Rules, Regulations and Subsidiary Instructions

(a) publishing draft regulations with such other details on its website, inviting public comments for a specified period before issuing them;

(b) publishing a general statement of its response to the public comments not later than the date of notification; and

(c) periodically reviewing the regulations.

A proviso allows urgency. If the Authority is of opinion that regulations are required to be made or amended urgently in the public interest, or that the subject matter relates solely to its internal functioning, it may dispense with that condition.

Section 26 of the Act of 1999 carries the same power under that Act, and adds a requirement the Insurance Act does not: the regulations are made in consultation with the Insurance Advisory Committee.

Section 25 of that Act constitutes the Committee. It consists of not more than twenty five members excluding ex officio members, to represent the interests of commerce, industry, transport, agriculture, consumer fora, surveyors, agents, intermediaries, organisations engaged in safety and loss prevention, research bodies and employees' associations in the insurance sector. The Chairperson and members of the Authority are its ex officio Chairperson and members.

Read section 25 as the answer to a common criticism. A regulator that consults only insurers writes regulations for insurers. The Committee's composition puts consumer fora, agriculture, transport and employees' associations in the room.

Section 27 of the Act of 1999 is the parliamentary check. Every rule and every regulation shall be laid before each House of Parliament, as soon as may be after it is made, while it is in session, for a total period of thirty days, which may be in one session or two or more successive sessions. If, before the expiry of the session immediately following, both Houses agree in making a modification, or agree that the rule or regulation should not be made, it takes effect only in the modified form or has no effect. Any such modification or annulment is without prejudice to the validity of anything previously done under it.

The third tier, new in 2026: subsidiary instructions

Section 114B(1) of the Insurance Act, 1938, inserted by section 69 of Act 40 of 2025, provides that the Chairperson, or one or more whole time Members of the Authority, or both, may issue subsidiary instructions in such manner and subject to such conditions as the regulations specify, for two purposes only:

(a) clarifying the ambiguity of any regulation, if any; and

(b) laying down any procedural requirement ancillary to any regulation.

A proviso requires consultation. Before making such instructions the concerned Consultative Committee constituted under section 114C shall be consulted. A further proviso allows urgency: where subsidiary instructions are required urgently, they may be made without consulting the Committee after recording the reasons.

Section 114B(2) gives them teeth. Any contravention of the subsidiary instructions shall amount to contravention of the regulation to which they relate.

Section 114C provides that the Authority shall constitute Consultative Committees, in such manner as the regulations specify, to advise it on matters relating to the making of subsidiary instructions under section 114B and any other issue it determines; provided that the advice of the Consultative Committee shall not be binding on the Authority.

Two things about this new tier are examinable. Its purposes are narrow, being clarification and ancillary procedure only, so a subsidiary instruction cannot create an obligation the regulation does not. But by section 114B(2) breaking one is breaking the regulation, so it carries the regulation's penalty. That combination, narrow scope and full sanction, is the design.

Section 114(2)(zca) and (zcb), added by the same amending Act, give the Central Government power to make rules about the manner and conditions of making subsidiary instructions and the manner of constituting the Consultative Committees.

Exemptions, savings and the financial centre

Section 116, substituted in 2026, empowers the Central Government, by order published in the Official Gazette and for reasons to be recorded in writing, to exempt any insurer constituted, incorporated or domiciled in a country outside India from any provisions of the Act specified in the order, absolutely or subject to conditions or modifications.

The substitution added two safeguards. The old section allowed exemption by notification; the new one requires an order published in the Official Gazette and reasons recorded in writing.

Section 117 provides that save as otherwise provided, nothing in the Act shall affect the liability of an insurer being a company to comply with the Companies Act, 2013. The two statutes are cumulative.

Section 118 exempts four things from the Act. A trade union registered under the Indian Trade Unions Act, 1926; a provident fund to which the Provident Funds Act, 1925 applies; if the Central Government so orders, to the extent and on the conditions specified, insurance business carried on by the Central Government, a State Government or a Government company as defined in section 2(45) of the Companies Act, 2013; and, if the Authority so orders in any case, to the extent and on the conditions specified, the further cases the section lists.

Section 118A provides that notwithstanding any other law, the powers exercisable by the Authority under the Act shall not extend to an International Financial Services Centre set up under section 18(1) of the Special Economic Zones Act, 2005, and shall be exercisable by the International Financial Services Centres Authority established under section 4(1) of its Act of 2019, so far as the regulation of financial products, services and institutions permitted in such a Centre is concerned.

Section 119 gives any person a right, on payment of the specified fees, to inspect the documents filed by an insurer under section 3(2) and to obtain copies. Section 111 deals with the service of notices.

Sections 28, 29 and 30 to 32 of the Act of 1999 complete the picture: other laws are not barred but supplemented; the Central Government may remove difficulties by order within two years of the appointed day, laid before each House; and sections 30, 31 and 32 are the amendments that Act made to the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the General Insurance Business (Nationalisation) Act, 1972.

The four tiers

How what the Authority makes can be challenged

Facts. Indian Express Newspapers (Bombay) Private Ltd. v. Union of India, (1985) 1 SCC 641, arose out of a customs notification affecting the import of newsprint, which the newspapers challenged as an interference with the freedom of the press.

Held. Subordinate legislation does not enjoy the same immunity from challenge as an Act of Parliament. It may be questioned on the ground that it is manifestly arbitrary or unreasonable, that the delegate has exceeded the standard laid down by the parent statute, or that it was made on irrelevant considerations.

Why it matters here. A regulation under section 114A must be consistent with the Act and the rules, and a subsidiary instruction under section 114B must do no more than clarify a regulation or add ancillary procedure. Each of those is a standard laid down by the parent statute, and exceeding it is the first ground in Indian Express Newspapers. The transparency duties in section 114A(1)(a) and (b) supply a second: a regulation made without publishing a draft or a response, where the urgency proviso was not invoked, is open to attack for that reason.

A worked example

The Authority wishes to require every health insurer to decide a cashless request within one hour.

If it does it by regulation under section 114A, it must publish a draft on its website inviting public comments for a specified period, publish a general statement of its response by the date of notification, and consult the Insurance Advisory Committee under section 26 of the Act of 1999. The regulation is then laid before both Houses for thirty days under section 27.

If the requirement is urgent, the proviso to section 114A(1) lets it dispense with the draft and comment stage, and it should record why.

If the point is only that an existing regulation is ambiguous about when the hour starts, section 114B is the right instrument: a subsidiary instruction clarifying the ambiguity, after consulting the Consultative Committee under section 114C, whose advice does not bind it. Breach of that instruction is by section 114B(2) a breach of the regulation itself.

But if the Authority tried by subsidiary instruction to create a new one hour obligation where the regulations impose none, it would be outside section 114B(1), which permits only clarification of ambiguity and ancillary procedure, and on Indian Express Newspapers it would be exceeding the standard laid down by the parent statute.

And if the requirement were about the salary of the Authority's own members, it is a rule matter under section 24(2)(a) of the Act of 1999, not a regulation at all.

What it does NOT mean

It does not mean regulations need parliamentary approval. They are laid before Parliament for thirty days under section 27 of the Act of 1999, and both Houses may modify or annul them, without prejudice to what was done in the meantime.

It does not mean the Insurance Advisory Committee decides anything. It is consulted under section 26 of the Act of 1999; its Chairperson and members include the Authority's own.

It does not mean a Consultative Committee's advice binds. The proviso to section 114C says expressly that it does not.

And it does not mean a subsidiary instruction is a soft instrument. Section 114B(2) makes its contravention a contravention of the regulation.

Quick revision

Section 114: Central Government rules, subject to previous publication; clause (aaa), the conditions and manner of foreign investment under section 3AA. Section 24 of the Act of 1999: the corresponding power.

Section 114A: Authority regulations consistent with the Act and the rules, with a duty of transparency: draft published for comment, a general statement of the response by the date of notification, and periodic review; dispensable for urgency or purely internal matters.

Section 26 of the Act of 1999: regulations in consultation with the Insurance Advisory Committee. Section 25: that Committee, not more than twenty five members excluding ex officio, representing commerce, industry, transport, agriculture, consumer fora, surveyors, agents, intermediaries, safety and loss prevention bodies, research bodies and employees' associations, with the Authority's Chairperson and members ex officio.

Section 27 of the Act of 1999: every rule and regulation laid before each House for thirty days, modifiable or annullable, without prejudice to anything previously done.

Sections 114B and 114C, from 2026: subsidiary instructions by the Chairperson or whole time Members, only to clarify ambiguity or lay down ancillary procedure, after consulting a Consultative Committee whose advice is not binding, urgency excepted on recorded reasons; and breach of an instruction is breach of the regulation.

Section 116: exemption of a foreign insurer by order in the Official Gazette for reasons recorded in writing. Section 117: the Companies Act, 2013 still applies. Section 118: trade unions, provident funds and, on order, Government insurance business exempt. Section 118A: the Authority's powers do not extend to an International Financial Services Centre.

Challenge: Indian Express Newspapers (Bombay) Private Ltd. v. Union of India, (1985) 1 SCC 641.

Test yourself

1. Who makes rules and who makes regulations under the insurance statutes? The Central Government makes rules under section 114 of the Insurance Act, 1938 and section 24 of the Act of 1999, subject to previous publication. The Authority makes regulations under section 114A of the Act of 1938 and section 26 of the Act of 1999.

2. What transparency does section 114A require? Publication of draft regulations on the website with an invitation for public comments for a specified period; publication of a general statement of the Authority's response not later than the date of notification; and periodic review. The proviso allows this to be dispensed with for urgency or for purely internal matters.

3. What is the Insurance Advisory Committee and who sits on it? A committee established by the Authority under section 25 of the Act of 1999, of not more than twenty five members excluding ex officio members, representing commerce, industry, transport, agriculture, consumer fora, surveyors, agents, intermediaries, safety and loss prevention organisations, research bodies and employees' associations; the Authority's Chairperson and members are ex officio.

4. For what may a subsidiary instruction be issued, and what happens if it is broken? Only to clarify the ambiguity of a regulation or to lay down a procedural requirement ancillary to a regulation: section 114B(1). Its contravention amounts to a contravention of the regulation to which it relates: section 114B(2).

5. Does a Consultative Committee's advice bind the Authority? No. The proviso to section 114C provides expressly that the advice shall not be binding on the Authority.

6. How long must a rule or regulation lie before Parliament? A total period of thirty days, which may be comprised in one session or in two or more successive sessions: section 27 of the Act of 1999.

7. On what grounds can a regulation of the Authority be struck down? That it is manifestly arbitrary or unreasonable; that the Authority has exceeded the standard laid down by the parent statute, for example by making a regulation inconsistent with the Act; or that it was made on irrelevant considerations: Indian Express Newspapers (Bombay) Private Ltd. v. Union of India, (1985) 1 SCC 641.