AS INTRODUCED IN LOK SABHA Bill No. 31 of 2015 THE INSURANCE LAWS (AMENDMENT) BILL, 2015 A BILL further to amend the Insurance Act, 1938 and the General Insurance Business (Nationalisation) Act, 1972 and to amend the Insurance Regulatory and Development Authority Act, 1999 . BE it enacted by Parliament in the Sixty-sixth Year of the Republic of India as follows:— CHAPTER I PRELIMINARY 1. (1) This Act may be called the Insurance Laws (Amendment) Act, 2015. Short title and 5 (2) It shall be deemed to have come into force on the 26th day of December, 2014. commencement. CHAPTER II AMENDMENTS TO THE INSURANCE ACT, 1938 4 of 1938. 2. In the Insurance Act, 1938 (hereafter in this Chapter referred to as the Insurance Substitution Act), throughout the Act,— of references to certain 7 of 1913. 10 (a) for the words and figures "the Indian Companies Act,1913", wherever they expressions occur, the words and figures "the Companies Act, 2013" shall be substituted; by certain 18 of 2013. other expressions. 2 (b) for the words and figures "the Companies Act,1956", wherever they occur, 1 of 1956. the words and figures "the Companies Act, 2013" shall be substituted'. 18 of 2013. Amendment 3. In section 2 of the Insurance Act,— of section 2. (i) for clauses (1) and (1A), the following clauses shall be substituted, namely:— '(1) "actuary" means an actuary as defined in clause (a) of sub-section (1) 5 of section 2 of the Actuaries Act, 2006; 35 of 2006. (1A) ''Authority'' means the Insurance Regulatory and Development Authority of India established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999;'; 41 of 1999. (ii) clause (5A) shall be omitted; 10 (iii) after clause (6B), the following clause shall be inserted, namely:— '(6C) "health insurance business" means the effecting of contracts which provide for sickness benefits or medical, surgical or hospital expense benefits, whether in-patient or out-patient travel cover and personal accident cover;'; (iv) for clause (7A), the following clause shall be substituted, namely:— 15 '(7A) "Indian insurance company" means any insurer, being a company which is limited by shares, and,— (a) which is formed and registered under the Companies Act, 2013 18 of 2013. as a public company or is converted into such a company within one year of the commencement of the Insurance Laws (Amendment) Act, 2015; 20 (b) in which the aggregate holdings of equity shares by foreign investors, including portfolio investors, do not exceed forty-nine per cent. of the paid up equity capital of such Indian insurance company, which is Indian owned and controlled, in such manner as may be prescribed. Explanation.--For the purposes of this sub-clause, the expression 25 "control" shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements; (c) whose sole purpose is to carry on life insurance business or 30 general insurance business or re-insurance business or health insurance business;’; (v) clause (8) shall be omitted; (vi) in clause (8A),— (I) for sub-clause (b), the following sub-clause shall be substituted, 35 namely:— "(b) having a minimum paid-up capital of rupees one hundred crore in case of life insurance business, general insurance business and health insurance business;"; (II) in sub-clause (d), after the words ''general insurance business'', the 40 words ''or health insurance business'' shall be inserted; (vii) for clause (9), the following clause shall be substituted, namely:— '(9) "insurer" means— (a) an Indian Insurance Company, or 3 (b) a statutory body established by an Act of Parliament to carry on insurance business, or (c) an insurance co-operative society, or (d) a foreign company engaged in re-insurance business through a 5 branch established in India. Explanation.—For the purposes of this sub-clause, the expression "foreign company" shall mean a company or body established or incorporated under a law of any country outside India and includes Lloyd's established under the Lloyd's Act, 1871 (United Kingdom) or any of its 10 Members;'; (viii) in clause (10), the words and figures "licensed under section 42" shall be omitted; (ix) in clause (11), in sub-clause (c), for the words "annuities payable out of any fund", the words "benefit payable out of any fund'' shall be substituted; 15 (x) clauses (12), (13) and (15) shall be omitted; (xi) in clause (16), for the words, brackets, figures and letter "clauses (13) and 7 of 1913. (13A) of section 2 of the Indian Companies Act, 1913", the words, brackets and figures 18 of 2013. "clause (68) and clause (72) of section 2 of the Companies Act, 2013" shall be substituted; 20 (xii) after clause (16), the following clauses shall be inserted, namely:— '(16A) "regulations" means the regulations framed by the Insurance Regulatory and Development Authority of India established under the Insurance 41 of 1999. Regulatory and Development Authority Act, 1999; (16B) "re-insurance" means the insurance of part of one insurer's risk by 25 another insurer who accepts the risk for a mutually acceptable premium; (16C) ''Securities Appellate Tribunal'' means the Securities Appellate Tribunal established under section 15K of the Securities and Exchange Board of 15 of 1992. India Act, 1992;'; (xiii) clause (17) shall be omitted. 30 4. After section 2CA of the Insurance Act, the following section shall be inserted, Insertion of namely:— new section 2CB. "2CB. (1) No person shall take out or renew any policy of insurance in respect of Properties in any property in India or any ship or other vessel or aircraft registered in India with an India not to be insurer whose principal place of business is outside India save with the prior permission insured with foreign 35 of the Authority. insurers except with (2) If any person contravenes the provision of sub-section (1), he shall be liable the permission to a penalty which may extend to five crore rupees.". of Authority. 5. Section 2E of the Insurance Act shall be omitted. Omission of section 2E. 6. In section 3 of the Insurance Act,— Amendment of section 3. 40 (i) for sub-section (2), the following sub-section shall be substituted, namely:— “(2) Every application for registration shall be made in such manner and shall be accompanied by such documents as may be specified by the regulations."; (ii) in sub-section (2A), in clause (d), for the figures, letter and word "5, 31A and 45 32", the figures, word and letter "5 and 31A" shall be substituted; 4 (iii) for sub-section (2C), the following sub-section shall be substituted, namely:— "(2C) Any person aggrieved by the decision of the Authority refusing registration may, within thirty days from the date on which a copy of the decision is received by him, appeal to the Securities Appellate Tribunal."; 5 (iv) sub-section (2D) shall be omitted; (v) for sub-sections (3), (4), (5) and (5A), the following sub-sections shall be substituted, namely:— "(3) In the case of any insurer having joint venture with a person having its principal place of business domiciled outside India or any insurer as defined 10 in sub-clause (d) of clause (9) of section 2, the Authority may withhold registration already made if it is satisfied that in the country in which such person has been debarred by law or practice of that country to carry on insurance business. (4) The Authority may suspend or cancel the registration of an insurer either wholly or in so far as it relates to a particular class of insurance business, 15 as the case may be,— (a) if the insurer fails, at any time, to comply with the provisions of section 64VA as to the excess of the value of his assets over the amount of his liabilities, or (b) if the insurer is in liquidation or is adjudged as an insolvent, or 20 (c) if the business or a class of the business of the insurer has been transferred to any person or has been transferred to or amalgamated with the business of any other insurer without the approval of the Authority, or (d) if the insurer makes default in complying with, or acts in contravention of, any requirement of this Act or of any rule or any regulation 25 or order made or, any direction issued thereunder, or (e) if the Authority has reason to believe that any claim upon the insurer arising in India under any policy of insurance remains unpaid for three months after final judgment in regular court of law, or (f) if the insurer carries on any business other than insurance business 30 or any prescribed business, or (g) if the insurer makes a default in complying with any direction issued or order made, as the case may be, by the Authority under the Insurance Regulatory and Development Authority Act, 1999, or 41 of 1999. (h) if the insurer makes a default in complying with, or acts in 35 contravention of, any requirement of the Companies Act, 2013 or the General 18 of 2013. 57 of 1972. Insurance Business (Nationalisation) Act, 1972 or the Foreign Exchange 42 of 1999. Management Act, 1999 or the Prevention of Money Laundering Act, 2002, 15 of 2002. or (i) if the insurer fails to pay the annual fee required under section 40 3A, or (j) if the insurer is convicted for an offence under any law for the time being in force, or (k) if the insurer being a co-operative society set up under the relevant State laws or, as the case may be, the Multi-State Co-operative Societies 45 Act, 2002, contravenes the provisions of law as may be applicable to the 39 of 2002. insurer. 5 (5) When the Authority suspends or cancels any registration under clause(a), clause (d), clause (e), clause (f), clause (g) or clause (i) of sub-section (4), it shall give notice in writing to the insurer of its decision, and the decision shall take effect on such date as it may specify in that behalf in the notice, such date not being less than one month not more than two months from the date of 5 the receipt of the notice in the ordinary course of transmission. (5A) When the Authority suspends or cancels any registration under clause (b), (c), (j) or (k) of sub-section (4), the suspension or cancellation, as the case may be, shall take effect on the date on which notice of the order of 10 suspension or cancellation is served on the insurer."; (vi) for sub-section (5C), the following sub-section shall be substituted, namely:— "(5C) Where a registration is suspended or cancelled under clause (a), clause (d), clause (e), clause (f), clause (g) or clause (i) of sub-section (4), the Authority may at its discretion revive the registration, if the insurer within six 15 months from the date on which the suspension or cancellation took effect complies with the provisions of section 64VA as to the excess of the value of his assets over the amount of his liabilities or has had an application under sub- section (4) of section 3A accepted, or satisfies the Authority that no claim upon him such as is referred to in clause (e) of sub-section (4) remains unpaid or that 20 he has complied with any requirement of this Act or the Insurance Regulatory 41 of 1999. and Development Authority Act, 1999, or of any rule or any regulation, or any order made thereunder or any direction issued under those Acts, or that he has ceased to carry on any business other than insurance business or any prescribed business, as the case may be, and complies with any directions which may be given to him by the Authority.". 25 7. For section 3A of the Insurance Act, the following section shall be substituted, Substitution namely:— of new section for section 3A. "3A. (1) An insurer who has been granted a certificate of registration under Payment of section 3 shall pay such annual fee to the Authority in such manner as may be specified annual fee by 30 by the regulations. insurer. (2) Any failure to deposit the annual fee shall render the certificate of registration liable to be cancelled.". 8. For section 4 of the Insurance Act, the following section shall be substituted, Substitution namely:— of new section for section 4. 35 "4. The insurer shall pay or undertake to pay on any policy of life insurance or a Minimum group policy issued, a minimum annuity and other benefits as may be determined by limits for regulations excluding any profit or bonus provided that this shall not prevent an annuities and other benefits insurer from converting any policy into a paid-up policy of any value or payment of secured by surrender value of any amount.". policies of life insurance. 40 9. In section 5 of the Insurance Act,— Amendment of section 5. (i) in sub-section (1), both the provisos shall be omitted; (ii) sub-section (3) shall be omitted. 10. For section 6 of the Insurance Act, the following section shall be substituted, Substitution namely:— of new section for section 6. 45 "6. (1) No insurer not being an insurer as defined in sub-clause (d) of clause (9) Requirement of section 2, carrying on the business of life insurance, general insurance, health as to capital. 6 insurance or re-insurance in India or after the commencement of the Insurance Regulatory and Development Authority Act, 1999, shall be registered unless he has,— 41 of 1999. (i) a paid-up equity capital of rupees one hundred crore, in case of a person carrying on the business of life insurance or general insurance; or (ii) a paid-up equity capital of rupees one hundred crore, in case of a 5 person carrying on exclusively the business of health insurance; or (iii) a paid-up equity capital of rupees two hundred crore, in case of a person carrying on exclusively the business as a re-insurer: Provided that the insurer, may enhance the paid-up equity capital, as provided in this section in accordance with the provisions of the Companies 10 Act, 2013, the Securities and Exchange Board of India Act, 1992 and the rules, 18 of 2013. regulations or directions issued thereunder or any other law for the time being in 15 of 1992. force: Provided further that in determining the paid-up equity capital, any preliminary expenses incurred in the formation and registration of any insurer as 15 may be specified by the regulations made under this Act, shall be excluded. (2) No insurer, as defined in sub-clause (d) of clause (9) of section 2, shall be registered unless he has net owned funds of not less than rupees five thousand crore.". Amendment 11. In section 6A of the Insurance Act,— 20 of section 6A. (i) for sub-section (1), the following sub-section shall be substituted, namely:— "(1) No public company limited by shares having its registered office in India, shall carry on life insurance business or general insurance business or health insurance business or re-insurance business, unless it satisfies the following conditions, namely:— 25 (i) that the capital of the company shall consist of equity shares each having a single face value and such other form of capital, as may be specified by the regulations; (ii) that the voting rights of shareholders are restricted to equity shares; 30 (iii) that, except during any period not exceeding one year allowed by the company for payment of calls on shares, the paid-up amount is the same for all shares, whether existing or new: Provided that the conditions specified in this sub-section shall not apply to a public company which has, before the commencement of the 35 Insurance (Amendment) Act, 1950, issued any shares other than ordinary 47 of 1950. shares each of which has a single face value or any shares, the paid-up amount whereof is not the same for all of them for a period of three years from such commencement."; (ii) in sub-section (2), after the words "paid-up amount of the", the word 40 "equity"shall be inserted; (iii) for sub-section (4), the following sub-section shall be substituted, namely:— "(4) A public company as aforesaid which carries on life insurance business, general and health insurance business and re-insurance business— (a) shall, in addition to the register of members maintained under the 45 Companies Act, 2013, maintain a register of shares in which the name, 18 of 2013. occupation and address of the beneficial owner of each share shall be 7 entered including any change of beneficial owner declared to it within fourteen days from the receipt of such declaration; (b) shall not register any transfer of its shares— (i) unless, in addition to compliance being made with the 18 of 2013. 5 provisions of section 56 of the Companies Act, 2013, the transferee furnishes a declaration in the prescribed form as to whether he proposes to hold the shares for his own benefit or as a nominee, whether jointly or severally, on behalf of others and in the latter case giving the name, occupation and address of the beneficial owner or 10 owners, and the extent of the beneficial interest of each; (ii) where, after the transfer, the total paid-up holding of the transferee in the shares of the company is likely to exceed five per cent. of its paid-up capital unless the previous approval of the Authority has been obtained to the transfer; 15 (iii) where, the nominal value of the shares intended to be transferred by any individual, firm, group, constituents of a group, or body corporate under the same management, jointly or severally exceeds one per cent. of the paid-up equity capital of the insurer, unless the previous approval of the Authority has been obtained 20 for the transfer. Explanation.—For the purposes of this sub-clause, the expressions "group" and "same management" shall have the meanings respectively assigned to them in the Competition Act, 12 of 2003. 2002."; (iv) sub-sections (3), (6), (7), (8), (9) and (10) shall be omitted; 25 (v) in sub-section (11),— (a) in the opening portion, the words, brackets and figures "except those of sub- sections (7), (8) and (9)" shall be omitted; (b) in clause (i) the word “and” shall be omitted; (c) clause (ii) shall be omitted; 30 (d) in the Explanation 1, in clause (ii), in sub-clause (c), the words "managing agent" shall be omitted. 12. Section 6AA of the Insurance Act shall be omitted. Omission of section 6AA. 13. In section 6B of the Insurance Act,— Amendment of section 6B. (i) in sub-section (1),— 35 (a) for the words "life insurance business", the words "life or general or health insurance or re-insurance business" shall be substituted; and (b) for the words "Central Government", the word "Authority" shall be substituted; 40 (ii) in sub-sections (2) and (3), for the words "High Court", the words "the Securities Appellate Tribunal" shall be substituted;". (iii) sub-section (4) shall be omitted. 14. Sections 6C, 7, 8 and 9 of the Insurance Act shall be omitted. Omission of sections 6C, 7, 8 and 9. 15. In section 10 of the Insurance Act,— Amendment of section 10. 45 (i) in sub-section (1), for the words "prescribed in this behalf", the words "specified by the regulations" shall be substituted; 8 (ii) in sub-section (2),— (a) the words, brackets and figures, "after the expiry of six months from the commencement of the Insurance (Amendment) Act, 1946", shall be omitted; 6 of 1946. (b) the words "under the law of the insurer's country" occurring at the end, shall be omitted. 5 (iii) after sub-section (2A), the following sub-section shall be inserted, namely:— "(2AA) Where the insurer carries on the business of insurance, all receipts due in respect of each sub-class of such insurance business shall be carried to and shall form a separate fund, the assets of which shall be kept separate and distinct from other assets of the insurer and every insurer shall submit to the 10 Authority the necessary details of such funds as may be required by the Authority from time to time and such funds shall not be applied directly or indirectly, save as expressly permitted under this Act or regulations made thereunder.". Substitution 16. For section 11 of the Insurance Act, the following section shall be substituted, of new namely:— 15 section for section 11. "11. (1) Every insurer, on or after the date of the commencement of the Insurance Accounts and balance sheet. Laws (Amendment) Act, 2015, in respect of insurance business transacted by him and in respect of his shareholders' funds, shall, at the expiration of each financial year, prepare with reference to that year, balance sheet, a profit and loss account, a separate account of receipts and payments, a revenue account in accordance with the regulations 20 as may be specified. (2) Every insurer shall keep separate accounts relating to funds of shareholders and policyholders. (3) Unless the insurer is a company as defined in clause (20) of section 2 of the Companies Act, 2013, the accounts and statements referred to in sub-section (1) shall 25 18 of 2013. be signed by the insurer, or in the case of a company by the chairman, if any, and two directors and the principal officer of the company, or in case of an insurance cooperative society by the person in-charge of the society and shall be accompanied by a statement containing the names, descriptions and occupations of, and the directorships held by, the persons in charge of the management of the business during the period to which 30 such accounts and statements refer and by a report on the affairs of the business during that period.". Substitution 17. For section 12 of the Insurance Act, the following section shall be substituted, of new namely:— section for section 12. Audit. "12. The balance sheet, profit and loss account, revenue account and profit and 35 loss appropriation account of every insurer, in respect of all insurance business transacted by him, shall, unless they are subject to audit under the Companies Act, 2013, be audited annually by an auditor, and the auditor shall in the audit of all such 18 of 2013. accounts have the powers of, exercise the functions vested in, and discharge the duties and be subject to the liabilities and penalties imposed on, auditors of companies 40 by section 147 of the Companies Act, 2013.". Amendment 18. In section 13 of the Insurance Act,— of section 13. (i) for sub-section (1), the following sub-section shall be substituted, namely:— "(1) Every insurer carrying on life insurance business shall, once at least every year cause an investigation to be made by an actuary into the financial 45 condition of the life insurance business carried on by him, including a valuation of his liabilities in respect thereto and shall cause an abstract of the report of such actuary to be made in accordance with the regulations: 9 Provided that the Authority may, having regard to the circumstances of any particular insurer, allow him to have the investigation made as at a date not later than two years from the date as at which the previous investigation was made: 5 Provided further that every insurer, on or after the commencement of the 41 of 1999. Insurance Regulatory and Development Authority Act, 1999, shall cause an abstract of the report of the actuary to be made in such manner as may be specified by the regulations."; (ii) for sub-section (4), the following sub-section shall be substituted, namely:— 10 "(4) There shall be appended to every such abstract a statement prepared in such form and in such manner as may be specified by the regulations: Provided that, if the investigation referred to in sub-sections (1) and (2) is made annually by any insurer, the statement need not be appended every year but shall be appended at least once in every three years."; 15 (iii) for sub-section (6), the following sub-section shall be substituted, namely:— '(6) The provisions of this section relating to the life insurance business shall apply also to any such sub-class of insurance business included in the class "Miscellaneous Insurance" and the Authority may authorise such modifications and variations of regulations as may be necessary to facilitate their application to any such sub-class of insurance business: 20 Provided that, if the Authority is satisfied that the number and amount of the transactions carried out by an insurer in any such sub-class of insurance business is so small as to render periodic investigation and valuation unnecessary, it may exempt that insurer from the operation of this sub-section in 25 respect of that sub-class of insurance business.'. 19. For section 14 of the Insurance Act, the following section shall be substituted, Substitution namely:— of new section for section 14. "14. (1) Every insurer, in respect of all business transacted by him, shall maintain— Record of policies and (a) a record of policies, in which shall be entered, in respect of every policy claims. issued by the insurer, the name and address of the policyholder, the date when 30 the policy was effected and a record of any transfer, assignment or nomination of which the insurer has notice; (b) a record of claims, every claim made together with the date of the claim, the name and address of the claimant and the date on which the claim was 35 discharged, or, in the case of a claim which is rejected, the date of rejection and the grounds thereof; and (c) a record of policies and claims in accordance with clauses (a) and (b) may be maintained in any such form, including electronic mode, as may be specified by the regulations made under this Act. 40 (2) Every insurer shall, in respect of all business transacted by him, endeavour to issue policies above a specified threshold in terms of sum assured and premium in electronic form, in the manner and form to be specified by the regulations made under this Act.". 20. For section 15 of the Insurance Act, the following section shall be substituted, Substitution 45 namely:— of new section for section 15. 10 Submission of "15. (1) The audited accounts and statements referred to in section 11 or sub- returns. section (5) of section 13 and the abstract and statement referred to in section 13 shall be printed, and four copies thereof shall be furnished as returns to the Authority within six months from the end of the period to which they refer. (2) Of the four copies so furnished, one shall be signed in the case of a company 5 by the chairman and two directors and by the principal officer of the company and, if the company has a managing director by that managing director and one shall be signed by the auditor who made the audit or the actuary who made the valuation, as the case may be.". Omission of 21. Section 16 of the Insurance Act shall be omitted. 10 section 16. Omission of 22. Sections 17 and 17A of the Insurance Act shall be omitted. sections 17 and 17A. Amendment 23. In section 20 of the Insurance Act,— of section 20. (i) for sub-section (1), the following sub-section shall be substituted, namely:— "(1) Every return furnished to the Authority or certified copy thereof shall be kept by the Authority and shall be open to inspection; and any person may 15 procure a copy of any such return, or of any part thereof, on payment of such fee as may be specified by the regulations."; (ii) in sub-section (2), the words and figures "or section 16" shall be omitted; (iii) in sub-section (3), for the words "one rupee", the words "such fee as may be specified by the regulations" shall be substituted. 20 Amendment 24. In section 21 of the Insurance Act,— of section 21. (i) in sub-section (1), in clause (d), the words and figures ''or section 16'' shall be omitted; (ii) for sub-section (2), the following sub-section shall be substituted, namely:— "(2) The Securities Appellate Tribunal may, on the application of an insurer 25 and after hearing the Authority, cancel any order made by the Authority under clause (d) of sub-section (1) or may direct the acceptance of such a return which the Authority has declined to accept, if the insurer satisfies the Tribunal that the action of the Authority was in the circumstances unreasonable: Provided that no application under this sub-section shall be entertained 30 unless it is made before the expiration of four months from the date when the Authority made the order or declined to accept the return.". Amendment 25. In section 22 of the Insurance Act,— of section 22. (i) in sub-section (1), the words, brackets, letter and figures"or an abstract of a valuation report furnished under clause (c) of sub-section (2) of section 16" shall be 35 omitted; (ii) in sub-section (2), the words, brackets and figures "or, as the case may be, of sub-section (2) of section 16" shall be omitted. Substitution 26. For sections 27, 27A, 27B, 27C and 27D of the Insurance Act, the following sections of new shall be substituted, namely:— 40 sections for sections 27, 27A, 27B, 27C and 27D. Investment of ‘27. (1) Every insurer shall invest and at all times keep invested assets equivalent assets. to not less than the sum of— (a) the amount of his liabilities to holders of life insurance policies in India on account of matured claims, and