Shruti Kesarwani, LLM Candidate, Amity Law School, Noida
Abstract
With the spread of greater interconnectedness globally, insurance regulatory mechanisms pose a quintessential arena for comparative legal investigation. This analysis performs an intensive comparative examination of insurance regulation between the US, UK, and EU, including a detailed review of India's regulatory environment. Utilizing an interdimensional comparative approach, the research seeks to understand the complex modalities of insurance regulation by studying structure, operations, and strategy within market governance. The study methodically explores central comparative dimensions such as requirements for market entry, consumer protection systems, norms of solvency, and adaptations to technological innovation. Employing a doctrinal and comparative law research methodology, the study probes the multifaceted differences and synergies that may exist between regulatory regimes with specific focus placed on new challenges in digitalization, cross-border transactions, and risk management measures. Critical observations demonstrate considerable differences in regulatory adaptability, technological integration, and consumer-oriented strategies between the markets under study. The study identifies strategic insights into the balance of innovation, consumer protection, and market stability in developed markets and provides a balanced understanding of possible adaptive strategies for the Indian insurance regulatory environment. The study makes a holistic evaluation that moves beyond shallow comparison, offering best-evidence guidelines for improving insurance regulation in India. Through its investigation of comparative approaches to law, the work presents a master plan for regulatory transformation, highlighting means by which India can benefit from best practice from advanced markets while overcoming its distinct market dynamics.
Finally, the study presents a critical perspective for analyzing the intricate interaction among regulatory frameworks, market forces, and technological change in the insurance industry, and presents useful lessons for policymakers, regulators, and other stakeholders in the changing global insurance environment.
Introduction
Insurance regulation is the mainstay of market stability, the protection of policyholders and the solvency of insurance providers. Norms referring to these two aspects differ among various jurisdictions. This difference is indicative of the market conditions, different historical developments, and policy objectives of individual markets. With the globalization of the insurance markets and new emerging perils, regulatory approaches have had to keep evolving into these new realities.
India's insurance sector has completely transformed since the liberalization period of the 1990s, in which time the IRDAI has considered a major role in market development and regulation. In contrast, most of the developed markets have established mature regulatory regimes, often characterized by principles-based approaches, comprehensive solvency frameworks, and advanced consumer protection mechanisms.
This Research examines the convergence and divergence of Indian Insurance Regulatory Framework with that of developed markets yet keeping in mind the Indian specific challenges and opportunities. The research is expected to identify regulatory best practice and implementation challenges while contributing to the contemporary discourse on insurance regulatory reforms in emerging economies.
Research Objectives
This research aims to:
Trace the development in the past and present shape in which insurance regulatory frameworks exist in India and selected developed markets.
Identify key regulatory dimensions, such as institutional forms, consumer protection mechanisms, solvency requirements, and market conduct rules, and compare them with those found in these developed markets.
Analyze the performance of different regulatory forms through case studies of regulatory interventions.
Identify regulatory gaps and implementation challenges within the Indian insurance market.
Recommend changes in the insurance regulatory framework of India in light of the global best practices while keeping in view, the country-specific factors.
Background: Evolution of Insurance Regulation
India's Insurance Regulatory Journey
The evolution of India's insurance sector can be traced back to the foundation of the Oriental Life Insurance Company, which was set up in the year 1818. However, it was the nationalization of life insurance stipulated under the Life Insurance Corporation Act of 1956 and general insurance under the General Insurance Corporation Act of 1972 that shaped the contemporary regulatory framework. The enactment of the Insurance Regulatory and Development Authority Act, in the year 1999, was the defining event that established the IRDAI as an autonomous regulatory organization and re-opened the market towards the private and foreign insurers.
This regulatory framework has evolved through different amendments such as the Insurance-laws (amendment) Act, 2015, increasing the foreign direct investment (FDI) ceiling to 49%, subsequently enhanced to 74% in 2021. Furthermore, some significant recent developments regarding regulation include risk-based capital requirements, sandbox regulations for innovations in insurance technology, and broader disclosure norms.
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