The Insurance Act, 1938 is a law originally passed in 1938 in
British India to regulate the
insurance sector. It provides the broad legal framework within which the industry operates.
History
Prior to the law, only the Marine Insurance Act, 1906 of
England existed in British India but it only applied to marine
insurance. For other insurance, the British
common law was applied. This law passed in 1938 borrowed heavily from the British law and covered all sorts of insurance. In 1963, a new Marine Insurance Act for independent India was passed. This also borrowed heavily from the English Marine Insurance Act, 1906.
The Insurance Act had resulted in the formation of Controller of Insurance, a regulatory. But following the nationalisation of major insurance companies in India, under Life Insurance of India Corporation Act, 1956 and General Insurance Business (Nationalisation) Act, 1972, its importance diminished. However, as India began allowing private companies again in the insurance sector,
Insurance Regulatory and Development Authority of India was formed in 1999.
Summary
The Insurance Act has 120 sections and 8 schedules. Under it, only an Indian company, as defined and registered under
Companies Act, 1956
The Companies Act 1956 was an Act of the Parliament of India, enacted in 1956, which enabled companies to be formed by registration, and set out the responsibilities of companies, their directors and secretaries. It was repealed and replaced b ...
, is allowed to operate in India. Its foreign entity-owned equity should not exceed 49% as of 2015. It must have a licence from
Insurance Regulatory and Development Authority of India.
In March 2021, The Insurance (Amendment) Bill, 2021 was passed by the
Parliament of India which increased the maximum permissible
Foreign Direct Investment
A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment by a notion of direct co ...
in the insurance sector to 74%, from the previous limit of 49%.
See also
*
Insurance in India
Insurance in India covers both the public and private sector organisations. It is listed in the Constitution of India in the Seventh Schedule as a Union List subject, meaning it can only be legislated by the Central Government only.
The insuran ...
*
Insurance Regulatory and Development Authority of India
References
{{Financial services in India
Insurance in India
1938 in law
Acts of the Parliament of India 1938
Insurance legislation
Financial history of India