The Insurance Regulatory and Development Authority (Irda) today said it had inadequate penal powers and sought higher penalties for errant insurance companies.
"The Insurance Act of 1938 lacks sufficient penal machinery to take action against defaulters," N Rangachary, chairman, Irda, told reporters here, on the sidelines of a launch of the Rs 150 crore biotechnology venture fund by the Andhra Pradesh Industrial Development Corporation and Dynam Ventureast. "At the most we can levy a fine of Rs 100 or Rs 1,000 for an offence," he added.
He said the Insurance Act had become vintage by 2002 and Irda was trying to upgrade the provisions of the legislation.
Irda's demands come close on the heels of higher powers given to the Securities and Exchange Board of India (Sebi) and the proposed increase in penalties for errant companies coming under the purview of the department of company affairs.
He also said there was a need to put in place an appellate forum for purposes of hearing appeals against the orders of Irda.
Asked about the proposed move to transfer its funds to public accounts, Rangachary said the move would curtail the independence of the regulator and would also increase the cost of managing the affairs of Irda. "I will have to seek the government's clearance for any withdrawals that will curtail the regulatory independence and increase costs," he said.
He said the Insurance Act authorised Irda to levy charges on insurance companies, which was used to maintain the regulator's office and carry out the objectives that had been laid out in the Act. "This money does not belong to anybody other than the authority (Irda)," he said.
Citing that there were some observations that Irda was sitting on Rs 2,000-2,500 crore, he said the regulator's fixed deposits with banks was hardly Rs 45 crore at present.
Rangachary said the regulator had proposed a detariffing of the own-damage component of the motor insurance business by April 2005 and the interim period would be used to collect data for the purpose.
