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Insurance laws in for a revamp

Sarbajeet K. Sen

NEW DELHI, Aug. 17

INSURANCE laws are in for a complete overhaul. The initiative for the purpose has been taken by the Law Commission of India to put all insurance laws that are in force at present under the microscope.

Following the Law Commission's decision to undertake what it has promised would be "a comprehensive review" of all the insurance laws and to prepare a consultative paper for the purpose, the Insurance Regulatory and Development Authority (IRDA) has sought feedback from all quarters on the possible changes that could be incorporated in the present laws.

The Law Commission is a powerful body set up by the Government in the legislative arena that reviews the existing statutes from time to time and in the process provides valuable inputs to the official machinery in making amendment to the laws. Mr Justice Jagannadha Rao chairs the present Sixteenth Law Commission.

Among the major insurance laws that are in force today are the IRDA Act, 1999, the Insurance Act, 1938, the LIC Act, 1956 and the General Insurance Business (Nationalisation) Act, 1972. While the IRDA Act has been one of the most important insurance legislations of recent times since the enactment of the law provided the legislative backing for throwing open the insurance industry to private competition, the Insurance Act, 1938, has been the core of the insurance laws in India during the pre-nationalisation days and later including the period of nationalisation and the subsequent opening up of the industry. The LIC Act and GIBNA provided the basis for the earlier nationalisation of the insurance industry.

The review undertaken by the Law Commission is expected to focus on the removal of contradictions in the various laws and also the ways to refine it further. One of the likely aspects that the Commission would look into is the possibility of further improvements in the IRDA Act in order to provide it with further teeth to regulate the sector more effectively.

Of late, there has been a general feeling that the insurance regulator could do with some more powers to enforce its diktat. This has been felt ever since the IRDA could not force its wish on the Life Insurance Corporation (LIC) to hike it capital base in line with other private insurance companies. It has been reinforced more recently due to the defiance of the public sector non-life insurance companies in following the regulator's directives on the motor insurance front with repeated allegation by the transport industry of overcharging of premium despite the imposition of a regulatory cap.

The Ministry of Finance is, however, not likely to be a party to the review exercise at present. It may enter the picture once the Law Commission completes its study and finalises it views. When contacted few days prior to the issue of the present IRDA notice for review of the laws, officials of the Finance Ministry had said that no major proposal for a review of the insurance laws are at present pending with the Ministry.

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