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Transcript of THE INSURANCE LAWS (AMENDMENT) BILL, - PRS | Insurance Laws BilTHE INSURANCE LAWS (AMENDMENT) BILL,...

  • 1

    41

    STANDING COMMITTEE ON FINANCE

    (2011-12)

    FIFTEENTH LOK SABHA

    Ministry of Finance (Department of Financial Services)

    THE INSURANCE LAWS (AMENDMENT) BILL, 2008

    FORTY FIRST REPORT

    LOK SABHA SECRETARIAT

    NEW DELHI

    December, 2011/ Agrahyana, 1933 (Saka)

  • 2

    FORTY FIRST REPORT

    STANDING COMMITTEE ON FINANCE (2011-2012)

    (FIFTEENTH LOK SABHA)

    Ministry of Finance (Department of Financial Services)

    THE INSURANCE LAWS (AMENDMENT) BILL, 2008

    Presented to Lok Sabha on 13 December, 2011

    Laid in Rajya Sabha on 13 December, 2011

    LOK SABHA SECRETARIAT NEW DELHI

    December, 2011/ Agrahyana, 1933 (Saka)

  • 3

    CONTENTS

    Page No. Composition of the Committee ........(iii) Introduction .....................................................(iv)

    REPORT

    Part - I Background 1 Overview of Committees examination of the Insurance Laws (Amendment) Bill, 2008

    8

    Part II

    Clause By Clause Examination

    1. Clause 3 (iii): Definition of health insurance [Insertion of new Sub Section 6(B) in Section 2 of the Act]

    68

    2. Clause 3(iv): Definition of Indian insurance company (Substitution of Sub Section

    7A of Section 2 of the Insurance Act) 70

    3. Clause 3(V) Minimum Paid-up Capital (Substitution of Sub Section (b) in Section

    2 (8A) 73

    4. Clause 3(vi) Definition of Insurer (Substitution of Sub-Section 9 of Section 2 of

    the Insurance Act) 76

    5. Clauses 4, 5 and 6 relating to operation of insurers in Special Economic Zones (SEZ) (i) Substitution of new section for Section 2C providing for prohibition of transaction of insurance business by certain persons; (ii) amendment of Section 2CA providing for power of Central Government to apply provisions of this Act to SEZs; and (iii) insertion of new Section 2CB in Section 2CA of the Act providing for prohibition of insurance of properties in India with foreign insurers except with the permission of Authority

    78

    6. Clause 8 Amendment of Section 3 of the Insurance Act (Registration of

    insurers) 87

    7. Clause 12: Requirement as to capital (Substitution of new Section for Section 6 of the Insurance Act)

    90

    8. Clause 13: Capital structure, voting rights, maintenance of record of shareholders etc. (Amendment of Sub-Section 3 of Section 6A of the Insurance Act)

    94

    9. Clause 14: Manner of divesting excess shareholding by promoter in certain cases (Omission of Section 6AA of the Insurance Act)

    98

    10. Clause 15: Provision for securing compliance with requirements relating to capital

    structure (Amendment of Section 6B of the Insurance Act) 100

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    11. Clause 17: Separation of Accounts and funds (Amendment of Section 10 of the

    Insurance Act) 102

    12. Clause 20: Actuarial report and abstract- Amendment of Section 13 of the Insurance

    Act 105

    13. Clause 21: Record of Policies and claims (Amendment of Section 14 of the

    Insurance Act) 106

    14. Clause 28: Investment of assets (Amendment of Sections 27, 27A, 27B, 27C and

    27D of the Act) 107

    15. Clause 30: Loans or advances to subsidiaries of insurance companies (Amendment

    of Section 29 of the Insurance Act) 112

    16. Clause 37: Rural and Social Sector Obligations (Amendment) of Section 32B) 114 17. Clause 38: Obligation of insurer in respect of insurance business in third party risks

    of motor vehicles. (Insertion of new Section 32 D) 116

    18. Clause 39: Power of investigation and inspection by Authority (Amendment of

    Section 33 of the Insurance Act) 122

    19. Clause 47: Power of Authority to prepare scheme of amalgamation (Amendment of

    Section 37A of the Act) 123

    20. Clause 48: Assignment and transfer of insurance policies, Nomination by Policy

    holders, Prohibition of payment by way of commission or otherwise for procuring business (Substitution of new Sections for Sections 38, 39 and 40 of the Insurance Act)

    124

    21. Clause 49: Omission of Section 40A of the Insurance Act 134 22. Clause 51: Prohibition of rebating (Amendment of Section 41 of the Insurance Act,

    1938) 138

    23. Clause 52: Regulation of appointment of insurance agents by insurers in respect of

    eligibility, disqualification and other aspects. (Amendment of Section 42 of the Insurance Act)

    139

    24. Clause 53: Omission of Section 42A, 42B and 42C relating to regulation of principal

    agents, chief agents and special agents 148

    25. Clause 54: Issue of license to intermediary or insurance intermediary (Amendment

    of Section 42D of the Insurance Act) 151

    26. Clause 56: Record of insurance agents (Amendment of Section 43 of the Insurance

    Act) 153

    27. Clause 57: Omission of Section 44 relating to prohibition of cessation of payments

    of commission. 155

    28. Clause 58: Policy not to be called in question on ground of misstatement after five

    years (Amendment of Section 45 of the Insurance Act) 158

    29. Clause 86: Surveyors or Loss assessors (Substitution of Section 64UM of the

    Insurance Act) 165

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    30. Clause 92, 93 and 94: Penalty for failure to comply with Sections 3, 27, 27A, 27B,

    27D, 27E, 32B, 32C and 32D 170

    31. Clause 98: Appeal to Securities Appellate Tribunal (Substitution of new Section for

    Section 110) 174

    32. Clause 105 (xiii) and (xiv): Amendment of Section 114A of the Insurance Act relating

    to power of Authority to make regulations 177

    33. Clause 107: Enhancement of equity capital of General Insurance companies

    [Insertion of a new Section after Section 10A of the General Insurance Business (Nationalisation) Act]

    178

    34. Clause 109: Amendment of Section 2 of IRDA Act, 1999-Insertion of the words

    insurance agents, third party administrator in definition of intermediary or

    insurance intermediary

    180

    APPENDICES

    I. Notes of Dissent (i) & (ii) submitted by Shri Moinul Hassan, MP II. Minutes of the sittings of the Committee held on 7 October, 2010, 1 November,2010,

    1 December, 2010, 21 December, 2010, 12 January, 2011 and 8 December, 2011

    III. The Insurance Laws (Amendment) Bill, 2008.

  • 6

    COMPOSITION OF STANDING COMMITTEE ON FINANCE 2011-2012

    Shri Yashwant Sinha - Chairman

    MEMBERS

    LOK SABHA

    2. Shri Shivkumar Udasi Chanabasappa 3. Shri Jayant Chaudhary 4. Shri Harishchandra Deoram Chavan 5. Shri Bhakta Charan Das 6. Shri Gurudas Dasgupta 7. Shri Nishikant Dubey 8. Shri Chandrakant Khaire 9. Shri Bhartruhari Mahtab 10. Shri Anjan Kumar Yadav M. 11. Shri Prem Das Rai 12. Dr. Kavuru Sambasiva Rao 13. Shri Rayapati S. Rao 14. Shri Magunta Sreenivasulu Reddy 15. Shri Sarvey Sathyanarayana 16. Shri G.M. Siddeswara 17. Shri N. Dharam Singh 18. Shri Yashvir Singh 19. Shri Manicka Tagore 20. Shri R. Thamaraiselvan 21. Dr. M. Thambidurai

    RAJYA SABHA

    22. Shri S.S. Ahluwalia 23. Shri Raashid Alvi 24. Shri Vijay Jawaharlal Darda 25. Shri Piyush Goyal 26. Shri Moinul Hassan 27. Shri Satish Chandra Misra 28. Shri Mahendra Mohan 29. Dr. Mahendra Prasad 30. Dr. K.V.P. Ramachandra Rao 31. Shri Yogendra P. Trivedi

    SECRETARIAT

    1. Shri A.K. Singh - Joint Secretary 2. Shri R.K. Jain - Director 3. Shri T. G. Chandrasekhar - Additional Director 4. Shri Ramkumar Suryanarayanan - Deputy Secretary

  • 7

    INTRODUCTION

    I, the Chairman of the Standing Committee on Finance, having been authorized

    by the Committee, present this Forty-first Report on the Insurance Laws (Amendment)

    Bill, 2008.

    2. The Insurance Laws (Amendment) Bill, 2008 was introduced in Rajya Sabha on

    22 December, 2008 and referred to the Committee for examination and report. However

    due to dissolution of 14th Lok Sabha, the Committee could not finalise and present the

    Report. Following the constitution of 15th Lok Sabha, the Bill was referred to the

    Committee on 14th September, 2009, by the Honble Speaker, Lok Sabha under rule

    331E of the Rules of Procedure and Conduct of Business in Lok Sabha.

    3. The Committee obtained written information on various provisions contained in

    the aforesaid Bill from the Ministry of Finance (Department of Financial Services).

    4. Written views/memoranda were also received from the General Insurers (Public

    Sector) Association of India (GIPSA), General Insurance Council, Confederation of

    Indian Industries (CII), US India Business Council (USIBC), Reinsurance Group of

    America (RGA), various private sector insurance companies, employees association,

    insurance brokers association and Indian Institute of Insurance Surveyors and Loss

    Assessors (IISLA) etc.

    5. The Committee, at their sitting held on 7 October, 2010 and 12 January, 2011

    took evidence of the representatives of the Ministry of Finance (Department of Financial

    Services). At their sitting held on 1 November, 2010, the Committee heard the views of

    various employees, agents and field workers association such as All India LIC

    Employees Federation, All India Insurance Employees Association, National Federation

    of Insurance Field Workers of India