Industry Regulator

IRDA

Apr 28, 2023

IRDA Mission

To protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto.

IRDA and compliance Insurance is a highly regulated industry:

COMPANY FINANCIALS: Every insurer to maintain the required reserves and solvency

margins. All the investments of premiums based on the set norms Mandate of insurance committee Books of accounts maintained as per norms. Quarterly reporting to IRDA. Premium income and number of policies are filed regularly.

ACTUARY & MARKETING: Product designed internally by company Filed for approval. Launched post approval, incorporating the changes recommended if

any (File and Use) All promotional materials are duly approved

IRDA and compliance OPERATIONS

Enclosing proposal form and PQIS with the policy. Policy process flow has IRDA recommendations e.g.: 15 day free look

period. Random sampling to check for mis selling and risk control TAT in customer grievances

TALISMA is the tool used. CRO (Tanya Basu) designated role

SALES Only licensed representative are authorized to sell. Returns at two scenarios for all companies – 6% & 10% Signature of sales rep in PQIS.

TRAINING Ensuring that all the authorized person selling are IRDA certified Training to be done in IRDA certified institute

IRDA and complianceSummarizing:

IRDA is one the strongest regulator across industries It’s the biggest assurance for a customer Workings are reasonably transparent as compared

with other industries. Rigid controls and a dynamic body Website: www.irdaindia.org

Check on Financial Strength of Life Insurers

Valuation of Assets and Liabilities The company has to have two separate Funds –

Policyholders Fund and the Shareholders Fund No money can be transferred from Policyholders Fund

to the Shareholders Fund except 7.5 % of surplus arisen in the relevant year

 Compulsory valuation of Assets and Liabilities of the company on every 31st March

 Valuation is certified by the Appointed Actuary who has Statutory Responsibility to IRDA

 Every time the value of Assets in the Policyholders Fund have to be greater than the value of all liabilities relating to Insurance policies

Value of assets is taken as its easily realizable value (not the market or book value)

Check on Financial Strength of Life Insurers

Solvency MarginCompany has to have a minimum level of

Solvency Margin through additional assets The additional requirement of Solvency Margin is

as under: Traditional Products: 6% of Policy Value plus 0.45% of sum

at risk Unit Linked Policies: 1.5% of Policy Value plus 0.45 % of sum

at risk With Profit Unit Linked: 3% of Policy Value plus 3% of sum at

risk

The Solvency Margin is also checked by the IRDA on every 31st March

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Prospect’s concern…

Insurance Ombudsman Created by Govt. of India on 11 Nov. 1998 Powers under sub section (1) of section 114 of Insurance Act Appointment under Section 40 C of the Insurance Act Purpose of resolving customer grievances Cases referred only when the insurer has not responded within

one month For cases less than 20 lacs SA. Performs two types of functions:

Conciliation Awarding

There are 12 Ombudsman in India List appended in your hand-book

This section states “65% compulsorily to be put in Govt. Securities & the balance

35% in specified stocks.”

“Investment Of Assets”

Section 27 Of Insurance Act

This section states “No Insurer shall directly or indirectly invest outside India

the funds of the policy holders.”

“Prohibition for investments of funds outside India.”

Section 27 C Of Insurance Act

This section states “No insurer shall grant loans or temporary

advances either on hypothecation of property or on personal security or otherwise, except

loans on life policies issued by him within the surrender value, to any director, manager,

managing agent, actuary, etc.”

“Prohibition of Loans”

Section 29 Of Insurance Act

“Power to restrict payment of excessive remuneration”

This section states “Remuneration whether by way of salary or

commission cannot be disproportionate, according to normal standards prevailing in

the insurance industry.”

Section 31 B Of Insurance Act

“Power of authority to remove managerial person from office”

This section states “If affairs being conducted in detrimental to

the interests of policy holders then can remove from office, with effect from such date as may be specified in the order, any director or chief executive officer, by whatever name

called, of the insurer.”

Section 34 B Of Insurance Act

“Power of authority to appoint additional directors”

This section states “If the authority is of opinion that in the

public interest or in the interest of insurer, or his policy holders it is necessary to do so, he

may from time to time, by order in writing appoint one or more persons as additional

directors.”

Section 34 C Of Insurance Act

“Limitation of expenses of management in life insurance business”

This section states “No insurer shall, in respect of life insurance business transacted by him in India, spend as

expenses of management in any calendar year an amount in excess of the prescribed

limits.”

Section 40 B Of Insurance Act

“Power of Central Government to acquire undertaking of insurers in certain cases”

This section states “In the interests of the policy holders or

share holders of such insurer, it is necessary to acquire the undertaking of such insurer the Central Government may, by notified order,

acquire the undertaking of such insurer.”

Section 52H Of Insurance Act

“Voluntary Winding Up”

This section states “Notwithstanding anything contained in the Indian Companies Act, 1913 (7 of 1913) an insurance company shall not be wound up

voluntarily except for the purpose of affecting an amalgamation or a re-construction of the

company.”

Section 54 Of Insurance Act

Shareholder’s Funds

Solvency margins

Reserves

How safe is private sector?

Customer

IRDA

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