Page 33 - India Insurance Report 2023- BIMTECH

India Insurance Report - Series II 21

security deposits; (ii) imposing a disproportionate penalty for a breach in contract; (iii)
refusing to accept early repayment of debts; (iv) terminating the contract without
reasonable cause; (v) transferring a contract to a third party to the detriment of the
consumer without his consent; or (vi) imposing unreasonable charge or obligations
which put the consumer at a disadvantage;

2. Section 49 and 59 of the Consumer Protection Act 2019 empowers the State Commission
and National Commission to declare any term of contract which is unfair to any
consumer to be null and void;

3. Possible Provisions of the Insurance Policy which may be affected - Average Clause/
Principle of Loading of premium/Clauses with regard to the right of the insurer to cancel
the policy at any point of time can be affected/Repudiation clauses and exclusion clauses;

4. Trend in some other Countries

 In Australia, the provisions of the Competition and Consumer Act 2010 relating
to Unfair Contract Terms were not extended to the Insurance Contracts.

 In New Zealand, the provisions of the Fair-Trading Amendment Act, 2013 do not
apply to the Insurance Contracts entered into on or before 18.03.2015.

6. Chapter XI of the Motor Vehicles Act 2019 dealing with Third Party Claims
and its Impact

Section 147: Premium Fixation - 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 Insurance Regulatory and Development Authority.

Since Central Government will prescribe the base TP premium and the liability of an
insurer in relation to such premium, in consultation with IRDAI, any coverage for liability
over and above the fixed limit will attract further premium as decided by the insurer. The
overall liability in case of a third party still remains unlimited, and thus, the scope of increase
in premiums would be open every year based on the payments made in compliance of the
Court judgements. This will lead to insurance coverage getting costlier each year and may
lead to further vehicles remaining uninsured. Capping of final liability would help in
moderating the premiums and making insurance affordable for all.

Since the Central Government will prescribe the base TP premium and the liability of an
insurer in relation to such premium, in consultation with IRDAI, it de facto becomes the
insurance regulator, in addition to discharging the executive functions. This document
maintains a principle-based approach to insurance governance, including the precise role
and authorities for each wing of the ‘power structure’, i.e., legislative, executive and regulatory
wings. Whilst the executive wing has the concern to decide the scale of tortious liabilities,
the premium setting should be left to the IRDAI under the risk-based pricing concept.