Insurance Council and General Insurance Council as prescribed by the Act.
The Insurance (Amendment) Act, 1968 provided for the establishment of Tariff Advisory Committee for controlling the tariffs, conditions and stipulations to be followed by insurer in general insurance dealings. The President of India issued Securities and Insurance Laws (Amendment and Validation) Ordinance on June 18, 2010 which was subsequently passed by the Parliament by enacting Securities and Insurance Laws (Amendment and Validation) Act, 2010. The Act amended the Insurance Act, 1938 and three other Central legislation.