Insurance Act, 2002

The first Insurance Act was passed in 1938 and it was adapted from British Law it covered all the types of insurances present at that time and for the rest of the insurances, British Common Law was passed. Before this, there was only one Insurance act which was Marine Insurance Act, which was passed in 1906 and was present in British India but was only applicable to Marine Insurance. The Insurance act led to the form of a regulatory body named Controller of Insurance.

Insurance Act, 1938

The first Insurance Act was passed in 1938 and it was adapted from British Law it covered all the types of insurances present at that time and for the rest of the insurances, British Common Law was passed. 120 sections were there in Insurance Act, and it had 8 schedules. According to the law the companies which are Indian and registered under the Companies Act, 1956 will be allowed to operate in India. It is necessary to have a license from the IRDA (Insurance Regulatory and Development Authority of India). The entity owned by foreign companies cannot be more than 49% according to 2015.

Insurance Amendment Act, 2002

The Insurance (Amendment) Act or General Insurance business Bill, 2002, was passed by the President of India. It was passed by the Parliament in its monsoon season of 2002. The main significance of the Insurance Amendment Act, of 2002 was to detach the GIC (General Insurance Corporation) from four of its subsidies which were:

• NIL (National Insurance Company) Ltd.
• New India Assurance Company Ltd.
• Oriental Insurance Company Ltd.
• United India Insurance Company Ltd.

It also provided General Insurance Corporation to do the business of re-insurance. This also ensures that the four companies will do their own business of general insurance. The Insurance Act, of 2002 tries to correct the Insurance Act, of 1938. It allows the Insurance Cooperative Society to do Insurance Business in India without any issues.

Features of the Insurance Act

The salient features of the Insurance act are as follows:

• Constituting a Division of Insurance to oversee and control the insurance business.
• The insurance companies must register under the insurance companies act and submit their financial returns annually.
• Mandatory investment up to 55% in the securities of life fund approved by the government.
• Prohibiting rebating and restricting the commission and licensing payment of the agents were some of the important provisions to bring professionalism to this business.
• The initial deposits provision was allowed only to the major players in this field.
• Insurance companies will have to evaluate their company periodically and this was made compulsory to check the financial stability of the particular Insurance Company.
• A certificate of an Actuary was required for the premium tables and the formats of the policy were also standardised.

The Insurance Act of 1938 ensured the objective of executing and amending the laws which are related to the Insurance Business.

Conclusion

The Insurance Act of 1938 was made with the help of British laws, it made a lot of changes to the previous marine insurance. There were 120 sections in Insurance Act and it had 8 schedules overall. It also changed a lot of previous rules and added new ones like a) According to the law the companies which are Indian and registered under the Companies Act, 1956 will be allowed to operate in India. b) It is necessary to have a license from the IRDA. The Insurance Act of 2002 also brought some big changes to the previous insurance acts and made the concept of Insurance easier for investors.