The Life Insurance business was nationalised in 1956. at this stage, the General insurance business was allowed to be continued in private hands. In 1971, General Insurance (emergency provisions) ordinance was enacted.
The Government of India took over the management of all General Insurance Companies operating in India whether they belonged to Indian or non-Indian shareholders. Subsequently, the General Insurance (Emergency Provisions) Amendment Act, 1971 was passed withdrawing certain rights of the Directors and Members of the Companies, which they were enjoying under the Companies Act. General Insurance (Nationalization) Act, 1972 shortly followed and with effect from 2nd January,1973 the provisions of the Act became effective.
The most significant provisions of the Act are
Definitions:
In this act, unless the context otherwise requires, acquiring companies: means any Indian insurance company and, where a scheme has been framed involving the merger of one Indian insurance company in another or the amalgamation of two or more such companies,means the Indian insurance company in which any other company has been merged or the company which has been formed as a result of amalgamation;
Appointed day means such day, not being a day later than the 2nd day of January, 1973, as the central government may , by notification, appoint;
Companies act means the companies act, 1956;
Corporation means the general insurance corporation of India formed under section 9;
Existing insurer means every insurer the management of whose undertaking has vested in the central government under section 3 of he general insurance (emergency provisions) act, 1971 an d includes the undertaking of the life insurance corporation in so far as it relates to the general insurance business carried on by it;
Foreign insurer means an existing insurer incorporated under the law of any country outside India;
General insurance business means fire, marine or miscellaneous insurance business, whether carried on singly or in combination with one or more of them, but does not include capital redemption business and annuity certain business;
Government company means a government company as defined in section 617 of the companies act;
Indian insurance company means an existing insurer having a share capital who is a company within the meaning of the companies act;
Insurance act means the insurance act, 1938;
life insurance corporation means the life insurance corporation of India established under the life insurance corporation act, 1956;
Notification means a notification published in the official gazette;
Prescribed means prescribed by rules made under this act;
Schedule means the schedule to the act;
Scheme means the scheme framed under section 16;
Words and expressions used in this act but not defined herein or in the insurance act and defined in the companies act, shall have the meanings respectively assigned to them in the companies act.
Functions of Corporation
The functions of the Corporation are enumerated in Section18 of the Act, some of are as follows:
The functions of the Corporation shall include:-
(a) The carrying on of any part of the general insurance business, if it thinks it desirable to do so;
(b) Aiding, assisting and advising the acquiring companies in the matter of setting up of standards of conduct and sound practice in general insurance business and in the matter of rendering efficient services to holders of policies of general insurance;
(c) Advising the acquiring companies in the matter of the controlling their expenses including the payment of commission and other expenses.
(d) Advising the acquiring companies in the matter of the investment of their funds;
(e) Issuing directions to acquiring companies in relation to the conduct of general insurance business.
Functions of acquiring companies
(1) Subject to the rules, if any, made by the Central Government in this behalf and to its memorandum and articles of association, it shall be the duty of every acquiring company to carry on general insurance business.
(2) Each acquiring company shall so function under this Act as to secure that general insurance business is developed to the best of the community.
(3) In the discharge of any of its functions, each acquiring company shall act so far as may be on business principles and where any directions have been issued by the Corporation shall be guided by such directions.
(4) For the removal of doubts it is hereby declared that the Corporations and any acquiring company may, subject to the rules, if any, made by the Central Government in this behalf, “enter into such contracts of reinsurance treaties as it may think fit for the protection of its interests”.
Power to make rules
According to section 39,
The Central Government is also empowered to make rules to carry out the provisions of the Act and such rules may provide for:
(a) Manner in which the profits and other moneys received by the Corporation may be dealt with
(b) The conditions subject to which the Corporation and the acquiring companies shall carry on general insurance business;
(c) The terms and conditions subject to which any re-insurance contract or treaties may be entered into;
(d) Form and manner in which any notice or application may be made to the Central Government;
(e) The reports which may be called for by the Central Government from the Corporation and acquiring companies; and
(f) Any other matter which is required to be or may be prescribed.
Powers of the central government under the act
Power to transfer employees: under the provisions of sec 22 of the act, the corporation may at any time transfer any officer or employee from an acquiring company or the corporation to any other acquiring company or the corporation, as the case may be, and the officer or employee so transferred, shall continue to have the same terms and conditions of service as were applicable to him immediately before such transfer.
Power to issue directions: according to sec 23, the corporation and every acquiring company shall, in the discharge of its functions, be guided by such directions in regard to matters of policy involving public interest as the central government may give.
Power to frame/ amend a scheme
According to section 17,
If the central government is of opinion that for the more efficient carrying on of general insurance business it is necessary so to do, it may, by notification, frame one or more schemes. The central government may, by notification, add to, amend or vary any scheme framed under this section . a copy of every scheme , and every amendment thereto, framed under this section shall be laid, as soon as may be after it is made, before each House of Parliament
Power to regulate the terms and conditions of service of officers and other employees
According to section 17A, the central government may, by notification in the official gazette, frame one or more schemes for regulating the pay scales and other terms and conditions of service of officers and other employees of the corporation or of any acquiring company.
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