Insurance - Association of India

INSURANCE ASSOCIATION OF INDIA 201
0
PROJECT ON
ROLE OF INSURANCE ASSOCIATION OF
INDIA
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
S U BM I T T E D ON – 15 T H OF A PR I L , 2010
CHANAKYA NATIONAL LAW UNIVERSITY
INDIA, PATNA
L A W O F I N S U R A N C E
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STRUCTURE
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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ACKNOWLEDGEMENT
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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Table o f Contents
1. LIST OF
ABBREVIATIONS……………………………………………………....V
Research Methodology.................................................................................................II
.....................................................................................................................................II
Research Scheme..........................................................................................................II
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................II
“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.”........III
Table of Contents..........................................................................................................IV
List Of Abbreviations.....................................................................................................V
1. Introduction.................................................................................................................1
Expansion Of Insurance Industry In India – Nationalisation Of Insurance
Business............................................................................................................................3
Insurance Regulatory Authorities.................................................................................5
Insurance Regulatory and Development Authority (IRDA):........................................5
Tariff Advisory Committee:..........................................................................................6
Insurance Association of India:.....................................................................................7
2. Councils Of Insurance Association Of India..........................................................10
Life Insurance Council:..............................................................................................10
General Insurance Council:.........................................................................................14
3. Conclusion..................................................................................................................18
Bibliography............................................................................................................XXIII
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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
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, 2009
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were not considered necessary.3 The first general insurance company
established by an Indian was 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
3
Ibid
4
General insurance has its origins in the United Kingdom.
5
M.N. Srinivasan, “Principles of Insurance Law”, 8th ed. 2006, p.92
6
Ibid
7
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.
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
Ibid
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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 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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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
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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Committee, specifying the percentage of premium income of the insurer to
finance schemes for promoting and regulating 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 04:25pm
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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
Both these councils function through executive committees. The authorities
of the Life Insurance Council and the General Insurance Council constitute
16
B.N. Banerjee, “Law of Insurance”, 4th ed. 1994, vol.1, p.559
17
Section 64-A(3) of the Insurance Act
18
Rajiv Jain, “Insurance Law & Practice”, 2001 ed., p.4.359
19
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.
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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
20
Section 64E of Insurance Act, 1938
21
Section 64-F(4) of Insurance Act, 1938
22
Section 64-D of Insurance Act, 1938
23
Section 64-F(5) of Insurance Act, 1938
24
S. 64J & L of Insurance Act, 1938 for Life Insurance Council & General Insurance
Council respectively
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• 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
• 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 08:50pm
26
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.
27
Ibid
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l) It also performs various quasi-judicial functions.28
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
28
Ibid
29
Ibid
30
Ibid
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• 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
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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.
31
http://gicouncil.in last visited on 26th February, 2009.
32
Ibid
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• pro-active analysis and lobbying to secure improvement in the legal
and regulatory framework
• 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.
33
Ibid.
34
http://gicouncil.in last visited on 28-03-2008 at 01:20am
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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
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
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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 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, 1938
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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
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councils are highly active and strive towards achieving excellence in their
respective areas of insurance.
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
36
Section 64-C of Insurance Act
37
Section 64-A of Insurance Act
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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.
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
38
http://www.naic.org/index_about.htm last visited on 7th March, 2009.
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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 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
39
http://www.lloyds.com/About_Us/What_is_Lloyds/ last visited 7th March, 2009.
40
Section 64-J of Insurance Act
41
Ibid
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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.
42
Section 64-N of Insurance Act
Page | 22
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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
Page | XXIII
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• www.nishithdesai.com
• www.irdaindia.org
Page | XXIV

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INSURANCE ASSOCIATION OF INDIA 201

ROLE OF INSURANCE ASSOCIATION OF

SUBMITTED BY: SHAILENDRA PAL SINGH

VIIIth Semester (B.A.LLB Hons.)

SUBMITTED TO: PROF. Dr. S.C.Roy

CHANAKYA NATIONAL LAW UNIVERSITY

I TAKE THIS OPPORTUNITY TO EXPRESS MY HUMBLE GRATITUDE AND PERSONAL REGARDS TO

“I EXPRESS MY GRATITUDE TO THE FACULTY OF, ‘COMPANY LAW’ FOR

AIR All India Reporter

KLT Kerala Law Times

• Insurance Regulatory and Development Authority (IRDA) Act, 1999

• Insurance Act of 1938

Expansion Of Insurance Industry In India – Nationalisation Of

The central government in 1956 decided to take over the management of

(a) The privatization of the insurance sector by permitting the entry of

(b) The establishment of an Insurance Regulatory Authority.

The Malhotra Committee report was not implemented by the Government of

Insurance Regulatory Authorities

INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA):

IRDA is a statutory body which regulates and promotes the insurance

The Central Government appoints the members of IRDA from amongst

TARIFF ADVISORY COMMITTEE:

The Tariff Advisory Committee is controls and regulates the rates,

INSURANCE ASSOCIATION OF INDIA:

The Insurance Association of India has two main councils:19

(a) The Life Insurance Council

• to aid, advise and assist insurers carrying on life/general insurance

It is a duty of both the Executive Committees to meet once every year to

2. Councils Of Insurance Association Of India

LIFE INSURANCE COUNCIL:

• Advise the supervisory authority in the matter of controlling expenses

a) Assist the industry in maintaining high standards of ethics and

• The council seeks to provide structured regular information to the public

GENERAL INSURANCE COUNCIL:

There are currently 17 members of the General Insurance Council of India.

Among other objectives The General Insurance Council endeavors to

• It analysis and make representations in response to initiatives from

• being recognised as a leading contributor to public policy thinking on

• maintaining a core secretariat with staff of high calibre and relevant

• presenting a positive image of the industry to the public, the media

• providing leadership and guidance to the industry on issues which

The primary functions of the General insurance Council can be summarized

a) Promotion of sound development and maintenance of the

b) Presentation of requests and proposal: Representing the non-life

c) Promotion of a better understanding of non-life insurance

d) Response to social issues: Combating automobile theft, taking

With the opening up of economy after liberalization Indian Insurance

The contract of insurance is a contract of utmost good faith. Thus, in a

The Insurance Association of India is a very systematic set-up as a whole. It

The NAIC (National Association of Insurance Commissioners) is a similar

Also, the Executive Committees formulated under each of the Councils

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