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Chapter 16Chapter 16

Insurance OrganisationInsurance Organisation

22

Insurance Organisation in IndiaInsurance Organisation in India

Insurance Act, 1938Insurance Act, 1938

Insurance Regualtory and Development Insurance Regualtory and Development Authority (IRDA)Authority (IRDA)

IRDA RegulationsIRDA Regulations

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Until 1999, the insurance organisation in India Until 1999, the insurance organisation in India was comprised of two state-owned monolithic was comprised of two state-owned monolithic institutions: LIC and GIC and its four institutions: LIC and GIC and its four subsidiaries. With the entry of private players, the subsidiaries. With the entry of private players, the organisation has undergone a notable organisation has undergone a notable transformation. The elements of the present transformation. The elements of the present framework are the (i) Insurance Act, (ii) IRDA Act framework are the (i) Insurance Act, (ii) IRDA Act and (iii) Regulations framed by the IRDA.and (iii) Regulations framed by the IRDA.

Insurance OrganisationInsurance Organisation

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The Insurance Act provides the broad framework for The Insurance Act provides the broad framework for the insurance sector in the country. Some of the the insurance sector in the country. Some of the important aspects of the framework contained in the important aspects of the framework contained in the Act are: eligibility, registration, accounts and balance Act are: eligibility, registration, accounts and balance sheet, actuarial report and abstract; investment of sheet, actuarial report and abstract; investment of assets; insurance business in rural/social sector; assets; insurance business in rural/social sector; investigation; power to issue directions; registration investigation; power to issue directions; registration of principal/chief/ special agent(s); issue of license to of principal/chief/ special agent(s); issue of license to intermediary/ insurance penalties; power to call for intermediary/ insurance penalties; power to call for information; power of Government to make rules; information; power of Government to make rules; powers of IRDA to make regulations.powers of IRDA to make regulations.

INSURANCE ACT, 1938INSURANCE ACT, 1938

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Any class of insurance business can be Any class of insurance business can be carried out only by a public company, a carried out only by a public company, a cooperative society, an insurance cooperative cooperative society, an insurance cooperative society, or a body corporate other than a society, or a body corporate other than a private company. After the enactment of the private company. After the enactment of the IRDA Act, only Indian insurance companies IRDA Act, only Indian insurance companies are eligible to carry out any class of insurance are eligible to carry out any class of insurance business (i.e., life/general/fire/marine and business (i.e., life/general/fire/marine and miscellaneous), Indian companies are defined miscellaneous), Indian companies are defined as those in which the aggregate holding of as those in which the aggregate holding of equity by a foreign company does not exceed equity by a foreign company does not exceed 26 per cent of the paid-up equity capital.26 per cent of the paid-up equity capital.

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To carry on their business, insurance To carry on their business, insurance companies should be registered with the companies should be registered with the IRDA. It would register an applicant on being IRDA. It would register an applicant on being satisfied that its financial condition and the satisfied that its financial condition and the general character of its management are general character of its management are sound, the volume of its business, capital sound, the volume of its business, capital structure and earnings prospects would be structure and earnings prospects would be adequate, the interest of the public would be adequate, the interest of the public would be served, and it has complied with all the other served, and it has complied with all the other requirements. The minimum paid up capital of requirements. The minimum paid up capital of an insurance company should be Rs. 100 an insurance company should be Rs. 100 crore (for life/general business) and Rs. 250crore (for life/general business) and Rs. 250

77

crore (for reinsurance business). The crore (for reinsurance business). The registration would be renewed annually. registration would be renewed annually. Promoters cannot hold more than 26 per cent Promoters cannot hold more than 26 per cent of the paid-up capital of an insurance of the paid-up capital of an insurance company. Every insurer should also keep a company. Every insurer should also keep a specified deposit with the RBI which would be specified deposit with the RBI which would be deemed to be a part of its assets.deemed to be a part of its assets.

88

The assets of insurers should be invested in The assets of insurers should be invested in the following manner: 25 per cent in the following manner: 25 per cent in Government securities (including deposits Government securities (including deposits with the RBI); at least 25 per cent in with the RBI); at least 25 per cent in Government/other approved securities; and Government/other approved securities; and the balance in approved and other the balance in approved and other investments. Upto 15 per cent of the investments. Upto 15 per cent of the controlled fund of the insurers can be controlled fund of the insurers can be invested in other investments. Upto 25 per invested in other investments. Upto 25 per cent of the assets of general insurance cent of the assets of general insurance companies can be invested in other companies can be invested in other investments. No funds of policyholders can be investments. No funds of policyholders can be invested outside India.invested outside India.

99

The IRDA may conduct an investigation in to The IRDA may conduct an investigation in to the affairs of an insurer. It may issue the affairs of an insurer. It may issue directions in public interest/to prevent the directions in public interest/to prevent the affairs of an insurer being conducted in a affairs of an insurer being conducted in a manner detrimental to the interest of its manner detrimental to the interest of its policyholders or generally to secure the policyholders or generally to secure the proper management of any insurer, which proper management of any insurer, which would be binding on the insurer. The CEO of would be binding on the insurer. The CEO of an insurer may be removed from office on an insurer may be removed from office on similar grounds.similar grounds.

InvestigationInvestigation

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Penalties can be imposed for the following Penalties can be imposed for the following offences under the Insurance Act: (a) default offences under the Insurance Act: (a) default in compliance with/act in contravention of the in compliance with/act in contravention of the act, (b) carrying on business in contravention act, (b) carrying on business in contravention of requirement of registration and deposits, (c) of requirement of registration and deposits, (c) false statements in documents, (d) wrongly false statements in documents, (d) wrongly obtaining/withholding property, (e) offences obtaining/withholding property, (e) offences by companies, and (f) failure to comply with by companies, and (f) failure to comply with the rural/social sector obligations.the rural/social sector obligations.

PenaltiesPenalties

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The Government may make rules to carry out The Government may make rules to carry out the purposes of the Act and the IRDA may the purposes of the Act and the IRDA may make regulations to carry out its provisions.make regulations to carry out its provisions.

Power of Government to Make Power of Government to Make RegulationsRegulations

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The duty of the IRDA is to regulate, promote and The duty of the IRDA is to regulate, promote and ensure the orderly growth of the insurance and ensure the orderly growth of the insurance and reinsurance business. Its powers and functions reinsurance business. Its powers and functions include: Issue/renewal/ cancellation/suspension include: Issue/renewal/ cancellation/suspension of registration of insurance companies; of registration of insurance companies; protection of policyholder’s interests; specifying protection of policyholder’s interests; specifying the requisite qualifications/practical training for the requisite qualifications/practical training for intermediaries/agents; specifying the code of intermediaries/agents; specifying the code of conduct for surveyors/loss assessors; promotingconduct for surveyors/loss assessors; promoting

INSURANCE DEVELOPMENT AND INSURANCE DEVELOPMENT AND REGULATORY AUTHORITY (IRDA)REGULATORY AUTHORITY (IRDA)

Duties/Powers/FunctionsDuties/Powers/Functions

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efficiency in the conduct of insurance business; efficiency in the conduct of insurance business; promoting/regulating professional organisations; promoting/regulating professional organisations; calling for information, undertaking inspection, calling for information, undertaking inspection, conducting inquiries/investigations of insurers/ conducting inquiries/investigations of insurers/ intermediaries/other organisations; regulating intermediaries/other organisations; regulating investments of funds/maintenance of margin of investments of funds/maintenance of margin of solvency and so on. The IRDA would be bound by solvency and so on. The IRDA would be bound by the directions of the Government on questions of the directions of the Government on questions of policy.policy.

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The powers of the Government in relation to the The powers of the Government in relation to the undermentioned activities/operations of undermentioned activities/operations of insurance companies have been delegated to the insurance companies have been delegated to the IRDA: (i) investment of assets, (ii) maintenance of IRDA: (i) investment of assets, (ii) maintenance of assets, (iii) limit on expenditure, (iv) provision assets, (iii) limit on expenditure, (iv) provision regarding directors, (v) acquisition of surrender regarding directors, (v) acquisition of surrender values by policyholders and so on.values by policyholders and so on.

Delegation of Powers   Delegation of Powers  

1155

To carry out its powers/functions, the IRDA has To carry out its powers/functions, the IRDA has issued a number of regulations as ground rules issued a number of regulations as ground rules for the conduct of insurance business. The major for the conduct of insurance business. The major regulations covered here relate to the following: regulations covered here relate to the following: Rural/social sector obligations; Insurance Rural/social sector obligations; Insurance advertisements/disclosures; Licensing of advertisements/disclosures; Licensing of insurance agents; General insurance - insurance agents; General insurance - reinsurance; Appointment of an actuary; reinsurance; Appointment of an actuary; Registration of Indian insurance companies; Registration of Indian insurance companies;

IRDA REGULATIONSIRDA REGULATIONS

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Investment norms; Preparation of financial Investment norms; Preparation of financial statements and auditor’s report; Third party statements and auditor’s report; Third party administrators - health services; Protection of administrators - health services; Protection of policyholders interest’s; Licensing of policyholders interest’s; Licensing of corporate/composite corporate agents; corporate/composite corporate agents; Distribution of surpluses; Life insurance - Distribution of surpluses; Life insurance - reinsurance; Insurance brokers; Insurance reinsurance; Insurance brokers; Insurance surveyors and loss assessors; and Micro-surveyors and loss assessors; and Micro-insurance.insurance.

1177

All new life insurers have to undertake the All new life insurers have to undertake the following obligation pertaining to the rural sector: following obligation pertaining to the rural sector: of the total policies written in that year the of the total policies written in that year the percent share of the rural sector is as follows: percent share of the rural sector is as follows: first year–7 per cent; second year–9 per cent; first year–7 per cent; second year–9 per cent; third year–12 per cent; fourth year–14 per cent; third year–12 per cent; fourth year–14 per cent; fifth year–16 per cent; and sixth year–18 per cent. fifth year–16 per cent; and sixth year–18 per cent. The obligations for general insurers are: in the The obligations for general insurers are: in the first two years the share should be 2 and 3 perfirst two years the share should be 2 and 3 per

Rural/Social Sector ObligationsRural/Social Sector Obligations

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cent and it should be 5 per cent thereafter. All cent and it should be 5 per cent thereafter. All categories of insurers are obliged to issue 5, 7, categories of insurers are obliged to issue 5, 7, 10, 15, 20 and 25 thousand lives in the first six 10, 15, 20 and 25 thousand lives in the first six years respectively. The norms would be reviewed years respectively. The norms would be reviewed by the IRDA every five years.by the IRDA every five years.

1199

An insurance advertisement means/includes any An insurance advertisement means/includes any communication directly or indirectly related to an communication directly or indirectly related to an insurance policy and intended to result in an insurance policy and intended to result in an eventful sale/solicitation of a policy from the eventful sale/solicitation of a policy from the public. It includes all forms of printed/published public. It includes all forms of printed/published materials or any material using the print and/or materials or any material using the print and/or electronic medium for public communication.electronic medium for public communication.

Insurance Advertisement and Insurance Advertisement and DisclosureDisclosure

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Insurance intermediaries include brokers, Insurance intermediaries include brokers, consultants, surveyors and loss assessors.consultants, surveyors and loss assessors.

Insurance IntermediariesInsurance Intermediaries

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Compliance and Control Compliance and Control Every insurer/ Every insurer/ intermediary/agent should (1) have a compliance intermediary/agent should (1) have a compliance officer to oversee advertisements, (2) establish officer to oversee advertisements, (2) establish and maintain a system of control over the and maintain a system of control over the content/form/ method of dissemination of all content/form/ method of dissemination of all advertisements, (3) maintain a register to include advertisements, (3) maintain a register to include a specimen of every advertisement for 3 years, a specimen of every advertisement for 3 years, (4) file a copy of each advertisement with the (4) file a copy of each advertisement with the IRDA as soon as it is issued first and (5) file a IRDA as soon as it is issued first and (5) file a certificate of compliance with the IRDA certificate of compliance with the IRDA regulations and the advertisement code regulations and the advertisement code prescribed by the ASCI. The register would beprescribed by the ASCI. The register would be

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open to inspection/review by the IRDA for open to inspection/review by the IRDA for content/context/prominence/ position of the content/context/prominence/ position of the required disclosures /omission of the required required disclosures /omission of the required information and so on.information and so on.

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Any change in an advertisement would be Any change in an advertisement would be considered a new advertisement. All considered a new advertisement. All advertisements by insurance agents must have advertisements by insurance agents must have prior written approval from the insurer, which prior written approval from the insurer, which must ensure that they comply with the IRDA must ensure that they comply with the IRDA regulations and are not deceptive/misleading. regulations and are not deceptive/misleading. The identity of all advertisers should be stated.The identity of all advertisers should be stated.

Change in AdvertisementChange in Advertisement

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In case of a complaint, the IRDA can take action In case of a complaint, the IRDA can take action and issue directions to the advertisers. Failure to and issue directions to the advertisers. Failure to comply would entail necessary action, including comply would entail necessary action, including levy of penalty.levy of penalty.

Procedure for Action in Case of Procedure for Action in Case of ComplaintComplaint

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A licence from the IRDA is necessary to act as an A licence from the IRDA is necessary to act as an insurance/composite insurance agent, separately insurance/composite insurance agent, separately for life and general insurance. The applicant for life and general insurance. The applicant should have passed at least the higher should have passed at least the higher secondary/matriculate or equivalent examination. secondary/matriculate or equivalent examination. He should possess practical training of at least He should possess practical training of at least 100 hours and 150 hours to act as an agent and a 100 hours and 150 hours to act as an agent and a composite agent respectively, in the area of composite agent respectively, in the area of insurance sales, service and marketing. Theinsurance sales, service and marketing. The

Licensing of Insurance AgentsLicensing of Insurance Agents

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requirement is 50 and 70 hours in case of requirement is 50 and 70 hours in case of chartered accountants/cost accountants/ chartered accountants/cost accountants/ company secretaries/MBAs/actuaries and so on. company secretaries/MBAs/actuaries and so on. He should also have passed the pre-recruitment He should also have passed the pre-recruitment examination conducted by the Insurance Institute examination conducted by the Insurance Institute of India. Insurance agents should abide by the of India. Insurance agents should abide by the IRDA-prescribed code of conduct. His licence can IRDA-prescribed code of conduct. His licence can be cancelled if he (1) is minor, (2) is found to be be cancelled if he (1) is minor, (2) is found to be of unsound mind, (3) has been found guilty of of unsound mind, (3) has been found guilty of criminal misappropriation/breach of trust/ criminal misappropriation/breach of trust/ cheating/forgery and so on, (4) is found guilty ofcheating/forgery and so on, (4) is found guilty of

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fraud/misrepresentation, (5) does not possess the fraud/misrepresentation, (5) does not possess the requisite qualification, (6) has not passed the requisite qualification, (6) has not passed the requisite examination as (7) violates the code of requisite examination as (7) violates the code of conduct.conduct.

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A life insurer cannot transact business A life insurer cannot transact business without an appointed actuary, who should be without an appointed actuary, who should be a fellow member of the Acturial Society, of a fellow member of the Acturial Society, of India. He should have access to all the India. He should have access to all the information/ documents of the insurer, for a information/ documents of the insurer, for a proper/effective performance of his proper/effective performance of his duties/functions. The duties and obligations of duties/functions. The duties and obligations of an appointed actuary include: (1) advice to the an appointed actuary include: (1) advice to the insurer in the area of product design andinsurer in the area of product design and

Appointed ActuaryAppointed Actuary

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pricing, insurance contract wording, pricing, insurance contract wording, investment and reinsurance, (2) ensure investment and reinsurance, (2) ensure solvency of the insurer, (3) comply with the solvency of the insurer, (3) comply with the IRDA’s directions, (4) certify the acturial report IRDA’s directions, (4) certify the acturial report and abstract/other returns, and so on.and abstract/other returns, and so on.

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The appointed actuary should enjoy absolute The appointed actuary should enjoy absolute privilege to any written/oral statement, so as privilege to any written/oral statement, so as to perform his functions.to perform his functions.

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The provision regarding registration of insurance The provision regarding registration of insurance companies includes requisition for registration, companies includes requisition for registration, application for registration, renewal and action in application for registration, renewal and action in case of default.case of default.

Registration of Indian Insurance Registration of Indian Insurance CompaniesCompanies

3322

Requisition for Registration Requisition for Registration For registration of For registration of insurance companies with the IRDA, an applicant insurance companies with the IRDA, an applicant has first to make a requisition for registration has first to make a requisition for registration separately for each class of insurance business. separately for each class of insurance business. Only Indian companies are eligible to apply. On Only Indian companies are eligible to apply. On being satisfied about the bona fide of the being satisfied about the bona fide of the applicant to comply with all the requirements of applicant to comply with all the requirements of registration, the IRDA would accept the registration, the IRDA would accept the registration and direct the supply of the registration and direct the supply of the application form for registration to the applicant. application form for registration to the applicant. The application should be accompanied by (a) The application should be accompanied by (a) documentary proof of having made the requireddocumentary proof of having made the required

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deposit with the RBI, (b) evidence of having the deposit with the RBI, (b) evidence of having the required capital (Rs. 100 and Rs. 250 crore for life required capital (Rs. 100 and Rs. 250 crore for life and general insurance business respectively), (c) and general insurance business respectively), (c) an affidavit about the adequacy of capital, (d) an affidavit about the adequacy of capital, (d) statement regarding the issue of shares to the statement regarding the issue of shares to the promoters, (e) certified copy of the published promoters, (e) certified copy of the published prospectus, (f) the MOU between the Indian prospectus, (f) the MOU between the Indian promoters and the foreign promoter, (g) proof promoters and the foreign promoter, (g) proof about payment of the fee, and (h) a certificate about payment of the fee, and (h) a certificate from a C.A./ secretary that all the requirements from a C.A./ secretary that all the requirements relating to registration have been complied with. relating to registration have been complied with. On being satisfied about the eligibility, financialOn being satisfied about the eligibility, financial

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soundness, volume of business/capital/earnings soundness, volume of business/capital/earnings prospects, interest of public being served and prospects, interest of public being served and compliance with and fulfilment of other compliance with and fulfilment of other requirements, the IRDA would register the requirements, the IRDA would register the applicant as an insurer. The registration of an applicant as an insurer. The registration of an insurance company can be suspended for insurance company can be suspended for specified period for (1) conducting business in a specified period for (1) conducting business in a manner prejudicial to the policyholders’ interest, manner prejudicial to the policyholders’ interest, (2) failure to furnish the required information, (3) (2) failure to furnish the required information, (3) non-submission of the required periodical non-submission of the required periodical returns, (4) non-cooperation in any inquiry, (5) returns, (4) non-cooperation in any inquiry, (5) indulgence in manipulation or, (6) failure to invest indulgence in manipulation or, (6) failure to invest in infrastructure/social sector. in infrastructure/social sector.

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In case of repeated defaults of these types, the In case of repeated defaults of these types, the IRDA may cancel the registration.IRDA may cancel the registration.

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The investment norms for insurance companies The investment norms for insurance companies relate to regulation of investment and exposures.relate to regulation of investment and exposures.

Investment Regulations/NormsInvestment Regulations/Norms

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Approved InvestmentsApproved Investments The controlled fund of a life insurer should be The controlled fund of a life insurer should be

invested as follows: In Government/approved invested as follows: In Government/approved securities at least–50 per cent; approved securities at least–50 per cent; approved investments,–35 per cent; and infrastructure investments,–35 per cent; and infrastructure investments 15 per cent. In the case of a investments 15 per cent. In the case of a general insurer, investment in other general insurer, investment in other investments can be upto 25 per cent.investments can be upto 25 per cent.

3388

The share of Government/approved securities The share of Government/approved securities in the investment of assets of a pension and in the investment of assets of a pension and general annuity business should be 40 per general annuity business should be 40 per cent and the balance (60 per cent) should be cent and the balance (60 per cent) should be in approved and other investments. Not more in approved and other investments. Not more than 25 per cent of the fund should be than 25 per cent of the fund should be invested in an unapproved category in case of invested in an unapproved category in case of unit linked life insurance business.unit linked life insurance business.

3399

The assets of a reinsurance business should The assets of a reinsurance business should be invested in the same pattern as of a general be invested in the same pattern as of a general insurance business.insurance business.

4400

The different categories of investments should The different categories of investments should conform to the exposure norms specified below: (a) conform to the exposure norms specified below: (a) limit for investee company: not exceeding the lower limit for investee company: not exceeding the lower of 10% of capital, free reserves, debentures/bonds of of 10% of capital, free reserves, debentures/bonds of the investee company or 10% of the assets of the the investee company or 10% of the assets of the general insurer/controlled fund of the life insurer; (b) general insurer/controlled fund of the life insurer; (b) limit for the group: the same as in (a); limit for the limit for the group: the same as in (a); limit for the industry sector to which the investee company industry sector to which the investee company belongs: not exceeding 10% in the total investment belongs: not exceeding 10% in the total investment exposure to the industrial sector as a whole.exposure to the industrial sector as a whole.

Exposure NormsExposure Norms

4411

Dealings in Financial Derivatives Dealings in Financial Derivatives All insurance All insurance companies can deal in financial derivatives. companies can deal in financial derivatives. Margin/unamortised premium paid by an insurer Margin/unamortised premium paid by an insurer to the extent they are reflected as an asset to the extent they are reflected as an asset position in the balance sheet as per the IRDA position in the balance sheet as per the IRDA guidelines, would be treated as approved guidelines, would be treated as approved investments, only to the extent that the derivative investments, only to the extent that the derivative position constitutes a hedge for the underlying position constitutes a hedge for the underlying investment/portfolios which itself is treated as investment/portfolios which itself is treated as approved investments.approved investments.

4422

The TPAs provide health services for a The TPAs provide health services for a fee/remuneration specified in an agreement with fee/remuneration specified in an agreement with an insurance company. It prescribes the an insurance company. It prescribes the terms/conditions of health services which may be terms/conditions of health services which may be rendered to and/or received by parties to the rendered to and/or received by parties to the agreement. A TPA registered with the IRDA agreement. A TPA registered with the IRDA should have a minimum capital of Rs. 1 crore, at should have a minimum capital of Rs. 1 crore, at least one of the directors should be a doctor least one of the directors should be a doctor registered with the MCI and not more than 26 per registered with the MCI and not more than 26 per cent of its shares should be held by a foreign cent of its shares should be held by a foreign company.company.

Third Party Administrators (TPAs)Third Party Administrators (TPAs)

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A TPA should act in the best possible A TPA should act in the best possible professional manner and would be duty-professional manner and would be duty-bound to follow the prescribed code of bound to follow the prescribed code of conduct. He should maintain records of all conduct. He should maintain records of all transactions carried on behalf of the transactions carried on behalf of the insurance company and follow strictly, the insurance company and follow strictly, the professional confidentiality between the professional confidentiality between the concerned parties. To look into the proper and concerned parties. To look into the proper and efficient performance of any TPA, the IRDA efficient performance of any TPA, the IRDA may constitute committees consisting of may constitute committees consisting of members representing the TPAs, insurers, members representing the TPAs, insurers, IRDA and so on. All contracts of TPAs with the IRDA and so on. All contracts of TPAs with the insurance companies would be open for insurance companies would be open for inspection by the IRDA.inspection by the IRDA.

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The main elements of the regulations aimed at The main elements of the regulations aimed at the protection of the policyholders, interest are: the protection of the policyholders, interest are: point of sale, proposal for insurance, redressal of point of sale, proposal for insurance, redressal of grievances, matters included in policy, claims grievances, matters included in policy, claims procedures and policyholders’ servicing.procedures and policyholders’ servicing.

Protection of Policyholders Interest Protection of Policyholders Interest RegulationsRegulations

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Point of Sale Point of Sale A prospectus of an insurance product should A prospectus of an insurance product should

clearly state the scope of benefits, the extent clearly state the scope of benefits, the extent of insurance cover, explain the warranties/ of insurance cover, explain the warranties/ exceptions/conditions of the insurance cover exceptions/conditions of the insurance cover and whether the product is participating or and whether the product is participating or non-participating. The insurer should provide non-participating. The insurer should provide all material information in respect of a all material information in respect of a proposed cover to the prospect, to enable him proposed cover to the prospect, to enable him to decide on the best cover that would his to decide on the best cover that would his interest.interest.

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Proposal for Insurance Proposal for Insurance A proposal for insurance cover must be in a A proposal for insurance cover must be in a

written document. The insurer should written document. The insurer should encourage the prospect to avail of the encourage the prospect to avail of the nomination facility. The proposal should be nomination facility. The proposal should be processed with speed and efficiency and the processed with speed and efficiency and the decision communicated within 15 days.decision communicated within 15 days.

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Grievance Redressal Procedure Grievance Redressal Procedure Every insurer should have in place a proper Every insurer should have in place a proper

procedure and an effective mechanism to procedure and an effective mechanism to address complaints and grievances of address complaints and grievances of policyholders efficiently and with speed.policyholders efficiently and with speed.

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Matters to be Stated in Life Insurance Policy Matters to be Stated in Life Insurance Policy The insurance policies should clearly state the The insurance policies should clearly state the

matters specified by the IRDA.matters specified by the IRDA.

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Claims Procedure of a Life Insurance PolicyClaims Procedure of a Life Insurance Policy The life insurance policy should state the The life insurance policy should state the

primary documents normally required to be primary documents normally required to be submitted by a claimant in support of a claim. submitted by a claimant in support of a claim. The claim should be processed without delay The claim should be processed without delay and paid within 30 days, failing which interest and paid within 30 days, failing which interest rate of 2 per cent above the bank rate would rate of 2 per cent above the bank rate would have to be paid.have to be paid.

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Policyholder’s Servicing Policyholder’s Servicing A life insurer should A life insurer should respond within 10 days of the receipt of any respond within 10 days of the receipt of any communication from its policyholders in all communication from its policyholders in all matters such as change of address, nomination, matters such as change of address, nomination, assignment, current status of policy, loan on assignment, current status of policy, loan on security, duplicate policy, endowment and so on.security, duplicate policy, endowment and so on.

5511

The main elements of the licensing of The main elements of the licensing of corporate/composite corporate agents are: corporate/composite corporate agents are: licence, remuneration, code of conduct, and licence, remuneration, code of conduct, and renewal of licence.renewal of licence.

Licensing of Corporate/Composite Licensing of Corporate/Composite Corporate Agents RegulationsCorporate Agents Regulations

5522

Qualifications Qualifications To get a license as a corporate To get a license as a corporate agent/composite corporate agent, the required agent/composite corporate agent, the required qualifications are (1) the partnership qualifications are (1) the partnership deed/memorandum/document evidencing the deed/memorandum/document evidencing the constitution of the entity should contain, as one constitution of the entity should contain, as one of its main objects, procuring/soliciting insurance of its main objects, procuring/soliciting insurance business as a corporate agent; (2) the corporate business as a corporate agent; (2) the corporate executive (partner/director/officer/employee/chief executive (partner/director/officer/employee/chief executive should have passed the 10/12th executive should have passed the 10/12th standard examination, and should have standard examination, and should have undergone practical training of 100 hours and 150 undergone practical training of 100 hours and 150 hours for agent and composite agent hours for agent and composite agent

5533

respectively. For corporate executives who are respectively. For corporate executives who are MBAs, CAs/ICWAs/ company secretaries/ MBAs, CAs/ICWAs/ company secretaries/ certified/associate of Indian Institute of Bankers, certified/associate of Indian Institute of Bankers, the required training hours are 50 and 70 the required training hours are 50 and 70 respectively. He should also have passed the pre-respectively. He should also have passed the pre-recruitment examination of the Insurance recruitment examination of the Insurance Institute of India.Institute of India.

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Issue/Renewal of Licence Issue/Renewal of Licence Every corporate Every corporate licensed agent should abide by the specified licensed agent should abide by the specified code of conduct. The licence is valid for 3 years, code of conduct. The licence is valid for 3 years, renewable for 3 years. It can be cancelled if the renewable for 3 years. It can be cancelled if the agent suffers from any of the disqualifications.agent suffers from any of the disqualifications.

5555

The Insurance broker arranges, for a The Insurance broker arranges, for a commission, insurance contracts with commission, insurance contracts with insurance/reinsurance companies on behalf of insurance/reinsurance companies on behalf of his clients. There are three categories of his clients. There are three categories of insurance brokers: direct, reinsurance and insurance brokers: direct, reinsurance and composite. While a direct broker functions in composite. While a direct broker functions in general/life insurance business, a reinsurance general/life insurance business, a reinsurance broker arranges reinsurance for direct insurers. A broker arranges reinsurance for direct insurers. A composite broker performs the functions of bothcomposite broker performs the functions of both

Insurance Brokers Insurance Brokers

5566

the direct broker and the reinsurance broker. The the direct broker and the reinsurance broker. The framework of their operations includes the framework of their operations includes the following: license, remuneration, ceiling on following: license, remuneration, ceiling on business from a single client, code of conduct, business from a single client, code of conduct, segregation of insurance money, professional segregation of insurance money, professional indemnity insurance, books, disclosures, indemnity insurance, books, disclosures, inspection, and cancellation/suspension of inspection, and cancellation/suspension of registration.registration.

5577

Grant of License Grant of License An insurance broker should An insurance broker should obtain a licence from the IRDA. The IRDA takes into obtain a licence from the IRDA. The IRDA takes into account the following: (i) he does not suffer from any account the following: (i) he does not suffer from any disqualification, (ii) he the has necessary disqualification, (ii) he the has necessary infrastructure, (iii) he has two qualified persons in infrastructure, (iii) he has two qualified persons in employment, (iv) fulfillment of capital and deposit employment, (iv) fulfillment of capital and deposit requirements; (v) the principal officer possesses the requirements; (v) the principal officer possesses the minimum laid down qualification, has received the minimum laid down qualification, has received the prescribed training, passed the required examination prescribed training, passed the required examination and has not violated the code of conduct.and has not violated the code of conduct.

5588

Code of Conduct Code of Conduct The main elements of the code The main elements of the code of conduct of an insurance broker relate to: (1) of conduct of an insurance broker relate to: (1) standards of professional conduct and discharge standards of professional conduct and discharge of functions in the policyholder’s interest; (2) of functions in the policyholder’s interest; (2) matters relating to client relationships, (3) matters relating to client relationships, (3) matters relating to sales practices, (4) matters matters relating to sales practices, (4) matters relating to furnishing of information, (5) conduct relating to furnishing of information, (5) conduct in relation to insurance contract, () conduct in in relation to insurance contract, () conduct in relation to renewal of policies, (7) conduct in relation to renewal of policies, (7) conduct in relation to claim by clients, (8) receipt of relation to claim by clients, (8) receipt of complaints, (9) documentation, (10) advertising, complaints, (9) documentation, (10) advertising, (11) receipt of remuneration; (12) training and so (11) receipt of remuneration; (12) training and so on.on.

5599

Professional Indemnity Insurance Professional Indemnity Insurance Every Every insurance broker should have a professional insurance broker should have a professional indemnity insurance throughout the validity of indemnity insurance throughout the validity of the licence.the licence.

6600

Inspection Inspection The IRDA can conduct an inspection The IRDA can conduct an inspection of insurance brokers. Their licenses can be of insurance brokers. Their licenses can be suspended/ cancelled by the IRDA, with/without suspended/ cancelled by the IRDA, with/without notice.notice.

6611

The main elements of the operations of surveyors The main elements of the operations of surveyors and loss assessors are licensing procedure, and loss assessors are licensing procedure, constitution and functions of surveyors and loss constitution and functions of surveyors and loss assessors, categorisation, code of conduct, assessors, categorisation, code of conduct, practical training, register, submission of returns practical training, register, submission of returns and inspection.and inspection.

Insurance Surveyors and Loss Insurance Surveyors and Loss Assessors Assessors

6622

Licensing Procedure Licensing Procedure Both individual and Both individual and corporate surveyors and loss assessors should corporate surveyors and loss assessors should have a licence from the IRDA. The IRDA has have a licence from the IRDA. The IRDA has constituted a Surveyors and Loss Assessors constituted a Surveyors and Loss Assessors Committee to assist it on matters relevant to Committee to assist it on matters relevant to surveyors and loss assessors. The functions of surveyors and loss assessors. The functions of the Committee would be recommending the (i) the Committee would be recommending the (i) syllabi for examination and practical training for syllabi for examination and practical training for surveyors and loss assessors, (ii) considerations surveyors and loss assessors, (ii) considerations while recognising foreign qualifications and while recognising foreign qualifications and training to grant licence; (iii) improving/ training to grant licence; (iii) improving/ developing their status; (iv) coordination withdeveloping their status; (iv) coordination with

6633

educational/other institutions; (v) looking into educational/other institutions; (v) looking into matters of professional misconduct, indiscipline, matters of professional misconduct, indiscipline, non-adherence to code of conduct and so on.non-adherence to code of conduct and so on.

6644

Duties and Responsibilities of a Surveyor and Duties and Responsibilities of a Surveyor and Loss Assessor Loss Assessor The duties and responsibilities The duties and responsibilities of surveyor loss assessors are: to investigate, of surveyor loss assessors are: to investigate, manage, quantify, validate and deal with losses manage, quantify, validate and deal with losses arising from any contingency and report thereon arising from any contingency and report thereon and to carry out the work with competence, and to carry out the work with competence, objectivity and professional integrity by strictly objectivity and professional integrity by strictly adhering to the code of conduct. They should adhering to the code of conduct. They should submit their report as expeditiously as possible, submit their report as expeditiously as possible, but not beyond 30 days.but not beyond 30 days.

6655

Categorisation of Surveyors Categorisation of Surveyors Based on their Based on their professional qualification, training experience professional qualification, training experience and so on, surveyors and loss assessors are and so on, surveyors and loss assessors are categorised into A, B and C categories. They are categorised into A, B and C categories. They are eligible to carry on their work as per the eligible to carry on their work as per the categorisation specified in the licence.categorisation specified in the licence.

6666

Code of Conduct Code of Conduct Every surveyor/loss assessor Every surveyor/loss assessor should abide by the prescribed code of conduct. should abide by the prescribed code of conduct. He should undergo practical training for at least He should undergo practical training for at least 12 months with Category A or B surveyor/loss 12 months with Category A or B surveyor/loss assessor. He may also be required by the IRDA to assessor. He may also be required by the IRDA to pass an examination on the successful pass an examination on the successful completion of training. The IRDA should maintain completion of training. The IRDA should maintain a register of all licensed surveyors and loss a register of all licensed surveyors and loss assessors. It can inspect, survey the assessors. It can inspect, survey the work/books/records/ documents or investigate work/books/records/ documents or investigate any bona fide complaint against a surveyor/loss any bona fide complaint against a surveyor/loss assessor and take the necessary action.assessor and take the necessary action.

6677

Micro-insurance products are both general and life Micro-insurance products are both general and life insurance products. A general micro-insurance product insurance products. A general micro-insurance product (GMIP) means a health insurance contract/any contract (GMIP) means a health insurance contract/any contract covering belongings, such as, hut, livestock, tools, covering belongings, such as, hut, livestock, tools, instruments/any personal accident contract a on instruments/any personal accident contract a on personal/group basis. Life micro-insurance product personal/group basis. Life micro-insurance product (LMIP) means any term insurance contract with/without (LMIP) means any term insurance contract with/without return of premium/any endowment insurance return of premium/any endowment insurance contract/health insurance contract with/without an contract/health insurance contract with/without an accident benefit rider, either on individual or group accident benefit rider, either on individual or group basis.basis.

Micro-InsuranceMicro-Insurance

6688

Distribution of Micro-insurance Products Distribution of Micro-insurance Products In In addition to the insurance agents/brokers, MIPs addition to the insurance agents/brokers, MIPs can also be distributed by MIAs, namely, SHFs, can also be distributed by MIAs, namely, SHFs, NGOs and MFIs.NGOs and MFIs.