It is high time the Insurance Act 1938 is amended to empower the Insurance Regulatory and Development Authority (IRDA) completely and make it responsible for the growth of the insurance industry, says R Thyagarajan, Founder Chairman of the Shriram group companies. The 76-year-old Insurance Act has outlived its time.

“Majority of the sections in the Act are constricting the regulator and the industry players, and hence can be scraped, while IRDA is fully empowered and made accountable for the performance of the industry,” he said.

According to him, the Act prevents the governing body from framing dynamic regulations, instead of making it nimble-footed to facilitate growth.

For example, he said, the Act prohibits insurance agents from rebating certain portion of the premium to induce consumers to take a cover. This Section in the Insurance Act 1938 was introduced by the British to prevent any Indian insurance company from acquiring a consumer. It has absolutely no relevance now.

Currently, most of the life insurance businesses procured by agents are done through rebating – breaching the law. “Why not we rather legalise a practice that is being commonly followed by the agents,” he said.

The agents should have the freedom to decide the quantum of commission to pass on and how much to retain.

While rebating is not prohibited in almost all financial and non-financial products marketing, why should the insurance industry alone be punished for rebating, he says.

Even the provisions relating to the cap on management expenses of an insurance company is unfair. “Why should there be a statutory cap on management expenses when there is a solvency margin and the shareholders are willing to bring in additional capital?” If IRDA is fully empowered, it can regulate the sector better, without any intervention from any other power centre such as the Union Finance Ministry.

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