Indian insurance market: The regulatory framework

The Indian insurance market was nationalized shortly after the country’s independence in 1947. Before that time, the insurance industry had been governed by British legislation, more particularly by the British Insurance Act enacted in 1870. Offices and branches of foreign companies, mainly British, had therefore dominated the market.

In the light of this situation, the Indian government decided to gradually introduce new legislation aimed at regulating the activity of life and non-life companies and at imposing its grip over the market.

Several pieces of legislation were published: the Insurance Act in 1938, the Marine Insurance Act in 1963, the 1999 Law providing for the establishment of the Insurance Regulatory and Development Authority of India (IRDAI). Ever since, numerous regulations, directives, circulars and notices have been regularly introduced by IRDAI [4] in order to reinforce the legal framework.

Key legislations governing the Indian insurance market

A number of laws and legislations regulate the operations of life and non-life insurance companies in India.

• Life Insurance Companies Act, 1912
  First law promulgated to regulate the operations of the life market.
• Insurance Companies Act, 1928
  Legislation regulating statistical information gathering in the life and non-life activities.
• Insurance Act, 1938
  Comprehensive regulatory framework introducing new provisions aimed at legislating and supervising insurers’ activities. The legislation comprises 120 articles and 8 annexes.
• Life Insurance Corporation Act, 1956
  Nationalization of the life insurance market and establishment of Life Insurance Corporation (LIC), the first Indian life company.
• Marine Insurance Act, 1963
  First legal framework of marine insurance.
• General Insurance Business Act, 1972
  New measure authorizing the nationalization and restructuring of the non-life insurance business and market.
• Insurance Regulatory and Development Authority Act, 1999
  Establishment of the Insurance Regulatory and Development Authority of India (IRDAI). The main objectives of this entity are to protect the interests of policyholders, regulate the market and ensure the orderly growth of the industry. It grants approvals to the various stakeholders in the market: insurers, reinsurers, intermediaries.
• Actuaries Act, 2006
  Framework regulating the activity of actuaries. The document grants them professional status.
• Insurance Laws (Amendment) Act, 2015
  A legal act introducing amendments to the 1983, 1972 and 1999 legislations. The main amendments pertain to foreign direct investments (FDI) in local insurance companies and branches of foreign insurance companies in India.
• Reinsurance Regulations, 2018
  Implementation of the reinsurance regulation on 1 January 2019 and introduction of new requirements for the life and non-life activities. This regulation supersedes those of 2016 and 2013. It also amends the 2015 legislation regarding foreign reinsurers’ branches.