IRDA ACT 1999:

IRDA ACT 1999
Prior to 1999, insurance companies were owned by the Government. In 1999, the government of India introduced the insurance regulatory and development authority act, thereby, deregulating the insurance sector and allowing private companies into the insurance.
The Insurance Regulatory and Development Authority Act, 1999 is an act to provide for the establishment of an Authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto and further to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the General insurance Business (Nationalization) Act, 1972
Extent and Commencement
The act extends to the whole of India and will come into force on such date as the Central Government may, by notification in the Official Gazette.
The Act has defined certain terms, some of the most important ones are as follows: -
A)     Appointed day means the date on which the Authority is established under the act.
 B)     )Authority means the IRDA established under this Act.
C)     Interim insurance regulatory authority means the insurance regulatory authority set up by the central government through resolution no. 17(2)/94-InsV , dated the 23rd January 1996.
D)     Intermediary or insurance intermediary includes insurance brokers, reinsurance brokers, insurance consultants , surveyors and loss assessors.
E)     Member means whole time or a part time member of the authority and includes the chairperson .
F)      Notification means a notification published in the official gazette.
G)     Regulations means the regulations made by the authority.
Establishment and incorporation of authority (section 3)
With effect from such date as the Central Government may, by notification, appoint the Insurance Regulatory and Develop is to be constituted. The Authority shall be a body corporate, having perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and dispose of property, and to contract and can be sue or be sued in its own name. The head office of the Authority shall be at such place as the Central Government may decide from time to time and it may establish offices at other places in India.
Composition of Authority
The Authority shall consist of the following members, namely
(a)     a Chairperson;
(b)     not more than five whole-time members;
(c)     not more than four part-time members, to be appointed by the Central Government
Tenure of office of Chairperson and other members
The Chairperson and every other whole-time member shall hold office for a term of five years from the date of appointment shall be eligible for reappointment:
However, no person shall hold office as a Chairperson after he has attained the age of sixty-five years and no person shall hold office as such whole-time
member after he has attained the age of sixty-two years.
A part-time member shall hold office for a term not exceeding five years from the date of his appointment and shall be eligible for reappointment
A member may:
resign by giving in writing to the Central Government notice of not less than three months; or be removed from his office in accordance with the provisions.
Removal from office
The Central Government may remove from office any member who: -
(a)     is, or at any time has been, adjudged as insolvent;
(b)     has become physically or mentally incapable of acting as a member;
(c)     has been convicted of any offence which, in the opinion of the Central Government, involves moral turpitude;
(d)    has acquired such financial or other interest as is likely to affect prejudicially his functions as a member;
(e)     has so abused his position as to render his continuation in office detrimental to the public interest.
Salary and allowances of Chairperson and members
The act u/s 7 prescribes-The salary and allowances payable to, and other terms and conditions of service of, the members other than part-time members shall be such as may be prescribed. The part-time members shall receive such allowances as may be prescribed. The salary, allowances and other conditions of service of a member shall not be varied to his disadvantage after appointment in respect of all administrative matters of the Authority.
Meeting of Authority
The Authority shall meet at such times and places, and shall observe such rules and procedures in regard to transaction of business at its meetings (including quorum at such meetings) as may be determined by regulations. The Chairperson, or if for any reason he is unable to attend a meeting of the Authority, any other member chosen by the members present from amongst themselves at the meeting shall preside at the meeting. All questions which come up before any meeting of the Authority shall be decided by a majority vote of the members present and voting, and in the event of equality of votes, the Chairperson, or in his absence, the person presiding shall have a second or casting vote. The Authority may make regulations for the transaction of business at its meetings.
Duties, powers and functions of Authority
Subject to the provisions of this Act and any other law for the time being in force, the Authority has the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business. The powers and functions of the Authority include:-
(a)     to issue to the applicant a certificate of registration, to renew, modify, withdraw, suspend or cancel such registration
b)      protection of the interests of the policy-holders in matters concerning assigning of policy, nomination by policy-holders, insurable interest, settlement of insurance claim, surrender value of policy, and other terms and conditions of contracts of insurance
(c)     specifying requisite qualifications code of conduct and practical training for intermediary or insurance intermediaries and agents
(d)    specifying the code of conduct for surveyors and loss assessors
(e)     promoting efficiency in the conduct of insurance business
(f)     promoting and regulating professional organizations connected with the insurance and reinsurance business
(g)     levying fees and other charges for carrying out the purposes of this Act
(h)     calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organizations connected with the insurance business
(i)      control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under section 64U of the Insurance Act, 1938
(j)      prescribing the form and manner in which books of account shall be maintained and statement of accounts will be rendered by insurers and other insurance intermediaries
(k)     Regulating investment of funds by insurance companies
(l)      regulating maintenance of margin of solvency
(m)    adjudication of disputes between insurers and intermediaries or insurance intermediaries
(n)     supervising the functioning of the Tariff Advisory Committee
(o)     specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organizations
(p)     specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector
(q)     exercising such other powers as may be prescribed

Fund
There shall be constituted a fund to be called "The Insurance Regulatory and Development Authority Fund" is to be established and the following sums will be credited thereto:
(a)     All Government grants, fees and charges received by the Authority
(b)     All sums received by the Authority from such other source as may be decided upon by the Central Government
(c)     The percentage of prescribed income received from the insurer.
The Fund shall be applied for meeting the following expenses:
(a)     the salaries, allowances and other remuneration of the members, officers and other employees of the Authority
(b)     the other expenses of the Authority in connection with the discharge of its functions and for the purposes of this Act.
Accounts and audit
The Authority shall maintain proper accounts and other relevant records and prepare an annual statement of accounts in such form as may be prescribed by the Central Government in consultation with the Comptroller and Auditor General of India. The accounts of the Authority shall be audited by the Comptroller and Auditor General of India at such intervals as may be specified by him and any expenditure incurred in connection with such audit shall be payable by the Authority to the Comptroller and Auditor General of India. The Comptroller and Auditor-General of India and other person appointed by him in connection with the audit of the accounts of the Authority shall have the same rights and privileges and authority in connection with such audit as the Comptroller and Auditor General generally has in connection with the audit of the Government accounts and, in particular, shall have the right to demand the production of books, accounts, connected vouchers and other documents and papers and to inspect any of the officers of the Authority. The accounts of the Authority as certified by the Comptroller and Auditor General of India or any other person appointed by him in this behalf together with the audit report thereon shall be forwarded annually to the Central Government and that Government shall cause the same to be laid before each House of Parliament.
Powers of Central Government
Under the act
1)      Power to issue directions - The Authority shall, in exercise of its powers or the performance of its functions under this Act, be bound by such directions on questions of policy, other than those relating to technical and administrative matters, as the Central Government may give in writing to it from time to time
2)      Power to supersede Authority -If at any time the Central Government is of the opinion:-
(a)        that, on account of circumstances beyond the control of the Authority, it is unable to discharge the functions or perform the duties imposed on it by or under the provisions of this Act: or
(b)        that the Authority has persistently defaulted in complying with any direction given by the Central Government under this Act or in the discharge of the functions or performance of the duties imposed on it by or under the provisions of this Act and as a result of such default the financial position of the Authority or the administration of the Authority has suffered; or
(c)        that circumstances exist which render in necessary in the public interest so to do, the Central Government may, by notification and for reasons to be specified therein, supersede the Authority for such period, not exceeding six months, as may be specified in the notification and appoint a person to be the Controller of Insurance
The Central Government shall cause a copy of the notification issued and a full report of any action taken under this section and the circumstances leading to such action to be laid before each House of Parliament at the earliest.
3)      Power to make rules - The Central Government may, by notification, make rules for carrying out the purposes of this Act. Such rules may provide for all or any of the following matters, namely:
(a)        the salary and allowances payable to and other conditions of service of the members other than part-time members
(b)        the allowances to be paid to the part-time members
(c)        such other powers that may be performed by the Authority
(d)       the form of annual statement of accounts to be prepared by the Authority
(e)        the time at, the form and the manner in which returns and statements and particulars are to be furnished to the Central Government
(f)        the matters on which the Insurance Advisory Committee shall advise the authority
(g)        any other matter which is to be, or may be, prescribed, or in respect of which provision is to be or may be made by rules.
4)      Power to remove difficulties - If any difficulty arises in giving effect to the provisions of this act, the central government may, by order published in the official gazette, make such provisions not inconsistent with the provisions of this act as may appear to be necessary for removing the difficulty
5)      Grants by central government - The central government may, after due appropriation made by parliament by the law in this behalf, make to the authority grants of such sums of money as the government may think fit for being utilised for the purposes of this act.
Furnishing of returns, etc., to the Central Government
The Authority must furnish to the Central Government at such time and in such form and manner as may be prescribed, or as the Central Government may direct, to furnish such returns and statements and such particulars in regard to any proposed or existing programme for the promotion and development of the insurance industry as the Central Government may, from time to time, require.
The Authority must, within nine months after the close of each financial year, submit to the Central Government a report giving a true and full account of its activities including the activities for promotion and development of the insurance business during the previous financial year. Copies of the reports must be laid, as soon as may be after they are received, before each House of Parliament.
The Chairperson, members, officers and other employees of the Authority shall in this regard be deemed to be public servants.
Delegation of powers
The Authority may, by general or special order in writing, delegate to the Chairperson or any other member or officer of the Authority, subject to such conditions, if any, as may be specified in the order such of its powers and functions under this Act as it may deem necessary. The Authority may, by a general or special order in writing, also form Committees of the members and delegate to them the powers and functions of the Authority as may be specified by the regulations.
Establishment of Insurance Advisory Committee
The Authority may, by notification, establish with effect from such date as it may specify in such notification, a Committee to be known as the Insurance Advisory Committee. The Insurance Advisory Committee shall consist of not more than twenty-five members excluding ex officio members to represent the interests of commerce, industry, transport, agriculture, consumer forum, surveyors, agents, intermediaries, organizations engaged in safety and loss prevention, research bodies and employees' association in the insurance sector. The Chairperson and the members of the Authority shall be the ex officio Chairperson and ex officio members of the Insurance Advisory Committee. The objects of the Insurance Advisory committee shall be to advise the Authority on matters relating to the making of the regulations. The Insurance Advisory Committee may advise the Authority on such other matters as may be prescribed.
Penalty for default in complying with, or act in contravention of, this Act
lf any person, who is required under this Act, or rules or regulations made there under,-
(a)     to furnish any document, statement, account, return or report to the Authority, fail to furnish the same; or
(b)     to comply with the directions, fails to comply with such directions;
(c)     to maintain solvency margin, fails to maintain such solvency margin;
(d)    to comply with the directions on the insurance treaties, fails to comply with sue directions on the insurance treaties, he shall be liable to a penalty not exceeding five lakhs rupees for each such failure and punishable with fine.
lf a person makes a statement, or furnishes any document, statement, account, return or report which is false and which he either knows or believes to be false or does not believe to be true,-
(a)     he shall be liable to a penalty not exceeding five lakhs rupees for each such failure; and
(b)     he shall be punishable with imprisonment which may extend to three years or with fine for each such failure.
Offences by companies
Where any offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the Company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
Power to make regulations
The authority may, in consultation with the insurance advisory committee, by notification, make regulations, consistent with this act and providing for all or any of the following matters
The time and places of meetings of the authority and the procedure to be followed at such meetings including the quorum necessary for the transaction of business.
The transaction of business at its meeting under section 10(4).
The terms and conditions of service of officers and other employees of the authority under subsection (2) of section 12.
The powers and functions which may be delegated to committees of the members under subsection (2)of section 23.
Any other matter which is required to be, or may be, specified by regulations  or in respect of which provisions is to be or may be made by regulations.

Rules and regulations to be laid before parliament
Every rule and every regulation under this act shall be laid, as soon as may be after it is made, before each house of parliament, while it is in session, for a total period of thirty days, which may be comprised in one session oe in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both houses agree in making any modifications in the rule or regulations or both houses agree that the rule or regulations should not be made, the rule or regulation shall thereafter have effect only in such modified form or be no effect, as the case may be

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