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Report No. 67

44.51. Comments of State Governments regarding Duty on renewal.-

As regards the duty on renewal, two State Governments were of the view that renewals are chargeable at the same rates as for the original, and that a specific provision to that effect may be inserted to remove confusion. One State Government expressed this view-"Reduced rates in regard to renewals under item 47B of the article have been prescribed with a view to encourage insurance against fire and damage of property. Accident and sickness insurance premia are paid by well-to-do people either for themselves or for their workmen."

One State Government stated that in the absence of any provision, the duty for renewal with be the same as on originals. Three other State Governments were opposed to the suggested reduction. Two State Governments, and the Administrations of several Union Territories were agreeable to the reduction of the duty on renewal to one-half of the duty on the original.

44.52. We have given anxious consideration to the points made in the comments sent earlier to the Ministry of Finance. We think, that while likelihood of reduction in the revenue of States has to be taken into account, it should also, at the same time, be remembered, that there is a strong need for popularising accident insurance. The similarity of accident insurance with life insurance is mainly historical. A person taking out an accident policy has no motive of profit, and any profit that he makes is incidental. There are many points of difference between life and accident policies1. It is therefore legitimate to make a distinction is a case for reduction of the stamp duty as follows.

Under Article 47, Division C, paragraph (b),1 in respect of an original policy, (of insurance against accident and sickness), when the maximum amount which becomes payable in a case of any single accident or sickness does not exceed Rs. 5,000, the duty should be 10 paise for every Rs. 1,000 or a part thereof, and when the maximum amount which may become payable in the case of any single accident or sickness exceeds Rs. 5,000 the duty should be Re. 1 irrespective of the amount which may become payable. If this change is made, then the existing proviso to Article 47, Division C, paragraph (b), added by Act 18 of 1928, will become superfluous, and may be omitted. between the two in regard to the scheme of taxation, particularly if other relevant considerations present themselves.

1. See supra.

44.53. The limited similarity1 between life and accident insurance in respect of the fixed amount payable, appears to be due to the nature of the loss insured against. It has been pointed out2 that when an individual's life or earning power is affected, no accurate measure of its value is possible. The insurance contract therefore assigns the risk a fixed value, which is all that the insured recovers when the policy falls due. To put the matter differently, in a personal accident policy, the fixed sum dispenses with the proof of the extent of the loss, by specifying the nature and effect of the injury sustained.3

1. See supra.

2. Encyclopaedia of Social Sciences, (Macmillan), (1951-Reprint), Vol. 8, p. 96.

3. Cf. Ivamy General Principles of Insurance Law, (1966), pp. 8 and 357.

44.54. Classification of Insurance with reference to subject-matter.-

A classification of the various types of insurance1 from the point of view of the subject-matter would be helpful for appreciating the relevant points.

1. This is based mainly on Encyclopaedia of Social Sciences.

44.55. Examples of each category given in the above classification1 are:-

1a. Marine, Automobile, Fire, Flood, etc. Insurance.

1b. Compensation and liability insurance, Credit insurance, Insurance against interruption of business, Mortgage insurance, Title insurance, Re-insurance.

2a. Life Insurance.

2b. Endowment Insurance.

2c. Sickness Maternity, Accident and Invalidity Insurance.

2d. Unemployment Insurance.

1. See supra.

44.56. Though both accident insurance and life insurance fall tinder "personal" insurance, yet, in fact, accident insurance stands much nearer to the other classes of insurance than to life insurance. Assuming (as is stated in one comment)1 that accident insurance is taken out at present by only well-to-do people, there is no reason why others should not be encouraged to do so.

1. See supra.

44.57. As regards the objection1 that similar requests will be made by other persons (in respect of other types of policies), we can only say, that any request by a person interested in other policies-for example, policies governed by Articles 47A and 47D can be considered on the merits when it is put-forth.

1. See supra.

44.58. Lastly, the fact that the stamp duty is paid by the Insured and not by the company, does not mean that a suggestion1 made by an Association of the Insurance Companies should not be accepted, if it is in the general interest.

1. See supra.

44.59. Compensation for loss-position regarding.-

At this stage, we would like to elaborate the proposition that the policy does not bring profit1. Accident insurance may not be "indemnity" in the strict sense2. But the amount recoverable under the policy is regulated. As has been stated by Halsbury,3 the policy usually provides for payment of a lump sum in the event of the assured's death by accident, and of other sums, varying in amount according to the nature and extent of the injury. The specified amount is payable in the event of the assured sustaining certain specified injuries, such as the loss of sight in one eye or total loss of sight.4

Sometimes, the policy provides for increased compensation for certain forms of accident. Thus, in one case5, a double benefit was payable if the assured, at the time of the accident, was a passenger on a public conveyance. Halsbury observes6, "Where the policy provides for payment of compensation in the event of non-fatal injury, but makes no special provision for its amount, the assured is entitled to receive compensation for his pain and suffering of and expenses incurred to an amount not exceeding the amount payable in case of death.7

1. See supra.

2. See supra.

3. Halsbury's, 3rd Edn., Vol. 22, p. 299, para. 597.

4. Bawden v. London Edinburgh & Glassgow Assurance Co., (1892) 2 QB 534 (CA).

5. Fidelity and Casuality Co. of New York v. Mitchell, 1917 AC 592 (594) (PC).

6. Halsbury's, 3rd Edn., Vol. 22, p. 299.

7. Theobald v. Railway Passengers Assurance Co., (1854) 10 Exch 45.

44.60. Recommendation regarding duty on original policy.-

(a) Having regard to the considerations summarised above1, and also to the fact that the premium in respect of policies of accident insurance is low2, we think that there is a case for reduction of the stamp as follows. Under Article 4. Division C, paragraph (b), 3 in respect of an original policy, (of insurance against accident and sickness), when the maximum amount which becomes payable in a case of any single accident or sickness does not exceed Rs. 5,000 the duty should be 10 paise for every Rs. 1,000 or a part thereof, and when the maximum amount which may become payable in the case of single accident or sickness exceeds payable. If this change is made, then the existing Proviso to Article 47, Division C, paragraph (b), added by Act 18 of 1928, will become superfluous, and may be omitted.

(b) We have considered the suggestion4 regarding bus journeys. We think that policies of insurance against accidents in course of journey by bus, if valid for a single journey, should be exempt, where the amount does not exceed Rs. 5,000. We are, further of the view that this exemption should extend to journeys by all conveyances including rail or air.

We are of the view that policies for single journey or voyage above Rs. 5,000 should bear duty of only 10 paise whatever be the mode of conveyance. We are further of the opinion that aircraft should be treated in the same category as railway, since the article is dealing with accidents. We should mention that in the Questionnaire, in putting forth a re-draft, we had made5 a limited suggestion for amendment of the article. But, after fuller consideration, we are of the view that certain other changes are required, for reasons already stated.

1. Paras. 36, 37, 40 to 47, supra.

2. See supra.

3. See Appendix 1 (Draft Amendment to Article 47, Division C).

4. See supra.

5. Question 98.



Indian Stamp Act, 1899 Back




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