The Insurance and Reinsurance Law Review: India


Insurance and reinsurance companies and insurance intermediaries in India are regulated by the Insurance Regulatory and Development Authority of India (IRDAI). The primary legislation governing the Indian insurance sector is the Insurance Act 1938 (the Insurance Act) and the Insurance Regulatory and Development Authority Act 1999 (the IRDA Act). At present, India has 24 life insurers, 28 general insurers and seven stand-alone health insurers, 20 third-party administrators, 524 insurance brokers, 23 web aggregators, four insurance repositories, about 587 corporate agents and numerous insurance agents. There are 10 foreign reinsurer branches in India, including the branch office of Lloyd's of London set up under the IRDAI (Lloyd's India) Regulations 2016 (the Lloyd's India Regulations). In addition, at present, there is one reinsurance company in India: the government-owned General Insurance Corporation, which has been granted registration by the IRDAI.

Recently, the foreign direct investment limit in insurance companies has been increased from the erstwhile 49 per cent to 74 per cent. In this regard, the Insurance Act was amended by way of the Insurance (Amendment) Act 2021 and the Indian Insurance Companies (Foreign Investment) Amendment Rules 2021 were issued by the Ministry of Finance, which amended specific provisions of the Indian Insurance Companies (Foreign Investment) Rules 2015 to expressly provide the norms applicable to insurance companies having foreign investment. In addition, the requirement of Indian insurance companies to be Indian owned and controlled has now been withdrawn, pursuant to the Circular on Withdrawal of Guidelines on Indian Owned and Controlled of 30 July 2021.

Foreign investment in insurance intermediaries is permitted up to 100 per cent. However, certain restrictions on, inter alia, payments to related parties, repatriation of dividends and board composition are applicable to insurance intermediaries with majority foreign investment.

The year 2021 has been a relatively busy year for the Indian insurance sector with the continued impact of the covid-19 pandemic and several regulatory changes being introduced by the insurance regulator with the aims of stabilising the insurance market and ensuring protection of policyholders' interests.


i The insurance regulator

Insurance and reinsurance companies, foreign reinsurer branches and intermediaries in India are governed by the IRDAI.

ii Position of non-admitted insurers

Overseas non-admitted insurers cannot write direct insurance business in India. Non-admitted insurers who have registered with IRDAI as cross-border reinsurers can reinsure risks written by Indian insurers in accordance with the IRDAI (Re-insurance) Regulations 2018. Pursuant to the Insurance Laws (Amendment) Act 2015, overseas non-admitted reinsurers are also permitted to access the Indian market by way of branch offices set up in India and service companies set up under the Lloyd's India Regulations.

Indian residents may purchase life insurance policies issued by an insurer outside India provided the policy is held under specific or general permission of the Reserve Bank of India. Indian residents are prohibited from purchasing insurance in respect of any property in India or any ship, vessel or aircraft registered in India with an insurer outside India without the permission of the IRDAI. Indian residents can, however, purchase health insurance policies from an insurer outside India provided aggregate remittance including amount of premium does not exceed the limits prescribed by the Reserve Bank of India under the Liberalised Remittance Scheme from time to time.

iii Position of brokers

The framework governing the operation and functioning of insurance is provided under the IRDAI (Insurance Brokers) Regulations 2018 (the Brokers Regulations). Insurance brokers that are registered with the IRDAI as direct brokers, reinsurance brokers or composite brokers in accordance with the Brokers Regulations can operate as insurance brokers in India. The Brokers Regulations have set out provisions for sale of insurance online and sale of insurance using distance marketing modes. Further, the Brokers Regulations also set out norms with regard to the minimum capital requirements for insurance brokers, agreements with third-party service providers, remuneration or fee receivable by the insurance brokers and the services that a registered insurance broker is permitted to perform. Additionally, Indian scheduled commercial banks may also be licensed as insurance brokers in accordance with the licensing rules set out under the IRDA (Licensing of Banks as Insurance Brokers) Regulations 2013.

iv Requirements for authorisation

The general rule is that only licensed insurance agents and insurance intermediaries can distribute insurance products for Indian insurers. Unlicensed persons are prohibited from soliciting and procuring insurance business or providing introductions or leads.

v Regulation of individuals employed by insurers

Individuals employed by Indian insurers must be internally trained by the insurer to carry out the distribution of insurance products. Indian insurers are also permitted to use individual insurance agents that are licensed in accordance with the IRDAI (Appointment of Insurance Agents) Regulations 2016 for the distribution of insurance products.

vi The distribution of products

Only licensed or registered insurance agents, intermediaries and insurance intermediaries may solicit and procure insurance business for insurers. In addition to insurance agents, pursuant to the extant regulations, an Indian insurer is permitted to utilise the following intermediaries and insurance intermediaries: insurance brokers; corporate agents; web aggregators; third-party administrators; surveyors and loss assessors; insurance marketing firms; motor insurance service providers (for solicitation and servicing of motor insurance); and point-of-sale persons (for solicitation and servicing of point-of-sale products).

Insurers are also permitted to engage licensed telemarketers for the solicitation and procurement of insurance business and they may also purchase access to the database of licensed referral companies.

vii Compulsory insurance (e.g., employers' liability)

The following are examples of insurance cover that are compulsory by central law:

  1. under the Public Liability Insurance Act 1991: accidental cover for persons handling hazardous substances and environmental issues;
  2. under the Motor Vehicles Act 1988: compulsory third-party liability insurance and compulsory personal accident cover;
  3. under the Deposit Insurance and Credit Guarantee Corporation Act 1961: insurance to be taken by the banks functioning in India;
  4. under the Brokers Regulations, IRDAI (Insurance Web Aggregators) Regulations 2017, IRDAI (Registration of Corporate Agents) Regulations 2015, Guidelines on Repositories and Electronic Issue of Insurance Policies of 29 May 2015, and IRDAI (Registration of Insurance Marketing Firm) Regulations 2015: professional indemnity insurance covering errors and omission, dishonesty and fraudulent acts by employees, and liability arising from loss of documents or property (the IRDAI has recently issued standard policy wordings for professional indemnity policies for all insurance intermediaries);
  5. under the Carriage by Air Act 1972: parties are required to maintain adequate insurance covering any liabilities that may arise;
  6. under the Rights of Persons with Disabilities Act 2016: an insurance scheme for employees with disabilities;
  7. under the Personal Injuries (Compensation Insurance) Act 1963: employers' liability for workers sustaining injuries;
  8. under the Employees State Insurance Act 1948: insurance for employees in case of sickness, maternity and employment injury;
  9. under the Payment of Gratuity Act 1972: insurance for gratuity payments to employees;
  10. under the War Injuries (Compensation Insurance) Act 1943: for workers sustaining injury in war;
  11. under the Marine Insurance Act 1963: insurance for marine adventures;
  12. under the Merchant Shipping Act 1958: insurance on the lives of crew members;
  13. under the Inland Vessels Act 1917: insurance of mechanically propelled vessels;
  14. under the Companies Act 2013: insurance of deposits accepted by companies; and
  15. under the Real Estate Regulatory Act (RERA) Act 2016: title insurance for real estate developers.

viii Compensation and dispute resolution regimes (within the financial services context)

Dispute resolution in India is broadly divided into three mechanisms: civil courts; consumer forums; and arbitration and alternate dispute resolution.

The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act 2015 (the Commercial Courts Act) provides for the establishment of specialised courts to adjudicate on disputes pertaining to transactions of merchants, bankers, financiers and traders.

Amendments were also made to the Arbitration and Conciliation Act 1996 (ACA) to ensure that commercial arbitrations are completed within a specified timeline and an attempt has been made to do away with the archaic system of awarding costs followed in India and to make the costs more realistic.

Further detail on these regimes is provided in Section IV.

ix Taxation of premiums

Premiums received on account of insurance and reinsurance business attract applicable taxes, including goods and services tax. Income tax laws provide deductions to the policyholder on life and health insurance premiums paid.

x Proposed changes to the regulatory system

The IRDAI has issued the following exposure drafts, which may be considered further and notified following feedback from stakeholders:

  1. Exposure Draft on IRDAI (Obligations of an Insurer in Respect of Motor Third Party Insurance Business) Regulations 2022 on 5 January 2022;
  2. Exposure Draft on Guidelines on Remuneration of Non-Executive Directors and Managing Director/Chief Executive Officer/Whole-time Directors of Insurance companies of 3 January 2022;
  3. Exposure Draft on Insurance Regulatory and Development Authority of India (Insurance Information on Bureau of India) Regulations of 8 September 2021;
  4. Exposure Draft on Discussion Paper on Increasing General Insurance Penetration in Rural Areas with Special Focus on Agriculture and Allied Activities through the Concept of a Model Insured Village of 3 May 2021;
  5. Exposure Draft on Report of the Working Group (WG) for Revisiting the Retail Business of Engineering Tariff of 29 April 2021;
  6. Exposure Draft on Insurance Regulatory and Development Authority of India (General Insurance Products) Regulations 2021 of 5 April 2021;
  7. Exposure Draft re Report of the Working Group (WG) to Study Cyber Liability Insurance of 20 January 2021;
  8. Exposure Draft re Report of the Working Group (WG) to Examine and Recommend Linking of Motor Insurance Premium with Traffic Violations of 18 January 2021.

xi Other notable regulated aspects of the industry (e.g., ownership, mergers, capital requirements)

The minimum paid-up equity capital for an insurer is 1 billion rupees. Any direct or indirect foreign investment in an insurer is restricted to 74 per cent. With the foreign investment ceiling being increased from 49 per cent to 74 per cent, the guidelines on Indian Owned and Controlled have been withdrawn. Foreign investment in insurance intermediaries is permitted up to 100 per cent. However, certain restrictions, on, inter alia, payments to related parties, repatriation of dividends and board composition are applicable to insurance intermediaries with majority foreign investment.

The IRDAI has released the IRDAI (Investment by Private Equity Funds in Indian Insurance Companies) Guidelines 2017 of 5 December 2017, to facilitate and regulate investment by private equity funds in insurance companies, as investors and promoters. These guidelines have been made applicable to unlisted Indian insurance companies and to the private equity funds who have invested in such unlisted insurance companies. These guidelines further allow private equity funds to invest either directly in Indian insurance companies in the capacity of an investor or to invest through a special purpose vehicle in the capacity of a promoter in the insurance company. Further, the IRDAI has issued norms on the manner of assessment of compensation to shareholders or members in the event of amalgamation of insurers under the IRDAI (Manner of Assessment of Compensation to Shareholders or Members on Amalgamation) Regulations 2021.

Over the past two years, because of the covid-19 pandemic, the volume of mergers and acquisition activity in the insurance sector, as well as listing of insurance companies in India, has seen a dip. However, press reports indicate that the Indian government is looking to privatise one public sector insurance company and also to issue an initial public offering for the Life Insurance Corporation of India. Furthermore, with the Indian economy slowly reviving, and the foreign investment limit for insurers being relaxed from 49 per cent to 74 per cent and 100 per cent foreign investment being permitted for insurance intermediaries, it is anticipated that this will result in a surge in foreign direct investments in the insurance sector.

Insurance and reinsurance law

i Sources of law

The Insurance Act 1938, the Insurance Regulatory and Development Authority Act 1999, the Marine Insurance Act 1963 and the regulations, guidelines, circulars and notifications issued by the IRDAI govern insurance and reinsurance business.

The courts may refer to common law if there are no judicial precedents available under Indian law. Common law is, however, not binding on Indian courts.

ii Making the contract

The terms and conditions of property and engineering insurance covers are currently governed by the policy wording specified by the former Tariff Advisory Committee. Very few modifications to this policy wording have been permitted. In all other lines of insurance business, insurers are permitted to issue only those policy terms and conditions, endorsements and other ancillary documentation that have either been approved by the IRDAI in advance or filed with the IRDAI, in accordance with the prescribed product filing procedures. The IRDAI has issued standardised wordings for general clauses for indemnity-based health insurance policies (excluding personal accident and domestic or overseas travel) and exclusions under health insurance contracts. In addition, for health insurance policies, the IRDAI has specified a standard set of definitions, standard nomenclature for critical illness, a standard list of excluded expenses, exclusions not allowed in health insurance policies, existing diseases that may be permanently excluded, modern treatment methods that should be covered and standards and benchmarks for hospitals in the insurance network. It has also specified a number of other conditions for health insurance policies, making these policies highly regulated. The IRDAI has in the past few years notified standardised and tariff products, such as an individual health insurance product, a standard non-linked non-participating individual pure risk life insurance product, a standard individual immediate annuity product, and several covid-related products such as Covid Kavach and Covid Rakshak, which are mandatorily required to be offered by insurers. IRDAI has also issued standard terms and conditions for fire and allied perils for dwellings and small and micro businesses.

The IRDAI (Protection of Policyholders' Interests) Regulations 2017 (the Policyholders Regulations) prescribe certain matters to be mandatorily incorporated in life insurance, general insurance and health insurance policies. Some of the key requirements are as follows:

  1. the name and unique identification number allotted by the IRDAI for the product, its terms and conditions and details of the sales person;
  2. benefits payable and the contingencies upon which these are payable and the other terms and conditions of the insurance contract, including any riders or endorsements;
  3. details of the nominees;
  4. the premiums payable, frequency of payment, grace period allowed and the implications of discontinuing the payment of an instalment of the premium;
  5. any special clauses, exclusions or conditions imposed on the policy;
  6. the address and email of the insurer to which all communications in respect of the policy must be sent;
  7. details of the insurer's internal grievance redressal mechanism, along with the right of the insured to approach the insurance ombudsman with requisite territorial jurisdiction; and
  8. a list of the documents normally required to be submitted in the event of a claim.

Where exclusions are to be stipulated in the policy, the Policyholders Regulations require that, wherever possible, insurers must endeavour to classify the exclusions into the following:

  1. standard exclusions applicable in all policies;
  2. exclusions specific to the policy that cannot be waived; and
  3. exclusions specific to the policy that can be waived on payment of an additional premium.

Similarly, to give clarity and understanding of the conditions to the policyholder, insurers are also required to try to categorise policy conditions broadly into the following:

  1. conditions precedent to the contract;
  2. conditions applicable during the contract;
  3. conditions when a claim arises; and
  4. conditions for the renewal of the contract.

Additionally, insurers are now required to arrange all health insurance policy contracts in the following manner:

  1. policy schedule;
  2. preamble;
  3. definitions:
    • standard definitions (definitions whose wordings are specified by the IRDAI);
    • specific definitions (definitions other than those mentioned under the bullet above);
  4. benefits covered under the policy;
  5. exclusions:
    • standard exclusions (exclusions for which standard wordings are specified by the IRDAI);
    • specific exclusions (exclusions other than those mentioned under the bullet above);
  6. general terms and clauses:
    • standard general terms and clauses (general terms and clauses whose wordings are specified by the IRDAI);
    • specific terms and clauses (terms and clauses other than those mentioned under the bullet above); and
  7. other terms and conditions.

While a broad product classification on the basis of the target customer base exists under general insurance and health insurance policies in India, the requirements above apply uniformly to consumer contracts, as well as to commercial contracts.

In addition, all product literature is required to be in 'simple language' and 'easily understandable to the public at large', and all technical terms used in the policy wording are to be clarified to the insured. To the extent possible, insurers are also required to use similar wording for describing the same insurance cover or the same requirements across all their products, particularly in relation to clauses on renewal, basis of insurance, due diligence, cancellation and arbitration.

An insurance contract is one of utmost good faith and insurers are entitled to a fair presentation of the risk prior to inception.

The Marine Insurance Act 1963 obliges an insured to make a full and frank disclosure prior to inception and the Supreme Court has stated that this includes by way of the proposal. There is an argument that an insurer may limit the insured's duty by limiting the questions asked in the proposal form unless the proposal form contains a statement that has the effect of negating any restriction of the disclosure obligation by reference to the questions asked. The IRDAI (Protection of Policyholders' Interests) Regulations 2017 also impose an obligation on the insured to disclose all material information. An insurer is therefore entitled to receive full and fair disclosure of the material information that would influence the judgement of the insurer in determining whether to accept or reject the risk. The insured's duty to disclose is not confined to the facts that are within his or her knowledge but extends to all material information that the insured ought to have known. The duty of good faith is of a continuing nature.

If there has been a misrepresentation or non-disclosure of a material fact, then an insurer may avoid the policy ab initio. Unless the misrepresentation or non-disclosure was fraudulent, the premium must be returned to the policyholder.

iii Interpreting the contract

In general terms, the statutory framework may be said to favour insurers more than insureds, but the regulatory framework and the interpretation of applicable law is perhaps more favourable to insureds. For example:

  1. the courts and consumer forums have held that if there is any ambiguity in the terms and conditions, then these shall be construed in favour of the insured;
  2. the Insurance Act 1938 restricts the ability of insurers to call a life insurance policy into question after three years from inception on any grounds, including fraud;
  3. the IRDAI (Protection of Policyholders' Interests) Regulations 2017 provide, among other obligations, that insurers must follow certain practices at the point of sale of the policy as well as at the processing or claims stage so that:
    • the insured can understand its terms properly;
    • insurers have proper procedures and mechanisms to hear any grievances of the insured;
    • the policy terms are clearly stated (e.g., warranties, conditions, insured's obligations, cancellation provisions, conditions precedent);
    • certain claims procedures are followed to expeditiously process claims; and
    • insurers pay interest at a rate of 2 per cent above the prevalent bank rate in cases of delayed payment, etc.;
  4. following the IRDAI (Health Insurance) Regulations 2016 (the Health Regulations), general insurers and health insurers are ordinarily required to renew a health insurance policy except on grounds of fraud, moral hazard, misrepresentation or non-cooperation by the insured. Renewal cannot be denied on grounds such as an adverse claims history. Moreover, according to the Guidelines on Product Filing Procedures for General Insurance Products issued by the IRDAI in February 2016, in a general insurance policy, the insurer can cancel the policy mid-term only on grounds of fraud, misrepresentation and moral hazard;
  5. the IRDAI has also directed that all health insurance policies offer portability benefits whereby policyholders are given credit for the waiting periods already served under previous health insurance policies with that insurer or any other Indian insurer; and
  6. pursuant to the Health Regulations, the IRDAI is also monitoring wellness benefits provided to policyholders under health insurance policies by mandating that such policies clearly stipulate the manner of calculation, accrual, redemption and carrying forward of such benefits.

Another feature of the insurance sector concerns government-owned insurers, which are considered instruments of the state and are thus expected to act justly and reasonably.

iv Intermediaries and the role of the broker

Insurance brokers, corporate agents, web aggregators, referral companies, insurance marketing firms and insurance agents are granted a licence for a fixed period of three years, following which the licence may be renewed for a further three years at the discretion of the IRDAI.

Insurance brokers and web aggregators are required to carry on exclusively the distribution of insurance products, while corporate agents may have a main business other than the distribution of insurance products, and insurance marketing firms are allowed to sell or service other financial products.

If a corporate agent has a main business other than insurance distribution, then it is not permitted to make the sale of its products contingent on the sale of an insurance product or vice versa. Corporate agents were previously restricted to acting for a maximum of one life insurer and one general insurer; however, following the notification of the IRDAI (Registration of Corporate Agents) Regulations 2015, they are permitted to adopt an open architecture under which they can act for up to three life insurers, three general insurers and three health insurers.

The IRDAI's regulations specify separate codes of conduct for each insurance intermediary, governing the conduct expected of intermediaries while performing their functions. Breach of the applicable code of conduct could lead to suspension or cancellation of the intermediary's licence or certificate of registration.

The regulatory limits on the commission or remuneration payable to insurance agents and insurance intermediaries for the solicitation and procurement of insurance business continue to remain under the IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations 2016 (Commission Regulations), as amended from time to time. However, insurers are permitted to make other payments in the form of rewards to insurance agents or insurance intermediaries.

Insurance agents and insurance intermediaries are also prohibited from offering rebates to customers on the premium or commission receivable.

All insurance brokers are required to be part of the Insurance Brokers Association of India.

v Claims

Insurance policy terms and conditions are meant to specify the requirements for notification of claims or circumstances that may give rise to a claim. In our experience, usually the notification of a claim is required 'immediately', 'as soon as practicable', 'as soon as reasonably practicable', etc. The IRDAI, through its Circulars dated 20 September 2011, 28 October 2016 and 28 June 2017 also provided guidance in relation to reporting requirements. This is an evolving sphere, but at the present time, we see courts adopting a strict approach towards adherence to policy terms and conditions, including the notification requirement.

Insurance policy terms and conditions are also meant to expressly state the insurer's grievance redressal procedure and the applicable dispute resolution provisions for differences or disputes arising under the policy. While there are no specific regulatory requirements in this regard, it is common for retail policies to give exclusive jurisdiction to the Indian courts and commercial lines policies to contain express arbitration provisions.

General insurance policies are usually annually renewable policies with the entire premium being paid in advance and it is not common to offer these policies on a long-term basis or to provide for premium payments in instalments. Life insurance policies usually have policy terms of at least 10 years and, unless a single premium is payable in advance, it would usually be payable at regular intervals during the policy terms. All life insurance policies are required to contain express provisions and conditions for reinstatement of the policy in the event of discontinuance of premium payments.

Health insurance policies are usually annually renewable policies with flexible premium payment options. Health insurance policies also provide options to migrate from one insurer to another or to other insurance policies of the same insurer at the time of renewal.

Dispute resolution

i Jurisdiction, choice of law and arbitration clauses

Policyholders have a statutory right to sue for relief under an insurance policy in Indian courts and Indian law shall be applicable. This right cannot be abridged by the terms of the insurance policy or otherwise.

It is common for retail policies to be subject to the exclusive jurisdiction of Indian courts and for commercial lines policies to contain arbitration clauses.

ii Litigation

An insured can approach a commercial court (if the claim meets the pecuniary threshold), a civil court or (if the dispute qualifies) a consumer court. An insurer can only approach a commercial court or a civil court. Consumer, commercial and civil courts have territorial and pecuniary jurisdiction, so actions before them need to be brought keeping in mind the geographical location pertaining to the cause of action or the place where the defendant resides and the value of the claim.

The consumer courts follow a three-tier hierarchy that comprises, in ascending order, the district forums, followed by the state consumer dispute redressal commissions (the state commissions), followed by the National Consumer Dispute Redressal Commission (NCDRC).

The Consumer Protection Act 2019 (the CPA 2019) was brought into force on 20 July 2020 and repealed the Consumer Protection Act 1986 (the CPA 1986). All consumer complaints instituted before the coming into force of CPA 2019 shall continue to be heard by the fora designated by the CPA 1986 and are not be transferred in terms of the new pecuniary limits established under the CPA 2019. On 30 December 2021, the central government notified the Consumer Protection (Jurisdiction of the District Commission, the State Commission and the National Commission) Rules, 2021 which revised the pecuniary jurisdiction of the consumer courts under the CPA. In accordance with the revised pecuniary jurisdiction, District Commissions now have the jurisdiction to entertain complaints where the 'value of goods and services paid as consideration' does not exceed 5 million rupees. The term 'value of goods and services paid as consideration' refers to the premium paid by an insured to obtain a policy. State Commissions can entertain complaints where the premium paid to obtain a policy is valued at more than 5 million rupees and up to 20 million rupees; where a premium of more than 20 million rupees has been paid, complaints will need to be filed with the NCDRC. An order passed by the NCDRC can be challenged in the Supreme Court of India.

Similarly, the broad ascending hierarchy of the civil courts comprises around 600 district courts, 25 high courts and the Supreme Court, which only hears appeals and cases from the lower courts that involve breaches of fundamental rights. Four of the 25 high courts (Delhi, Bombay, Madras and Calcutta) have original jurisdiction to hear matters of a civil nature over a certain pecuniary value. The district courts under them do not hear matters involving values higher than that limit. The remaining district courts have an unlimited pecuniary jurisdiction and are the competent courts of first instance to hear any insurance dispute falling within their territorial jurisdiction.

The Commercial Courts Act has led to the establishment of commercial courts at the district level and commercial division and commercial appellate division benches within the high courts. These commercial courts are specially assigned to hear insurance and reinsurance matters, among other disputes. The pecuniary jurisdiction of these courts is disputes that have a value of 300,000 rupees and above. Recent amendments to the Commercial Courts Act have mandated compulsory mediation for parties before filing a commercial suit except where a party seeks urgent interim relief. There is no right to a hearing before a jury and cases are decided by judges.

Unless otherwise expressly provided in law, every decree passed by a court exercising original jurisdiction is subject to appeal before the court authorised to hear appeals from the decisions of the court that passed the decree, unless the decree has been passed with the consent of the parties.

As a general rule, an appeal will be available if there is a substantial question of law involved. Facts established in the lower court are not normally disturbed.

In civil disputes, the usual sequence is that the decision of a district court is appealable before a single judge of a high court. The single judge's decision can be appealed before a division bench of the high court. The final stage of appeal is before the Supreme Court.

The Code of Civil Procedure 1908 (CPC) governs the method of instituting and trying civil suits. The Commercial Courts Act provides for summary judgment in a suit. Under this Act, plaintiffs can apply for summary judgment in a suit after summons has been served upon a defendant. If the court is convinced that the defendant has no real prospect of succeeding in a claim, it may grant a summary judgment. In other circumstances, the court may pass conditional orders allowing a defendant to defend the suit after payment of a deposit or on such other terms as the court may deem fit.

Courts may award the successful party its costs, but the award is at the court's discretion. It is common for costs awards to be made in favour of a successful party, but the level of costs awarded is rarely sufficient to cover the actual costs incurred. The Commercial Courts Act attempts to rectify the situation, as it amends the CPC to permit courts to grant actual costs to a successful party. In view of the low level of costs awarded, there are as yet no material advantages in making a pretrial offer in civil litigation.

In addition, Section 89 of the CPC embraces a provision for the settlement of disputes outside court. All cases that are filed in court need not necessarily be decided by the court itself. Considering the time taken for legal proceedings and the limited number of judges available, it has become imperative to resort to an alternative dispute resolution (ADR) mechanism with a view to end litigation between parties at an early date. The ADR mechanism as contemplated by Section 89 is arbitration, conciliation or judicial settlement, including settlement through a Lok Adalat (a mode of ADR) or mediation. There is usually a mediation cell associated with each court.

Parties' choice of law and jurisdiction governing a contract is respected by the Indian courts. Unless there is a situation where the courts of the parties' choosing do not have jurisdiction in law, the courts will not interfere with the parties' choice of law and jurisdiction.

iii Arbitration

The ACA is based on the UNCITRAL Model Law. The ACA preserves party autonomy in relation to most aspects of arbitration, such as the freedom to agree upon the qualification, nationality and number of arbitrators (provided this is not an even number), the place of arbitration, choice of law governing the arbitration and the procedure to be followed by the tribunal. The principle of party autonomy has recently been confirmed by the Supreme Court in a number of cases. The decisions restrict the scope of the Indian courts to intervene in respect of those arbitration proceedings where the seat is non-Indian.

The Arbitration and Conciliation (Amendment) Act 2015 (the 2015 Amendment Act) amended the ACA. This 2015 Amendment Act made the ACA a preferred reference for settlement of commercial disputes, as it not only sets out strict timelines for completion of the arbitral proceedings but also permits parties to choose to conduct arbitration proceedings in a fast-track manner, with the award being granted within six months. In addition to the foregoing, a cost regime with regard to providing the costs of arbitration proceedings to a successful party has also been set out.

On 9 August 2019, the Arbitration and Conciliation (Amendment) Act 2019 came into force, which introduced changes to the ACA. The tribunal now has a time frame of six months for the completion of pleadings and 12 months thereafter to conclude the arbitration. This period can be extended by another six months upon the consent of the parties, but any further extensions can only be granted by a court.

The central government recently introduced the Arbitration and Conciliation (Amendment) Act 2021, which came into force on 10 March 2021. The recent amendment allows the court to unconditionally stay an award during the pendency of a challenge of the award, if the court is prima facie satisfied that the arbitration agreement or contract that is the basis of the award or the award itself is induced or affected by fraud or corruption.

Recent judgments passed by the Supreme Court have upheld the principle of party autonomy in arbitration proceedings. The Supreme Court has recently upheld party autonomy and held that two Indian parties can choose a foreign seat of arbitration. In another judgement, the apex court held that full party autonomy is given to parties by the ACA to have their disputes decided in accordance with institutional rules that can include an emergency arbitrator delivering interim orders and such an order will be enforceable in India.

The ACA bars the courts from intervening in an arbitral proceeding except to the extent this is provided for in the Act itself. For example:

  1. where a party files an action before a court in spite of an arbitration agreement, the other party can apply to that court to refer the dispute to arbitration instead;
  2. a party can apply to a court for interim remedies;
  3. a party can seek the court's assistance for the appointment of an arbitrator if the other party refuses to cooperate in the process; and
  4. a party can seek the court's assistance for recording evidence.

Recent judgments passed by the Supreme Court have confirmed the courts' non-interventionist approach to arbitration proceedings.

The Supreme Court in a recent case involving a reference for the appointment of an arbitrator has held that the issue of limitation would lie within the domain of the tribunal. The Supreme Court further held that the question of limitation relates to the maintainability or admissibility of a claim that must be decided as a preliminary issue or at the final stage after evidence is led by the parties. The court can set aside an award where it has been passed following material errors of jurisdiction or in prejudice of the public interest. The court's power is limited in this regard and it cannot interfere in the reasoning given for arriving at the award.

iv Alternative dispute resolution

The ACA recognises arbitration and conciliation as valid forms of ADR.

v Mediation

The courts may direct the parties to refer their disputes to ADR with the parties' consent. There are a number of mediation cells associated with the courts. The mediator is either selected by the parties or by the court. The mediator acts as a facilitator to encourage parties to settle their disputes. However, unlike arbitration, the mediation process is not binding on either party. The Commercial Courts Act provides for compulsory mediation between the parties prior to filing of a suit unless urgent interim relief is sought.

Year in review

Despite the ongoing covid-19 pandemic and the country being put under various lockdown and curfew restrictions for months, 2021 was a fairly active year for the Indian insurance sector. As from March 2020, to combat the issues arising from the pandemic, the IRDAI issued various directions pertaining to, inter alia, the handling of covid-19 claims, extension of grace periods for premium payments, relaxation of regulatory timelines and expeditious servicing of insurance policies.

The IRDAI issued the following regulations, guidelines and circulars:

  1. the IRDAI (Surety Insurance Contracts) Guidelines 2022 of 3 January 2022 which inter alia stipulate that only insurers registered to transact general insurance business may offer surety insurance products in the manner prescribed;
  2. the IRDAI's Guidelines on Trade Credit Insurance of 2016 were revised pursuant to the (Trade Credit Insurance) Guidelines of 2021, to address the evolving insurance risk needs of various sectors and response to changing market conditions;
  3. the IRDAI (Insurance Advertisements and Disclosure) Regulations 2021 were issued to update and stipulate norms in relation to advertisements issued by insurers, insurance agents and insurance intermediaries including on social media platforms and in association with third parties;
  4. the Insurance Act was amended by way of the Insurance (Amendment) Act 2021 and the Indian Insurance Companies (Foreign Investment) Amendment Rules 2021 were issued, to incorporate, inter alia, the revised foreign direct investment limit in the insurance sector;
  5. guidance and requirements on Indian-owned and controlled have now been withdrawn by way of the Withdrawal of Guidelines on Indian Owned and Controlled of 30 July 2021;
  6. new norms on the manner of assessment of compensation to shareholders or members whose interest in and rights against the transferee insurer resulting from amalgamation are less than his or her interest in or rights against the original insurer were introduced under the IRDAI (Manner of Assessment of Compensation to Shareholders or Members on Amalgamation) Regulations 2021; and
  7. various provisions of the IRDAI (Insurance Surveyors and Loss Assessors) Regulations 2015, including but not limited to reports to be submitted by insurers in specific formats were amended by the IRDAI (Insurance Surveyors and Loss Assessors) (Amendment) Regulations 2020. The IRDAI, by a circular of 5 May 2021, has issued Guidelines on Standard Domestic Travel Insurance Product (SDTIP) which specifies the basic mandatory covers to be uniform across the market and optional covers as specified in the guidelines.

Outlook and conclusions

Over the years, the Indian insurance sector has seen many challenges and has consistently developed and matured. The year 2021, however, continued to be a challenging year for the insurance sector to adapt to the global pandemic. The pandemic triggered significant changes in the way in which market participants undertake insurance business. Commencing from March 2020, the IRDAI has issued various directions to address the covid-19 pandemic situation pertaining to, inter alia, handling of covid-19 claims, extension of grace periods for premium payment, relaxation of regulatory timelines and expeditious servicing of insurance policies. In this regard, some extension periods such as for filing of returns, public disclosures, issuance of electronic policies and dispensing with physical signatures on proposal forms and issuance of covid-19-specific health insurance products continue to be applicable, owing to the pandemic persisting in certain parts of the country. The IRDAI, to boost insurance penetration in the country, from 2020 to 2021 has issued various standard and uniform general, health and life insurance product wordings to be used across all insurers in the interest of policyholders. Over the past few years, the Indian jurisdiction has seen a consistent growth in the volume and quantum of financial line claims, particularly in the professional indemnity and directors' and officers' sector, reflecting the dynamic economic and regulatory environment. We are also seeing increasing interest and development in the cyber sector in terms of the wording and post-claim support being offered by insurers, reflecting the increasing claim notifications and related quantum, and specifically because of the remote working environment introduced by the pandemic. We believe the upward trend in the sector is likely to continue in the coming year.


1 Neeraj Tuli is the senior partner and Celia Jenkins is a partner at Tuli & Co.

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