Chennai, Oct 10 (IANS): The 76-year-old Insurance Act should be scrapped while the insurance regulator should be fully empowered and made accountable for the performance of the Indian insurance industry, said a top official of the Shriram group.
"Time has come to consign the Insurance Act 1938 to the dust bin as its provisions are constricting the regulator and the industry players. Ninety five percent of the Insurance Act can be scrapped," R. Thyagarajan, founder-chairman of the Shriram group of companies told reporters here Friday.
The Shriram group has life and non-life insurance business in its fold apart from major interests in non-banking finance companies (NBFC), chit funds, infrastructure, energy and others.
"The IRDA should be empowered and also be made accountable for the performance of the insurance sector as a whole," he said.
The provisions relating to the cap on management expenses of an insurance company or the one that prohibits premium rebate by an agent to a policyholder and several other sections are not relevant now, Thyagarajan said.
"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," he queried.
As for the provisions of the Insurance Act that prohibit an insurance agent from inducing a prospect to take a policy - like rebating certain portion of the premium - Thyagarajan said the law is observed more in the breach.
"The provision was made by the British when they ruled India as a protection for their own insurance companies from domestic competition," he said.
According to him, the proposal to levy Rs.500,000 fine on agents who rebate premium will be used as a blackmailing tool against the agents.
He said arguments that the provisions of the Insurance Act have stood the test of time are not valid.
Thyagarajan said a fully empowered IRDA can draft necessary regulations to govern the sector and there need not be two power centres - central government/finance ministry and the sectoral regulator.