INSURANCE ACT, 1938

 The Insurance Act, 1938 is a law originally passed in 1938 in British India to regulate
the insurance sector.
 An act to consolidate and amend the law related to the business of insurance.
 It provides the broad legal framework within which the industry operates.
 According to the IRDAI circular, the norms are issued under the provisions of Section 34
(1) of the Insurance Act, 1938.
 The Insurance Act has 120 sections and 8 schedules. Under it, only an Indian company,
as defined and registered under Companies Act, 1956, is allowed to operate in India. It
must have a license from Insurance Regulatory and Development Authority of India.

TRAVEL INSURANCE

Travel insurance is a type of insurance that covers the costs and losses associated with traveling.
It is useful protection for those traveling domestically or abroad. 

According to the IRDAI circular, these norms are issued under the provisions of Section 34 (1)
of the Insurance Act, 1938. Insurers shall put in place procedures to verify that at least once in a
period of three months the travel policies offered are complying with the below norms.

Therefore, to bring more transparency in buying travel insurance, the IRDAI circular directs as
follows:
Where policies are offered under Group platform or through any travel agency or portal, the
following norms shall comply:

 Insurers are responsible to ensure an informed choice to the persons to be insured and
ensure compliance to Regulation 6 of IRDAI (Protection of Policyholders' Interests)
Regulations, 2017.

 The name of the Insurance Company which is offering the travel insurance cover, the
amount of the premium that shall be collected towards travel insurance cover shall be
specifically disclosed as the cost of travel cover, at the time of opting to buy a travel
insurance cover. Rate of tax that is applicable to the premium shall be also separately
specified.

 Insurers shall ensure that any portal or App providing the travel insurance coverage shall
not pre-select the option of buying the travel cover as a default option. The prospect shall
be able to specifically choose whether or not to buy the coverage.

 Where selected to buy, an option shall be provided for opting out or de-selecting the
option before concluding the transaction.

 There shall be a provision to let the person to be insured buying a travel cover go through
the benefits, terms and conditions offered under the travel insurance cover on the screen
 itself and consent shall be obtained in the form of selecting a radio button by the prospect
/policyholder in confirmation of having read and understood the terms and conditions.

 In order to ensure that every travel policy offered is in compliance with these norms,
there shall be a clause in the agreement entered with the master policyholder and in the
terms and conditions of the group policy along with a provision to cancel the group
policy arrangement if the master policyholder is not adhering to the norms specified.

FOREIGN EXCHANGE MANAGEMENT ACT, 1999

The FEMA, also referred to as the Foreign Exchange Management Act was introduced in the
year 1999. The act was a replacement of the FERA or Foreign Exchange Regulation Act. FEMA
came into effect on 1st of June, 2000. FEMA was passed since FERA did not meet the
requirements of the policies being implemented after liberalization. FEMA introduced a
prominent change in the system by making all the offenses pertaining to foreign exchange as the
civil offenses, instead of criminal offenses (earlier applicable in the case of FERA). 

As far as FEMA is concerned, it basically aims at consolidating and amending the foreign
exchange law with an aim to facilitate external trading as well as payments. The act was
designed for promoting the development as well as maintenance of the Indian foreign exchange
market in an orderly manner. At present, FEMA can be applied across India as well as across all
the branches, agencies and offices outside of India controlled or owned by an individual who is
an Indian resident. FEMA’s head office, also referred to as Enforcement Directorate is located in
New Delhi and spearheaded by its Directors. 

Main Features of Foreign Exchange Management Act, 1999

1. It gives powers to the Central Government to regulate the flow of payments to and from a
person situated outside the country.
2. All financial transactions concerning foreign securities or exchange cannot be carried out
without the approval of FEMA. All transactions must be carried out through “Authorised
Persons.”
3. In the general interest of the public, the Government of India can restrict an authorised
individual from carrying out foreign exchange deals within the current account.
4. Empowers RBI to place restrictions on transactions from capital Account even if it is
carried out via an authorized individual.
5. As per this act, Indians residing in India, have the permission to conduct a foreign
exchange, foreign security transactions or the right to hold or own immovable property in
a foreign country in case security, property or currency was acquired, or owned when the
individual was based outside of the country, or when they inherit the property from
individual staying outside the country.
 6.  It is consistent with full current account convertibility and contains provisions for
progressive liberalisation of capital account transactions.
7.  It is more transparent in its application as it lays down the areas requiring specific
permissions of the Reserve Bank/Government of India on acquisition/holding of foreign
exchange.
8.  It classified the foreign exchange transactions in two categories, viz. capital account and
current account transactions.
9. It provides power to the Reserve Bank for specifying, in , consultation with the central
government, the classes of capital account transactions and limits to which exchange is
admissible for such transactions.
10. It gives full freedom to a person resident in India, who was earlier resident outside India,
to hold/own/transfer any foreign security/immovable property situated outside India and
acquired when s/he was resident.
11. This act is a civil law and the contraventions of the Act provide for arrest only in
exceptional cases.
12. FEMA does not apply to Indian citizen’s resident outside India

Categories of Authorised Persons under FEMA

Category Authorised Dealer – Authorised Dealer Authorised Full Fledged Money

Category I Category – II Dealer Changers
Category – III

Entities 1.Commercial Banks 1. Upgraded FFMC 1. Select 1. Department of

2.State Co-operative 2. Co-operative Banks Financial and Post
Banks other 2.Urban Co-operative
3. Regional Rural
Institutions Banks
3.Urban Co-operative Banks (RRB’s), others
Banks 3. Other FFMC

Activities As per RBI All activities permitted Foreign Purchase of foreign

Permitted guidelines, all current to FFMC and specified exchange, exchange and sale for
and capital account non-trade related transactions private and business
transactions current account related visits abroad
transactions

Structure of FEMA.

1. Head Office of FEMA, also known as Enforcement Directorate, headed by Director is

located in New Delhi.
2. There are 5 zonal offices in Delhi, Mumbai, Kolkata, Chennai and Jalandhar, each office
is headed by Deputy Director.
3. Every 5 zones are further divided into 7 sub-zonal offices headed by Assistant Directors
and 5 field units headed by Chief Enforcement Officers.