The Insurance Regulatory and Development Authority on Monday proposed major amendments in the Insurance Act, which may include a provision for setting up an appellate authority to settle disputes and hefty penalties for breach of contract by insurers.
The regulator, which is looking into the recommendations of Law Commission and KP Narasimhan committees on updating insurance laws, will submit its report to government by this month end, IRDA chairman C S Rao said on the sidelines of a Federation of Indian Chambers of Commerce and Industry seminar in New Delhi.
"It is agreed that we should have a revision in the Insurance Act of 1938... We will submit our report to the government by this month end," Rao said.
He said the two committees had many points of convergence and some differences in opinion. Based on the feedback of two committees, IRDA will take it up with government the amendments required.
"Today's interactions with the stakeholders of the insurance industry would be the last official opportunity for the insurance players to express their views and concerns on the road ahead," he said and added that IRDA would be in a position to finalise its recommendations by February-end.
The main differences between the two committees are on settlement of disputes. While the Law Commission has proposed a Grievance Redressal Authority and a Insurance Appellate Authority the KPN panel has favoured continuing with the existing system of ombudsman and making use of the Securities Appellate Tribunal, Rao said.
Moreover, Insurance Act may also be modified to stipulate stiff penalties for insurers in case of breach of contract of insurers in a better way. "Sections 45 and 38 of the Act deals with that," Rao said.
Though Rao agreed that there should be an easy entry norm for health and agriculture insurance companies as proposed by the KPN panel, he declined to prescribe a figure.
At present, insurers have to bring in a minimum capital of Rs 100 crore (Rs 1 billion) and have a maximum 26 per cent FDI for their ventures in India.
K N Chaturvedi, member-secretary of Law Commission highlighted the need for a modern insurance law to give a fillip to the sector, which provides long term funds for infrastructure development. It was also imperative to build a competitive insurance market and ensure effective regulation, he pointed out.
The law of insurance is a technical area of private law in which areas for review include issues such as non-disclosure, breach of warranty, doctrine of insurable interest, definition of insurance, agency and insurance, subrogation, worthless policies, contract certainty, post-contractual duty of good faith, fraud in making of claims, remedies available to a policyholder when an insurer unreasonably delays the settlement of a claim and reinsurance, he said.
