By Trisha Shreyashi
The Department of Financial service has issued the Insurance Laws (Amendment) Bill, 2022 for public feedback. The Bill proposes some major tweaks to the Insurance Act, 1938 and the Insurance Regulatory and Development Authority Act, 1999.
The amendments propose changes and new insertions in the definition section. Some notable tweaks are:- insurance intermediary, captive insurer, insurance business, Indian insurance company, insurance cooperative society, insurer, personal accident insurance business, premium, principal officer, surveyor, and travel insurance business.
The bill also seeks amendments in provisions governing composition of authority, tenures of the chairperson & other office members, duties, powers & functions of the authority, delegation of powers, capital requirements, separation of accounts & funds, investment of assets, liability of directors, amalgamation & transfer of insurance business, and levy of penalty.
It is pertinent to mention that the tweaks allow an insurer to distribute other financial products as specified by and subject to regulations. However, no insurer shall commence insurance business unless it has such minimum paid-up equity capital as may be specified by the regulatory body.
Presently, the paid up capital required to start general, life or standalone health insurance business is Rs. 100 Crores and that for reinsurance business is Rs 200 crore. The proposed amendments suggest that the minimum paid up capital be specified by IRDAI considering the size and scale of operations, class or sub-class of insurance business and the category or type of insurer.
While the amendments confer the power to prescribe regulations regarding paid-up capital upon the IRDAI, it proposes a statutory cap on holding by foreign entities. It puts a limit of 26% foreign holding in an insurance cooperative and 74% foreign stakes in an Indian insurance company.
Another notable amendment is the increase in retirement age. The bill proposed that IRDAI whole-time members can hold office till the age of 65 years instead of the present limit of 62 years.
Further, the composition of the General Insurance Council & Life Insurance Council is also sought to be changed. It proposes to provide for a Central Government appointee on the council as opposed to the earlier system of self-regulation.
Additionally, the bill prescribes stiff penalties for insurance agents & companies in cases of omissions and commissions. It also seeks to penalize insurers in cases of violation of code of conduct by the agents.
The Ministry has sought public comments on the bill by December 15 2022.
(The author is a legal professional and an honorary panelist at HBR Advisory Council. Views are personal.)