COMPARISON BETWEEN THE INSURANCE ACT 1938 AND THE INSURANCE ACT 2010
For filling up the demand of insurance sector a new Insurance Act has been passed in 2010 by repealing the previous Act on Insurance passed in the British colonial time dated 1938.
4.2. Major Differences
Main Differences are-
4.2.1 Setting up of a Policyholders’ Protection Fund
In order to make the overall claim settlement procedure smooth and timely, the insurance companies have to set up a special fund named ―Policyholders ‘Protection Fund as per the new requirements of the newly passed and being implemented Insurance Act 2010.
4.2.2 Adding of Broker House
The new Insurance Act 2010 (section 33) said that brokerage houses (Banks, financial institutions or any middleman company/organization) should be created for insurance policies. Under the section 58(1), none can give money of commission to anybody except the certain agents or brokerage houses in order to launch or expand any insurance business in Bangladesh. The distribution of the commission must be as follows:
- 35% of the premium in the first year.
- 10% of the renewed premium in the second year.
- 5% of the renewed premium in the 3rd year and on after.
4.2.3 Division of General and Islamic Insurance
By the Insurance Act 2010, Insurance has been divided into general and Islamic and Islamic Insurance recognized separately. A new legal framework for Islamic Insurance has been brought: as from the enactment of Insurance Act 2010, no insurance company is allowed to do both Islamic Insurance and non life insurance business together.
4.2.4 Life and Non-Life Insurance
The section 5 (1) of the Insurance Act 2010 proposed that insurance company to be categorized as life and non-life instead of life and general and it have replaced the Insurance Act 1938. So, from now on the insurance companies in the entire insurance sector in Bangladesh will be categorized as life and non-life insurance companies under the new insurance Act.
4.2.5 Foreign Investment in Insurance
The Insurance Act 2010 said the sector needs to be managed properly and be strengthened by reducing business risks, and local and international insurance laws need to be harmonized considering the socio-economic aspects of the country and protect the interest of policy-holders and other beneficiaries.
4.3. Minor Differences
This new Act on Insurance 2010 have some similar and dissimilar provisions:
- The Act enacted in 1938 related to insurance is called Insurance Act 1938 and extent was whole India whereas the new Act termed as Insurance Act 2010 operated only in Bangladesh.
- In The Insurance Act 1938, there are 120 sections whereas Insurance Act 2010 has 160 sections.
- Insurance Act 1938 is a consolidating Act on the other hand Insurance Act 2010 is repealing and Reenacting Act.
- There are 29 definitions in The Insurance Act 1938 whereas The Insurance Act 2010 contains 40 definitions. Regarding interpretation, The Insurance Act, 1938 referred several Acts for interpretation but in 2010, the law is completely new one and does not refer such other laws.
- There is no definition of ‘insurance’ in The Insurance Act 1938 but there is a definition of ‘Insurance’ in The Insurance Act 2010. Here the definition provided is given below –An Insurance is a contract where by one party undertakes in return of consideration called premium to pay to the other party a certain sum of money on the happening of a certain event or to indemnify the other party against a loss arising from the risk insured.
- Under section 13 of The Insurance Act 2010, non – life insurer will not be allowed to register and business of life insurance. But it was possible in The Insurance Act 1938.
- Number of Directors reduced to 20 to 15 by new laws. The new Insurance Act bars a director of an insurance company to become director of any other financial institution including banks. Under the Insurance Act 2010, the number of the directors cannot exceed 15, while it was 20 under the Insurance Act 1938.
- New Act opportune Micro Insurance business in the sector of Bangladesh especially in rural areas which were not present in the Insurance Act 1938.
- Section 6 of 193, unless they paid up a certain amount one cannot conduct his insurance business under 1938. It is mentioned in the Body of The Act. But in 2010, there is separate schedule in this regard.
- Under section 31 of The Insurance Act, 2010, every insurance company must maintain a registrar book in accordance with Insurance rules but no such provision were in The Insurance Act 1938.
- The required minimum capital paid up was tk 300 million in The Insurance Act 1938 while it rises to tk 400 million by New Act 2010.
- Reinsurance is allowed by The New Act where it was not possible by The previous Act 1938.
- Chapter five of The Insurance Act 2010 is related with offence and punishment where the violation of this chapter will be compensated maximum 1 lakh and minimum 50 thousand tk and continuance of violation, 5 thousand for every day.
- A provision has been made for encouraging the savings by the people in rural areas by inducing the insurers to undertake such parentage of their business in the rural areas.
- The Insurance companies are directed to special fund named “Policy holders “ protection fund for making the claim settlement procedure easy and less time consuming under The Insurance Act 2010 but there were no such provision in The Insurance Act 1938.
- The Insurance Development and Regulatory Authority (IDRA) has been established for supervising and monitoring the insurance sector of Bangladesh by The Insurance Act 2010 but there was no such Authority before.
- There are similar provisions found in two laws but only the sections are different. For example section 38 says about endorsement and assignment and transfer, on the other hand section 56 of The Insurance Act 2010 elaborate such a provision.
There are several similarities and dissimilarities are found between Insurance Act 1938 and Insurance Act 2010.