Page 18 - Insurance Times April 2019

mentality. Despite the substantial competitive threat, many Penalties in Competition Law Violations
insurance companies seem to be ignoring the opportunity
that personalized services can provide. in India
In June 2011, the Indian government implemented the
Penalty by Insurance Ombudsman: merger control regime under the Competition Act, 2002 and
the Competition Commission of India (Procedure in regard
With an objective to provide a forum for resolving disputes to the transaction of business relating to combinations)
and complaints from the aggrieved insured public or their Regulations, 2011. While the Competition Commission of
legal heirs against Insurance Companies, the Government India is a fairly young regulator, over the years, the
of India, in exercise of powers conferred on it u/s 114(1) of
jurisprudence on Indian competition law and the merger
Insurance Act, 1938 framed "Redressal of Public Grievances
control regime has developed substantially. The Act
Rules, 1998", which came into force w.e.f. 11th November, prescribes asset and turnover thresholds and if a transaction
1998. These Rules aim at resolving complaints relating to crosses any of these thresholds, the parties are required to
the settlement of disputes with Insurance Companies on
seek approval of the CCI prior to effecting the transaction.
personal lines of insurance, in a cost effective, efficient and
impartial manner.
The Act and the Regulations also provide certain
exemptions, such as the target test exemption and
These Rules apply to all the Insurance Companies operating exemptions based on the nature of the transaction. This
in General Insurance business and Life Insurance business, update highlights some of the recent orders of the CCI in
in Public and Private Sectors. Established under the RPG respect of a failure to notify a transaction. CCI's recent
1998, the Office of Insurance Ombudsman deals with
orders on the failure to notify transactions under the Act
consumer complaints against Insurers operating in general show that the CCI is actively scrutinizing M&A transactions
and life insurance sector. There are 22 offices of Insurance reported in the media, but not notified under the Act, to
Ombudsman across the country.
assess whether such transactions require approval. The
penalty of INR50 imposed by the CCI in 2016 for failure to
Regulation 5 of IRDA Regulations for Protection of notify a transaction is the highest since 2011.
Policyholders Interests, 2002 which provides for insurers to
have in place speedy and effective grievance redressal With the competition law jurisprudence in India growing
systems, and in terms of the Authority's powers and every year, the CCI expects deal makers to take the merger
functions as enunciated in Section 14 of IRDA Act 1999, the
control regime and the procedural requirements there
IRDA has issued certain guidelines pertaining to minimum
under seriously. Provisions pertaining to enforcement of
time-frames and uniform definitions and classifications with
competition law in India (i.e., Sections 3 and 4 of the
respect to grievance redressal by insurance companies.
Competition Act, 2002 (as amended) (Competition Act))
came into effect on 20 May 2009. Despite being a relatively
Insurance ombudsmen have recommended a penalty
young regulator, the Competition Commission of India (CCI)
provision against insurers for not complying with the norms has addressed several significant questions of law and fact.
related to redressal of public grievances. The Rules for
Redress of Public Grievances (RPG) are going to be This jurisprudence, in effect, has already brought about a
amended. There should be a reviewing authority in cases paradigm shift, redefining the way businesses are being
of dissatisfaction. And there should be a provision for
carried out in India. Section 48 of the Competition Act
penalising the insurance companies in case they are not
provides for potential liability of individuals who were
complying with it.
actively or passively involved in the contravention of the
Competition Act.
The Delhi Office of Insurance Ombudsman received the
distinction of first insurance ombudsman office being
certified as ISO 9001:2015. An ISO certification was Competition Appelate Tribunal:
conferred based on quality services, including strong In a major relief to four state- run insurers, Competition
customer focus, motivation, continual improvement and Appellate Tribunal slashed the Rs 671 crore penalty imposed
review. Insurance Ombudsman Rules, 2017 has empowered on them by CCI to a mere Rs 2 crore, saying the burden of
an Insurance Ombudsman to pass an award of and up to fine will be transferred to public as these entities are owned
Rs. 30 lakh. by the government. The Competition Commission, in July

18 The Insurance Times, April 2019