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The Insurance Act 1938 a comprehensive legislation governing not only Life but also Non-Life branches of Insurance to provide State Control over Insurance business.
B. Regulations introduced for the compulsory registration of Insurance Companies and for filing of Returns of Investment and Financial conditions.
C.Provisions for Deposits to prevent Insurance Inadequate financial resources or speculative concerns from commencing business
D.Provision that 55% of the net life fund of an Indian or Non-Indian Insurance should be vested in Government and approved securities with at least 25% in Indian Government rupee securities. All other companies i.e. Foreign Companies must invest 100% of their Indian Liabilities in Indian Government and approved securities, with at least 33.3% in Indian Government Securities
E. Provision of rebating, restriction of commission were fixed at 40% of the first years premium and 5% of the renewal premium in respect of Life Insurance business. The agent must be licensed, to improve the status of the profession.
F. Periodical valuation for Indian Business of foreign companies and the business of Indian Companies. G. G. Provision for Policyholders Directors, making it possible for the representatives of Policyholders to be on the Board
H. Standardization of Policy Conditions required all companies to file standard forms and tables of Premium approved by an Actuary under this requirement, the initial deposit for Life Insurance business was raised from Rs. 25,000/in government Securities to Rs. 50,000 in cash or approved securities, which was subsequently to be raised by installments to Rs. 2 lac within a specified time limit.
Thus for the first time in the history of Insurance in India, the whole business was brought under a unified system of control and its structure strengthened by statutory regulations. Weaker elements were weeded out, indiscriminate promotion was checked and speculative Insurance was eliminated. The best proof of the soundness of law was the effective check on large scale liquidations which had marred the name of Insurance in the thirties.
Various amending Acts to 1938 Act were passed in 1939, 1940, 1941, 1944, 1945 and 1946 on issues like control on deposits, creation of an office of Superintendent of Insurance with wide powers of Supervision of Control, Investments, rebating, Policyholders Directors, Returns and Managing Agencies Further amendments were brought about in 1950, 1956 and 1968 to make the act more comprehensive and meaningful.
rating
Nationalisation enabled mobilisation and deployment of massive financial resources Committee on Reforms in Insurance Sector Malhotra Committee IRDA Act 1999
Recommendations of CRIS
Insurance Sector should be gradually opened for private participation both life and non-life separately. No composite insurers allowed. Foreign Companies be allowed through Joint Ventures established in India with Indian partners.
The minimum paid up capital of the new Insurance Companies should not be less than Rs. 100 Crores I.e. approximately US $25 Million Capital adequacy should be backed by very defined solvency standards Brokers may be allowed to operate for direct business subject to adequate controls and safeguards
Promoters shareholding should not exceed 40 percent of the paid up capital. This was subsequently modified to 26% by the Parliamentary Committee which was appointed subsequently and was later on incorporated in the IRDA Bill which was passed by both Houses of Parliament in December 1999.
IRDAs AIMS :
The IRDAs aims are : To protect customers of Insurance companies IRDA will : set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of those it regulates, in order to protect and to secure fair treatment for insurance policyholders;
IRDAs AIMS :
Aim to ensure that insurance customers receive precise, clear and correct information about the services, products and risks; Recognise insurance customers responsibility for their own decisions, while aiming to ensure that they are not exposed to risks that they should not reasonably by expected to assume.
IRDAs AIMS :
(ii)To promote clean and orderly markets. IRDA will : promote fairness, transparency and orderly conduct in financial markets dealing with insurance and enforce high standards in this area; take action where such standards are inadequate or ineffectively enforced
IRDAs AIMS :
(iii) IRDA will pursue these aims in an efficient way and will aim to ensure that the costs of regulation are proportionate to the benefits.
(2) Without prejudice to the generality of the provisions contained in sub-section (1), the powers and functions of the Authority shall include : (a) to issue to the applicant a certificate of registration, to renew, modify, withdraw, or cancel such registration