The insurance act originally passed in the year 1938. however It amended for several times, It latest amendment of the insurance act was the, the IRDA itself when it became the authority to perform many tasks required to be done under the insurance act such as issuing licenses, issuing registration certificates, monitoring compliance with the provisions of the Act, issuing directives, laying down norms. The all above said functions were performed by the controller of Insurance earlier as per the Insurance Act, 1938. The provisions of the Act may be briefly described as follows.
To obtain the certificate of registration is compulsory to the every insurance company. The Registration should be renewed annually. The paid up capital must be of Rs. 100 crores for life insurance or general and Rs. 200 crores for re-insurance business. Every insurer has to deposit in cash or approved securities, a sum equivalent to 1 % in life insurance or 3% in general insurance of the total gross premium in-any financial year commencing after 31st March, 2000 with the Reserve Bank of India. The amount is not being exceeding Rs. 10 crores. The deposit amount is Rs. 20 crores for reinsurance businesses.
Every insurance company must keep the accounts separately of all receipts and payment in respect of each class of insurance business such as the marine or miscellaneous insurance.
Insurers must invest his assets only in those investments which approved under the provisions of the Act.
Every insurance company has to do a minimum insurance business in the rural or social sector, as may be specified in the order. The authority can be investigated the affair of the insurer at any time.
Licensing of agents
License is the pre requirement for becoming the agent. Person can’t work as an insurance agent unless he has obtained a license from the authority. There is some disqualification as per the act for a person to be an agent, as follows:
- Being unsound mind.
- Being convicted of criminal misappropriation or criminal breach of trust or cheating or forgery or Abetment or Attempt to commit any such offence.
- Being found to have been guilty of or connived at any fraud, Dishonesty or misappropriation against any insured on insurer.
Licensing of surveyors and loss assessors
No insurer can settle any claim equal to or exceeding Rs. 20000/- without the report on the loss from a licensed surveyor. The person can act as a surveyor or loss assessor only after obtaining license from the authority. The authority can’t issue the license without get satisfaction about the applicant.
The authority for the insurer also decides the solvency margin. The act clarifies how the assets and liabilities have to be determined and the extent to which the assets are to exceed the liabilities. These provisions exist to ensure the adequacy of insurer’s solvency
Payment of premium before assumption of risk
A risk can be assumed by the, insurance company after receiving the premium or a guarantee that the premium will be paid within the prescribe time. Sometimes agents collect the premium amount and dispatch or deposited to the insurance company. They have to deposit the money within the 24 hours except the bank and postal holiday. The agent has to deposit the premium in full without deducting his commission. If any refund of, the premium will be due, the insurer directly shall paid the amount to the insured by crossed or order cheque or by postal money order.