Irrespective of the regulatory mechanism in place, unless there are stringent penal provisions in force against the regulatory breaches by insurers, consumer interests are likely to suffer. As the insurance contract is between a highly experienced insurance professional and a general novice in insurance, the consumers require regulatory protection. The Authority too is reluctant to intervene in disputes, lest it is seen as bringing undue pressure to bear on the insurer. There is a need for this logjam to be broken. It is for the Authority to decide how best it should discharge this responsibility.

Regulation is not new to the insurance industry. As early as the 18th century, the British Parliament mandated the usage of the Lloyd's standard policy form. This was done to avoid different interpretations being put on different policy wordings in usage in order to protect the interests of marine policyholders.

There are different types of regulatory procedures on the market conduct of insurers in currency: Prudential regulations that are essentially rule-based, requiring the regulated to obey and follow all the regulations made, both in the spirit and in the letter of the law, in which they have been made; the other is the principles-based regulation that lays down the essential regulatory principles and norms to be followed, with codes of market conduct practice to be drawn up and implemented, fairly and uniformly, by the trade bodies of the insurance providers.

The latter system relies and acts, mostly as self-regulation to ensure a fair and voluntary system of market conduct towards the consumers. The trade bodies themselves also enforce the disciplinary mechanism for dealing with violations. Usually, it is expected that both the systems should coexist.

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