Insurance Act 2010.pdf

Insurance Act 2010(Act XIII of 2010) Ministry of Finance A contract of insurance A contract of insurance is a contract between two parties whereby, one party is called the insurer , agrees to pay to the other party a certain sum of money on happening of a specified contingency, or agrees to indemnify the other party from losses arising from certain specific events. The other party to the contract is called the insured, pays and agrees to pay some of money, called the premium, as consideration. Sec-4: Prohibition of insurance business: Registration of insurance business is prohibited unless it is a: 1. Public limited Company under the CA 1994; 2. Co-operative Society which is an existing insurer; 3. Insurance Institution registered outside Bangladesh not being a Pvt. Limited Company or subsidiary thereof; Mutual Insurance Company shall not deal in Non-life Insurance Business. Sec-5 Classification of insurance: Life and Non-life.

Sec.8: Registration Certificate, etc. No person shall run Insurance business unless it is registered under this Act. But JIbon Bima Corporation and Sdharan Bima Corporation are deemed to be registered under this Act. Every person interested in this business shall apply for a Certificate of Registration under this Act in prescribed form to the authority and pay fees as per rules. Every existing insurer shall apply to the authority within 06 months from the date of enforcement of this act. Papers/Documents are to be submitted: a) b) c) d)

MOA, AOA, Names and addresses and TIN numbers of the Directors; Address of registered Office; Names, Addresses, TIN of all members if it is a co-operative Society; Certificate from Bangladesh Bank for in compliance with section 23

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e) A certificate from the Auditor and a affidavit regarding its adequate paid-up capital in compliance with section 21 f) Receipts of payment of fees g) Others as prescribed by the rules Sec-9: Issuance Registration Certificate, etc. The Authority may issue a certificate of registration for Life Insurance or NonLife insurance on satisfactory receipt of the application. The authority may decline to issue the Certificate of registration giving an opportunity of being heard to the applicant. The aggrieved person may appeal to the authority within 30 days of communication for reconsideration. Sec-10: Suspension /Cancellation of Registration: Registration of insurance can be cancelled or suspended if the insurer: a) b) c) d) e) f) g) h) i)

Fails to comply with section 23; Fails to commence business with in 01 year Became insolvent, is liquidated, amalgamated etc. Runs the insurance business which is detrimental to the interest of policy holder, or of national interest. is unable to comply with the duties and responsibilities Fails to maintain solvency margin as required by the rules Contravenes any condition as to the registration, law, and rules or order of the authority Fails to discharge activity of re-insurer Fails to pay claims and keep pending more than 30 days after order of the court and the authority

The authority by giving a show cause notice of 30 days may suspend the registration for a maximum term of 30 days for any of the above causes. After receiving the reply the authority may withdraw the suspension or extend the suspension period of 2 months more or cancel the registration as it feels justified. The aggrieved person may appeal to the government against the order of the authority u/s 9, 10 and 11 Sec-11: Renewal of Registration: The registration is renewable and is to be renewed in each year. The insurer shall apply for renewal of the registration by 30th November in each year for the next year and pay required fees.

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Section-14: Opening of branch offices of insurance business: No new branch office of insurance business can be opened unless it obtained a license from the authority for its purpose. Section-21: Capital: No insurer shall be registered under this Act. Unless it maintain paid up capital as required by schedule-1 of this Act other than the existing Company. The amount of capital is to be kept in any scheduled Bank and it cannot be withdrawn without written permission of the authority. Interest on the amount can be withdrawn. No lien can be created on the amount without written approval of the authority.

Section-23: Deposit: Every insurer shall maintain deposit with Bangladesh Bank as required by Schedule-1 of this Act. Section: 26: Separate Accounts (of each class or sub-class of business) and fund: Separate Income Account for each class or sub-class of business of insurer is to be maintained. For life insurance business, a separate fund named life insurance fund is to be maintained. Accounts is to be sent to the authority having duly audited within 6 months of each calendar year. Section 27: Accounts and Balance Sheet: Each insurer shall prepare following Statements after closing of each calendar year: a) b) c) d) e)

Balance Sheet in prescribed format as per rules Profit and Loss Account in prescribed format as per rules Revenue Account in prescribed format as per rules Separate fund Accounts A report of the Management

Section-28: Accounts and statements are to be audited as per section 213 of CA-1994 Section-29: Special Audit: The Authority may time to time appoint auditor/auditors for auditing of accounts of the insurer. Auditors’ fees will be paid by the insurer. Section- 31 Registers are to be maintained: -

Register of policy Register of claims

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Section 32: Submission of Return All accounts as per section 27, Liability evaluation report as per section 30, others statements, reports, etc. (four sets) as required by this Act or rules are to be submitted to the authority within 6 months from the closing of the year. For submission of liability evaluation report shall be within 9 months. 06 months’ time will be extended 3 months more for insurer’s head office outside Bangladesh or the insurer has insurance business outside Bangladesh. The authority may extend 1month time for submission of return if necessary. Section- 37: Power of the authority regarding return If it is deemed to the authority that the return submitted by the insurer is incorrect/ incomplete, the authority may: a) Order the insurer to submit further information; b) Order the insurer for audit of accounts, register, etc. at the principal place of business of the insurer or to submit such further returns and statement. c) Enquire into any officer of the insurer d) Decline to except return if the deficiencies are not met within 1 month. If the authority declines to accept return as above, it should be treated that the insurer has failed to submit return U/s 32. Section- 82: Dividend, bonus, profit, etc. distribution: No dividend shall be paid unless any expenses, Commission, Brokerage, and Loss are fully adjusted/written off. For life insurance: on the basis of actuarial value as carried out and submitted to the authority. Life insurance fund cannot be used for this purpose. Distinguish among the life, fire and marine insurance Distinction in terms of Definition: Life insurance is different from other form of insurances in the sense that the subject matter on the insurance is human being. The insurer will pay a fixed amount of money at the time of death or at the expiry of certain period. Marine insurance has been defined as a contract between insurer and insured whereby the insurer undertakes to indemnify the insured in manner and to the interest thereby agreed, against marine loss incident to marine adventure. Fire insurance has been defined as a contract between insurer and insured whereby the insurer undertakes to indemnify the insured against any loss consequent upon destruction by fire.

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Indemnity: Life insurance is a contingent contract. The money is payable on the happening of a contingency (viz. death). Other forms of insurance (e.g. fire or marine) are contracts of indemnity. The insurer in these cases promises to indemnify the insured person against the consequence of fire, accident or some mischance and misfortune. The contract of insurance contained in a marine or fire policy is a contract of indemnity and of indemnity only, and that this contract means that the assured, in case of a loss against which the policy has been made, shall be fully indemnified but shall never be more than fully indemnified.

Insurable interest: In every contract of insurance the policy holder must possess an interest on the subject matter of the insurance is known as insurable interest. Insurable interest means proprietary or monetary interest on the subject matter of the insurance. The main object of the insurance is to protect the insurable interest. If there is no insurable interest there can be no insurance. A cannot insure B’s house. But if A has any interest on B’s house under any way such as by way of mortgage then A can insure B house to protect insurable interest of A. Insurable interest in case of Life Insurance: Insurable interest must exist at the time of commencement of policy. The policy holder needs no insurable interest after the policy is affected. Insurable interest in case of fire insurance: The insurable interest must exist at the time of incident. Insurable interest is not needed at the time of commencement of the policy. Insurable interest in case of marine Insurance: In case of marine insurance, insurable interest must exist at the time of commencement of policy as well as at the time of incident. A contract of insurance entered into without any insurable interest is a wagering agreement and is void. Double Insurance vs. Re-Insurance: 1. If the same risk and the same subject are insured to other insurer by the policyholder it is called double insurance. Re-insurance means the transfer of the part of the risk by the insurer.

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2. If there is a double insurance, the loss will be shared by all the insurers proportionately. In case of life insurance all the insurers are liable. In re-insurance, the re-insurer is entitled to get a proportionate part of the premium and will be liable for a proportion of part of the loss. 3. The re-insurer is liable only to the first insurer. In double insurance each insurer is liable directly to the policy holder. 4. Double insurance is a method of assuring the benefit of insurance. In case of Life insurance the insurer may have any number of policies and for any amount. Reinsurance is a method of reducing of the risk of the insurer.

Who can survey? Surveyors licensed from the authority are entitled to conduct survey for assessing the claims of any insured. They are generally listed with controller of insurance. In case of disagreement with the surveyor’s statement on the assessment of the claim of the insured, another surveyor may be engaged to carry out the survey further in order to reach to a real assessment on the request of the aggrieved party. i.

uberrimae fide

A contract of insurance is a contract uberrimae fide (based on good faith). It is the duty of the insured to disclose all material facts concerning the subject matter of insurance. The disclosure must be full and fair. If a material fact is not disclosed, if there is a misrepresentation or fraud, the insurer can avoid the contract. ii. Principle of subrogation: It is a principle for Fire or marine insurance that if the insurer indemnify the insured in full, the insurer will be the owner of the remaining part of the damaged goods/assets, etc. Section-103: Compulsory winding up by court: As per Companies Act. More causes are: -upon receipt of an statements from the 10% shareholders or holders of 10% paid up capital, 500 life insurance policy holders - the Insurer fails to keep deposit (as per section 23 and 119) - Fails to maintain solvency margin -Continuation of the Company will be detrimental to the interest of policy holders or of Public. Section-105: Voluntary winding up Voluntary winding up of any insurer is prohibited except Amalgamation, Reconstruction, inability to run business of insurer with huge liability or cancellation of licenses of insurer.

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Section-116: a) Mutual Insurance Company (Company which does not have capital) b) Co-operative Insurance Society (Existing insurer registered under cooperative societies Act) Insurance Development and Regulatory Authority Act 2010 (Act XII of 2010) A statutory body with a common seal having authority to hold or dispose off property and sue and be sued. Section-5: Composition of the Authority: A chairman and four members and they will be appointed by the government. Section-6: Tenure of the Chairman and the members: They will be appointed for a term of 3 years and will be eligible for re-appointment for another term only. They can resign giving a notice of 3months and shall continue till the resignation is accepted by the Government. Section-7: Qualification or disqualification of the Chairman and members 20 years of experiences on Insurance, Finance, Banking, Marketing, Statistics, Accounting, Management, Admin, law etc. It can be relaxed in necessary. Following persons are not eligible for the posts: a) If she/he is not a citizen of BD b) Any Director, Officer of any Company (Govt. or private) or of any organization regulated by the authority or others c) A Disabled person d) An Insolvent e) A loan defaulter f) If s/he is punished at least for a term of 6 months for any activity of moral turpitude g) his/her age reached to 67 years Section-15: Duties and Functions of the Authority a) to regulate the insurance institutions b) to Encouraging insurance industries and consulting to the Govt. for its Dev. c) To train for development of insurance service d) To hold Seminar, Workshop, Meeting for public awareness e) Registration, renew of registration, cancellation of registration etc to the insurer. f) Fixation of fees, penalties having prior approval of the Govt. for meeting the object of this law g) Issuance of format for Accounts, Information and Statements. h) Preparation of Format of Actuarial report i) Submission of annual reporting to the Govt. j) Etc.

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