Government of India Volume I: Analysis and Recommendations

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Canada Department of Finance - Mr. Jeremy Rudin, Assistant Deputy Minister Financial Consumer Agency of - Mr. Ursula Menke, Commissioner Canada (FCAC) Ms. Lucie Tedesco, Deputy Commissioner Canada Deposit Insurance Corporation (CDIC) - Ms. Michele Bourque, President Bank of Canada - Mr. Tiff Macklem, Sr. Dy. Governor Mr. Timothy Lane, Dy. Governor Office of the Superintendent of - Mr. Mark Zelmer, Asstt. Supdt. Financial Institutions (OSFI) Ms. Patty Evanoff, Senior Director Ontario Securities Commission (OSC) - Prof. Mary Condon, Vice-Chair 19.6. Working Group on insurance, retirement financing, and small savings 19.6.1. Composition Composition: Shri Dhirendra Swarup - Chairman Shri C.S. Rao - Senior Adviser Shri Tarun Bajaj - Member Ms. Anuradha Prasad - Member Shri Rajendra Chitale - Special Invitee 19.6.2. Terms of Reference: 1. Insurance ANNEXES (a) Review the consumer protection aspects of insurance and recommend principles for legal framework for the same. Some specific issues to be examined in this regard are: i. Review distribution models and sales practices in the insurance industry. ii. Review the present grievance redressal mechanisms. iii. Review the manner in which special aspects of insurance contracts, such as, dealing with misstatements, insurance fraud, assignment of policy and appointment of nominees, should be addressed. iv. Review the competition laws suitable for the insurance sector. v. Review general market conduct laws suitable for the insurance sector. (b) Examine the role of the regulator in pursuing the goal of ‘development’ and the manner in which the development of products in various areas, including, rural and social sector, micro insurance, agriculture insurance, health insurance, should be specified in laws and regulations. 164 FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION
ANNEXES (c) Examine whether information should be treated as a public good that can be shared through appropriate data warehousing and data mining infrastructure, subject to customer privacy and confidentiality requirements. (d) Identify the prudential regulation and supervision aspects of insurance regulation and recommend a model legal framework for the same. This may include: i. review of the ownership and capital structure of insurance companies. ii. review of the laws governing investment norms for insurance companies - examining how the regulators can be empowered to adjust the regulatory framework with time. iii. review of the prudent man principle approach versus prescription of investment guidelines. (e) Review the legal framework relating to re-insurance and examine the changes that might be required to promote more robust participation in the sector. (f) Review the systemic risks that can arise from the failure of insurance firms, and the legal framework for dealing with such risks. (g) Examine the appropriate resolution mechanisms that need to be adopted to deal with the failure of any insurance firm, keeping in view the interests of policyholders and financial stability. Also review whether this process should differ in any manner for life and non life insurance firms. (h) Review the design and implementation of the Employees’ State Insurance Act, 1948 and examine the possibility of allowing employers covered by that legislation to opt for group medical insurance offered by the private insurance industry. (i) Review the regulation and structure of State owned insurers, in particular the special status of Life Insurance Corporation. (j) Examine the manner in which life insurance policies offered by the Department of Posts can be brought within the regulatory ambit in order to ensure the protection of consumers and provide a level playing field. (k) Review the role of self regulatory organisation and industry associations in the insurance sector and examine whether there is a need for a re-assessment of their functions. (l) Review the insurance related provisions contained in the Motor Vehicles Act, 1988 and identify any changes required to be made to the existing legal regime. (m) Examine the mechanisms that need to be put in place for resolution of disputes between market players-insurers an intermediaries (n) In this context, review which powers should be given to regulators under law, how should the powers be used, how should the supervisory function be structured, and what punitive actions can be taken. 2. Pensions (a) The present retirement income framework in India consists of many components, such as, EPFO, New Pension System (NPS), Public Provident Fund (PPF), provident fund trusts and superannuation trusts, and is regulated in a very fragment manner. Examine the manner in which these components can be brought within the regulatory ambit of financial sector laws and the means for achieving coherence among the different components of the system? (b) Identify the consumer protection, prudential regulation and systemic risk aspects of pension regulation, which includes NPS, EPFO, provident fund trusts and superannuation trusts. FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION 165
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Government of India _______________
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Contents Acronyms . . . . . . . . .
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CONTENTS 12 Public debt management
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ACRONYMS FSAT Financial Sector Appe
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Acknowledgement When the Ministry o
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ACKNOWLEDGEMENT appreciate the effo
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EXECUTIVE SUMMARY rience till date.
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EXECUTIVE SUMMARY out many processe
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EXECUTIVE SUMMARY can issue regulat
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EXECUTIVE SUMMARY Alongside this, i
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EXECUTIVE SUMMARY to analyse one co
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Contracts, trading and market abuse
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5. A new Financial Redressal Agency
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EXECUTIVE SUMMARY States GDP as of
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1.2. Deliberations in the Commissio
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INTRODUCTION amendments frequently
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INTRODUCTION sectoral composition o
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INTRODUCTION The Commission has und
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CHAPTER 2 The tasks of financial la
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THE TASKS OF FINANCIAL LAW This is
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THE TASKS OF FINANCIAL LAW ◮ “i
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THE TASKS OF FINANCIAL LAW 2.5. Own
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THE TASKS OF FINANCIAL LAW desirabl
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CHAPTER 3 Structure of the regulato
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STRUCTURE OF THE REGULATOR Table of
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CHAPTER 4 Functions and powers of t
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FUNCTIONS AND POWERS OF THE REGULAT
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CONSUMER PROTECTION The consumer pr
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Table of Recommendations 5.4 Princi
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CONSUMER PROTECTION using or disclo
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CONSUMER PROTECTION providers. The
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CONSUMER PROTECTION Table of Recomm
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CHAPTER 6 Micro-prudential regulati
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MICRO-PRUDENTIAL REGULATION let tha
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MICRO-PRUDENTIAL REGULATION Table o
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MICRO-PRUDENTIAL REGULATION PRINCIP
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MICRO-PRUDENTIAL REGULATION the oth
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RESOLUTION payment systems. The cor
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RESOLUTION Commensurately, the corp
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Table of Recommendations 7.3 Intera
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Table of Recommendations 7.5 Powers
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Table of Recommendations 7.7 Fundin
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CHAPTER 8 Capital controls Capital
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CAPITAL CONTROLS 2. Absence of judi
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CAPITAL CONTROLS Table of Recommend
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CAPITAL CONTROLS Table of Recommend
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Table of Recommendations 9.1 Object
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Table of Recommendations 9.3 Establ
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SYSTEMIC RISK filings by financial
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SYSTEMIC RISK Table of Recommendati
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egulatory agencies. In such a situa
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FINANCIAL INCLUSION AND MARKET DEVE
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FINANCIAL INCLUSION AND MARKET DEVE
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Table of Recommendations 11.1 Objec
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Table of Recommendations 11.2 The m
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Table of Recommendations 11.3 Board
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CHAPTER 12 Public debt management 1
Page 145 and 146: PUBLIC DEBT MANAGEMENT of the publi
Page 147 and 148: PUBLIC DEBT MANAGEMENT State Govern
Page 149 and 150: PUBLIC DEBT MANAGEMENT Table of Rec
Page 151 and 152: CHAPTER 13 Foundations of contracts
Page 153 and 154: FOUNDATIONS OF CONTRACTS AND PROPER
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Page 164 and 165: 14.2. Problems of the present arran
Page 166 and 167: FINANCIAL REGULATORY ARCHITECTURE T
Page 168 and 169: FINANCIAL REGULATORY ARCHITECTURE w
Page 170 and 171: TRANSITION ISSUES On the functional
Page 172 and 173: TRANSITION ISSUES service providers
Page 174 and 175: SUMMARY OF RECOMMENDATIONS NOT EMBE
Page 177: CHAPTER 17 Conclusion Financial eco
Page 180 and 181: 18.2. Note of dissent by K.J. Udesh
Page 182 and 183: 18.3. Note of dissent by P.J. Nayak
Page 184 and 185: NOTES OF DISSENT A second difficult
Page 186 and 187: NOTES OF DISSENT 6. The present arr
Page 189 and 190: CHAPTER 19 Annexes 19.1. Formation
Page 191 and 192: ANNEXES 19.2. List of consultants,
Page 193 and 194: ANNEXES * Did not participate in th
Page 195: ANNEXES 19.5. Interactions with aut
Page 199 and 200: ANNEXES 2. General development of m
Page 201 and 202: ANNEXES 19. Role of surveyors: (a)
Page 203 and 204: ANNEXES 6. The law must provide for
Page 205 and 206: ANNEXES 31. Resolution of insurance
Page 207 and 208: ANNEXES 3. As shocks can spread thr
Page 209 and 210: ANNEXES 19.8.2. Terms of Reference
Page 211 and 212: ANNEXES (d) The Board of the target
Page 213 and 214: ANNEXES 2. The PDMA should adopt a
Page 215 and 216: ANNEXES 3. On the issue of co-opera
Page 217 and 218: ANNEXES 14. Regulators must look at
Page 219 and 220: ANNEXES 31. The WG recommends the m
Page 221 and 222: ANNEXES (b) Efficiency of DRT: Suit
Page 223 and 224: ANNEXES (c) Pledged shares and exem
Page 225 and 226: ANNEXES 19.11. Interactions by the
Page 227 and 228: ANNEXES 19.13. Submissions to FSLRC
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