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IRDA set to get more penal powers

Sidhartha

The government is planning to rewrite the Insurance Act, 1938, to provide more powers to the Insurance Regulatory and Development Authority. The Act has been referred to the Law Commission for review.

The Law Commission was expected to submit a white paper on the necessary amendments by the end of June, official sources told Business Standard.

The recommendations will then be reviewed by the government and the IRDA and a Bill to amend certain provisions of the Insurance Act, 1938, will be introduced in Parliament by December this year.

The present Insurance Act, which some experts say is still relevant, formed the basis for all regulations issued by IRDA in the run-up to the opening up of the Indian insurance sector.

Certain provisions of the Insurance Act were modified by the IRDA Act, 1999, which provided statutory powers to the regulator.

The officials, however, said some of the provisions of other legislation often override the provisions of the Insurance Act. A case in point is the Life Insurance Corporation Act, which, the law ministry said, overrode the Insurance Act.

In the past, LIC ran into trouble with IRDA on two occasions because the provisions of the Act governing the corporation were vastly different from those of the Insurance Act or the IRDA Act. Moreover, some penalty provisions could also be introduced into the Act.

IRDA chairman N Rangachary confirmed the development and said: "We can't proceed on several cases because our hands are tied. In case there are amendments to certain provisions, we will have a clear regime that will permit us to impose penalties in certain cases."

The officials added that the review of the IRDA Act and the Insurance Act had also been carried out by a multilateral institution which had recommended that amendments be made to the laws.

They said even when the IRDA Act was drafted there was an opinion that the Insurance Act needed to be amended or rewritten in order to simplify it and bring the legislation in tune with the needs of the present times.

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