Page 22 - India Insurance Report 2023- BIMTECH

10 India Insurance Report - Series II

“Promote effective and globally consistent supervision of the insurance industry in order to develop
and maintain fair, safe and stable insurance markets for the benefit and protection of policyholders”.

b. Insurance Business in Rural and Social Sectors/Obligations of the insurer in respect
of Rural or Unorganised Sector and Backward classes : Sections 32B and 32C

Section 32 B lays down that every insurer shall undertake such percentages of life insurance business
and general insurance business in the rural and social sectors, as may be specified, in the official gazette
by the Authority, Whereas Section 32C says that every insurer shall discharge the obligations specified
under the Section 32B to life insurance or general insurance policies to the persons residing in the rural
sector, workers in the unorganised or informal sector or economically vulnerable or backward classes of
the society and other categories of persons as may be specified by regulations made by the Authority
and such insurance policies shall include insurance for crops.
The Government of India, on the contrary, has already demonstrated demand-led transformation
through its marquee programmes such as PMSBY, PMJJY, PMFBY and PMJAY, etc., which has reminded
the policymakers that the market is not supply driven. Therefore, such market segments require an
active understanding of the development perspective rather than enforcing supply side mechanism,
through quotas and penal regimes.

c. Obligatory Insurance : Sections 32D and 105B

Motor third party insurance is now obligatory for general insurers to the extent prescribed in the
regulations. For the purposes of third-party insurance related to either the death of a person or grievous
hurt to a person, the Central Government shall prescribe a base premium and the liability of an insurer
in relation to such premium for an insurance policy in consultation with the IRDAI. And there is a
penalty of 250 million in case of a breach of obligatory insurance.

The social objectives, with its set of mandates and penalties, under a commercial dispensation, are
an anachronism and have the potential to impede efficiency, which in turn impacts growth.

d. Section 105C - Adjudication and Appeals: IRDAI Vested with the Power to
Adjudicate

The IRDAI has been empowered to hold enquiry after giving a reasonable opportunity of being
heard. The Appellate authority for appeal against orders of the IRDAI is ‘Securities & Appellate Tribunal’
(SAT), set up under the SEBI Act, 1992. Since the SAT currently deals with issues related to the capital
markets, its expertise in dealing with matters of insurance law may be limited. The Law Commission
had suggested a separate appellate authority for the insurance industry, which would hear appeals against
decisions by the IRDA. Appeals against decisions by the proposed insurance appellate authority (IAT)
would lie directly with the Supreme Court. In the interim, SAT could have a separate Insurance Bench