Insurance Regulatory and Development Authority (IRDA)

We regulate the Indian insurance industry to protect the interests of the policyholders and work for the orderly growth

of the industry.

Background

1991: Government of India begins the economic reforms programme and financial sector reforms

1993: Committee on Reforms in the Insurance Sector, headed by Mr. R. N. Malhotra, (Retired Governor,

Reserve Bank of India) set up to recommend reforms.

1994: The Malhotra Committee recommends certain reforms having studied the sector and hearing out the

stakeholders

Some recommended reforms

o Private sector companies should be allowed to promote insurance companies

o Foreign promoters should also be allowed

o Government to vest its regulatory powers on an independent regulatory body answerable to

Parliament

 Birth of IRDA

Insurance Regulatory and Development Authority (IRDA) set up as autonomous body under the IRDA Act,

1999

IRDA’s Mission: To protect the interests of policyholders, to regulate, promote and ensure orderly growth of

the insurance industry and for matters connected therewith or incidental thereto.

IRDA’s Activities

Frames regulations for insurance industry in terms of Section 114A of the Insurance Act 1938

From the year 2000 has registered new insurance companies in accordance with  regulations

Monitors insurance sector activities for healthy development of the industry and protection of policyholders’

interests

What We DoPrint eMail

IRDA’s Mission

Insurance Regulatory and Development Authority (IRDA) Act, 1999 spells out the Mission of IRDA as:

“... 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......”

Functions and Duties of IRDA

Section 14 of the IRDA Act, 1999 lays down the duties, powers and functions of IRDA. 

Registering and regulating insurance companies

Protecting policyholders’ interests

Licensing and establishing norms for insurance intermediaries

Promoting professional organisations in insurance

Regulating and overseeing premium rates and terms of non-life insurance covers

Specifying financial reporting norms of insurance companies

Regulating investment of policyholders’ funds by insurance companies

Ensuring the maintenance of solvency margin by insurance companies

Ensuring insurance coverage in rural areas and of vulnerable sections of society

Buying InsurancePrint eMail

Why buy Insurance

Life is full of uncertainties. We face various risks in our day to day life including risks to our life, health,

property and so on.

We don’t know whether something unfortunate will happen to us or when, but it is certainly possible for us to

take measures to reduce the financial impact of these risks and protect ourselves financially.

Such financial security could come with savings and investment but these merely give back our own money

and some returns.

Insurance is a financial tool specially created to reduce the financial impact of unforeseen events and create

financial security.

Insurance works on the law of large numbers where contributions by many in the form of premium pay for

the losses of a few. By paying a premium for protecting against a certain type of loss, you will be protected

for a certain sum of money that you will receive if you face that loss.

For example, if you pay a premium for hospitalisation expenses up to Rs 1 lakh, then the insurance policy

will pay you up to Rs 1 lakh when you incur hospitalisation expenses.

What insurance to buy

So, what insurance should you buy? Insurance is available for unpredictable events such as death,

accidents, sickness, loss or damage to property. These are simple you should protect yourself against and

what you should buy are life insurance, accident insurance, health insurance and insurance for whatever

property we are looking to protect - motor vehicle, house and so on.

There are more complicated risks like legal liability and various risks that commercial enterprises face. For

these too there are various special policies available. While life insurance and some types of accident and

health insurance are offered by life insurance companies, property insurance, health and accident insurance

(again) are offered by non-life insurance companies (also known as general insurance companies). Click here to see the list of insurance companies registered with IRDA.

The insurance policy that you buy must meet your requirements. This means you must identify what your

needs are first. You must choose your life insurance policy depending on which life-stage you are in and

your aspirations for the future. It will differ based on whether you are about to start a family or you have

growing children with education needs or want to plan for your retirement.

You should also join a health insurance scheme while you are young and ensure that you are continuously

covered. While third party insurance for your motor vehicle is statutory, that is, it is required under the law, it

would be wise to buy a comprehensive policy that covers your vehicle against own damage as well.

Protecting your house and contents against the risks of fire and flood will secure your hard-earned savings.

Be Alert!Print eMail

Fraud affects the lives of innocent people as well as the insurance industry. Insurance fraud has existed ever since

the beginning of insurance as a commercial enterprise. It takes many forms and may occur in any areas of insurance.

Hard Frauds and Soft FraudsAn insurance fraud could either be a hard fraud or a soft fraud. 

A hard fraud occurs when someone deliberately plans or invents a loss such as a theft of a motor vehicle or setting

fire to property covered by an insurance policy.

Soft frauds are more common and include exaggeration of legitimate claims by policyholders. They are also referred

to as opportunistic frauds.

Insurance companies, their intermediaries or those pretending to be either of them may also perpetrate frauds. It is

important that fraudulent activities are eliminated from the industry and it is the duty of all stakeholders to do their bit

in dealing with insurance fraud.

The IRDA has come across certain instances of fraudulent activities and has issued alerts to the public about them

 

Spurious Calls

Health Insurance business by unregistered entity 

Public Notice - Let the buyer beware - Check veracity of entity before buying insurance.

Buy With Care: Some Dos and Don'tsPrint eMail

You buy insurance for security. So be extra careful when you buy it. It is worth taking care of a few crucial aspects

during this process.

Mis-selling by insurers and their intermediaries is something you have to be cautious about. IRDA keeps a tab on

unethical practices by entities selling insurance based on unfounded promises. 

Your insurance company and intermediary have to act according to the Code of Conduct prescribed by IRDA, the

industry councils and the relevant recognised professional association

In case of complaints about misselling IRDA examines the matter and issues an appropriate notice of caution on its

website for public information.

Here are some Dos and Don’ts for buying insurance carefully:

Dos

Buy only from a registered insurer or through his authorised intermediary

See the list of insurers on IRDA's website. Ask them if your intermediary is genuine

Ask the intermediary for all information to make a decision

Evaluate if he is advising you dispassionately

Fill the proposal form yourself and give complete and factual information; False or misleading information

could lead to disputes at the time of a claim

Do not sign a blank proposal form or leave any portion unanswered

If you are not filling it up yourself, ensure that the contents are fully explained to you

Remember you have to sign a certificate as part of the proposal form taking responsibility for its contents

Make sure you understand clearly:

o Whether your policy has a single premium or regular premium

o What your policy term and premium paying term are. They can be different

o What your surrender value is. It can be less than the premiums you have paid

o What is covered and what is not covered

o Understand the returns and bonuses, what is guaranteed and what is not

In the case of Unit-Linked insurance policies (ULIPs):

o Make sure you understand the implications of bearing the investment risk yourself

o Evaluate the performance of the funds before you invest

o Understand the various charges levied under the policy

When you receive the policy bond:

o Make sure it matches the terms proposed/ agreed by you

o If they don’t, you can cancel it during the 15 day "free-look" period from the date you receive the

policy bond

o Premium will be refunded to you with some deductions

Don’ts

Do not sign a blank proposal form or leave any portion unanswered

Do not conceal relevant information or make any misstatements as it may lead to disputes at the time of a

claim

Click here to see Press Release on Misleading Sales Literature on a ULIP

Why Buy Health InsurancePrint eMail

The term ‘Health Insurance’ relates to a type of insurance that essentially covers your medical expenses. A health

insurance policy like other policies is a contract between an insurer and an individual / group in which the insurer

agrees to provide specified health insurance cover at a particular “premium” subject to terms and conditions specified

in the policy.

Health InsurancePrint eMail

Q.

What is Health Insurance?

A. The term health insurance is a type of insurance that covers your medical expenses. A health insurance policy is

a contract between an insurer and an individual /group in which the insurer agrees to provide specified health

insurance cover at a particular “premium”.

 

Category Name :

   Health Insurance

Q.

What are the forms of Health Insurance available?

A. The commonest form of health insurance policies in India cover the expenses incurred on Hospitalization, though

a variety of products are now available which offer a range of health covers, depending on the need and choice

of the insured. The health insurer usually provides either direct payment to hospital (cashless facility) or

reimburses the expenses associated with illnesses and injuries or disburses a fixed benefit on occurrence of an

illness. The type and amount of health care costs that will be covered by the health plan are specified in

advance.

 

Category Name :

   Health Insurance

Q.

Why is Health Insurance important?

A. All of us should buy health insurance and for all members of our family, according to our needs. Buying health

insurance protects us from the sudden, unexpected costs of hospitalization (or other covered health events, like

critical illnesses) which would otherwise make a major dent into household savings or even lead to

indebtedness.Each of us is exposed to various health hazards and a medical emergency can strike anyone of us

without any prior warning. Healthcare is increasingly expensive, with technological advances, new procedures

and more effective medicines that have also driven up the costs of healthcare. While these high treatment

expenses may be beyond the reach of many, taking the security of health insurance is much more affordable.

 

Category Name :

   Health Insurance

Q.

What kinds of Health Insurance plans are available?

A. Health insurance policies are available from a sum insured of Rs 5000 in micro-insurance policies to even a sum

insured of Rs 50 lakhs or more in certain critical illness plans. Most insurers offer policies between 1 lakh to 5

lakh sum insured. As the room rents and other expenses payable by insurers are increasingly being linked to the

sum insured opted for, it is advisable to take adequate cover from an early age, particularly because it may not

be easy to increase the sum insured after a claim occurs. Also, while most non-life insurance companies offer

health insurance policies for a duration of one year, there are  policies that are issued for two, three, four and five

years duration also. Life insurance companies have plans which could extend even longer in the duration. A

Hospitalization policy covers, fully or partly, the actual cost of the treatment for hospital admissions during the

policy period. This is a wider form of coverage applicable for various hospitalization expenses, including

expenses before and after hospitalization for some specified period. Such policies may be available on individual

sum insured basis, or on a family floater basis where the sum insured is shared across the family members.

Another type of product, the Hospital Daily Cash Benefit policy, provides a fixed daily sum insured for each day

of hospitalization. There may also be coverage for a higher daily benefit in case of ICU admissions or for

specified illnesses or injuries.  

A Critical Illness benefit policy provides a fixed lumpsum amount to the insured in case of diagnosis of a

specified illness or on undergoing a specified procedure. This amount is helpful in mitigating  various direct and

indirect financial consequences of a critical illness. Usually, once this lump sum is paid, the plan ceases to

remain in force.

There are also other types of products, which offer lumpsum payment on undergoing a specified surgery

(Surgical Cash Benefit), and others catering to the needs of specified target audience like senior citizens.

 

Category Name :

   Health Insurance

Q.

What is cashless facility?

A. Insurance companies have tie-up arrangements with several hospitals all over the country as part of their

network.  Under a health insurance policy offering cashless facility, a policyholder can take treatment in any of

the network hospitals without having to pay the hospital bills as the payment is made to the hospital directly by

the Third Party Administrator, on behalf of the insurance company. However, expenses beyond the limits or sub-

limits allowed by the insurance policy or expenses not covered under the policy have to be settled by you directly

with the hospital. Cashless facility, however, is not available if you take treatment in a hospital that is not in the

network.

  Category Name :

   Health Insurance

Q.

What are the tax benefits I get if I opt for Health Insurance?

A. Health insurance comes with attractive tax benefits as an added incentive. There is an exclusive section of the

Income Tax Act which provides tax benefits for health insurance, which is Section 80D, and which is unlike the

section 80C applicable to Life Insurance wherein other form of investments/ expenditure also qualify for the

deduction. Currently, purchasers of health insurance who have purchased the policy by any payment mode other

than cash can avail of an annual deduction of Rs. 15,000 from their taxable income for payment of Health

Insurance premium for self, spouse and dependent children. For senior citizens, this deduction is higher, and is

Rs. 20,000. Further, since the financial year 2008-09, an additional Rs 15,000 is available as deduction for

health insurance premium paid on behalf of parents, which again is Rs 20,000 if the parents are senior citizens.

 

Category Name :

   Health Insurance

Q.

What are the factors that affect Health Insurance premium?

A. Age is a major factor that determines the premium, the older you are the premium cost will be higher because

you are more prone to illnesses. Previous medical history is another major factor that determines the premium. If

no prior medical history exists, premium will automatically be lower.  Claim free years can also be a factor in

determining the cost of the premium as it might benefit you with certain percentage of discount. This will

automatically help you reduce your premium.

 

Category Name :

   Health Insurance

Q.

What does a Health Insurance policy not cover?

A. You must read the prospectus/ policy and understand what is not covered under it. Generally, pre-existing

diseases (read the policy to understand what a pre-existing disease is defined as) are excluded under a Health

Insurance policy. Further, the policy would generally exclude certain diseases from the first year of coverage and

also impose a waiting period. There would also be certain standard exclusions such as cost of spectacles,

contact lenses and hearing aids not being covered, dental treatment/surgery ( unless requiring hospitalization)

not being covered, convalescence, general debility, congenital external defects, venereal disease, intentional

self-injury, use of intoxicating drugs/alcohol, AIDS, expenses for diagnosis, x-ray or laboratory tests not

consistent with the disease requiring hospitalization, treatment relating to pregnancy or child birth including

cesarean section, Naturopathy treatment.

 

Category Name :

   Health Insurance

Q.

Is there any Waiting Period for claims under a policy?

A. Yes. When you get a new policy, generally, there will be a 30 days waiting period starting from the policy

inception date, during which period any hospitalization charges will not be payable by the insurance companies.

However, this is not applicable to any emergency hospitalization occurring due to an accident. This waiting

period will not be applicable for subsequent policies under renewal.

 

Category Name :

   Health Insurance

Q.

What is pre-existing condition in health insurance policy?

A. It is a medical condition/disease that existed before you obtained health insurance policy, and it is significant,

because the insurance companies do not cover such pre-existing conditions, within 48 months of prior to the 1st

policy.  It means, pre-existing conditions can be considered for payment after completion of 48 months of

continuous insurance cover.

 

Category Name :

   Health Insurance

Q.

If my policy is not renewed in time before expiry date, will I be denied for renewal?

A. The policy will be renewable provided you pay the premium within 15 days (called as Grace Period) of expiry

date. However, coverage would not be available for the period for which no premium is received by the

insurance company. The policy will lapse if the premium is not paid within the grace period.

  Category Name :

   Health Insurance

Q.

Can I transfer my policy from one insurance company to another without losing the renewal benefits?

A. Yes. The Insurance Regulatory and Development Authority (IRDA) has issued a circular making it effective from

1st October, 2011, which directs the insurance companies to allow portability from one insurance company to

another and from one plan to another, without making the insured to lose the renewal credits for pre-existing

conditions, enjoyed in the previous policy. However, this credit will be limited to the Sum Insured (including

Bonus) under previous policy. For details, you may check with the insurance company.

 

Category Name :

   Health Insurance

Q.

What happens to the policy coverage after a claim is filed?

A. After a claim is filed and settled, the policy coverage is reduced by the amount that has been paid out on

settlement. For Example: In January you start a policy with a coverage of Rs 5 Lakh for the year. In April, you

make a claim of Rs 2 lakh. The coverage available to you for the May to December will be the balance of Rs.3

lakh.

 

Category Name :

   Health Insurance

Q.

What is 'Any one illness’?

A. 'Any one illness' would mean the continuous period of illness, including relapse within a certain number of days

as specified in the policy. Usually this is 45 days.

 

Category Name :

   Health Insurance

Q.

What is the maximum number of claims allowed over a year?

A. Any number of claims is allowed during the policy period unless there is a specific cap prescribed in any policy.

However the sum insured is the maximum limit under the policy.

 

Category Name :

   Health Insurance

Q.

What is “health check” facility?

A. Some health insurance policies pay for specified expenses towards general health check up once in a few years.

Normally this is available once in four years.

 

Category Name :

   Health Insurance

Q. What do you mean by Family Floater Policy?

A. Family Floater is one single policy that takes care of the hospitalization

expenses of your entire family. The policy has one single sum insured,

which can be utilised by any/all insured persons in any proportion or

amount subject to maximum of overall limit of the policy sum insured.

Quite often Family floater plans are better than buying separate

individual policies.  Family Floater plans takes care of all the medical

expenses during sudden illness, surgeries and accidents.

 Free-Look PeriodPrint eMail

You have bought a new insurance policy

and received the policy document and find

that the terms and conditions are not what

you wanted.

What do you do? Grin and bear it?

Not at all. 

IRDA has built into its regulations a

consumer-friendly provision that takes care

this problem.

If you have bought a policy and realise you

don’t want it you can return it and get a

refund.

There are conditions though.

This applies only to Life insurance

policies and

To Health insurance policy that are

for a term of at least 3 years

You can exercise this option within

15 days of receiving the policy

document

You have to communicate to the

company in writing

The premium refund will be

adjusted for

o proportionate risk

premium for the period on

cover

o expenses incurred by the

insurer on medical

examination and

o stamp duty charges

Renewability of Health Insurance

Category Name :

   Health Insurance

Print eMail

There has been some concern among

consumers, especially senior citizens, about

insurance companies turning down the

renewal of health insurance policies.

IRDA has stipulated that a health insurance

policy should always be renewed except if

there has been

Fraud

Moral hazard (intentionally taking

an insurance policy in order to

make a false claim)

Misrepresentation

Click here for Guidelines on Renewability of Health Insurance

Group InsurancePrint eMail

A group insurance policy gives you

advantages of standardised coverage and

very competitive premium rates. You can

avail of group insurance policies that a group

you belong to takes. 

Groups – for this purpose - can be

employer-employee groups or non

employer-employee groups as defined by

IRDA’s group insurance guidelines. 

(Examples are holders of the same credit

card, savings bank account holders of a

bank or members of the same social or

cultural association and so on.)

Here are some things to be careful about

when you participate in a group policy:

Only one master policy will be

issued to the Manager of the group

and will be in the name of the group

(eg: the association)

You are entitled to get a certificate

of insurance if you participate in a

non employer-employee group

policy for your records.

This certificate should contain

o the schedule of benefits

o premium charged and

o terms and conditions of

the cover

Your cover could cease if you leave

the group

When you leave the group the

insurer should offer you continued

coverage under an individual policy

The Manager of the group should

disclose the premium rate and

terms of the policy including the

premium discounts offered to the

group and should pass on the

discounts to all members

The manager of the group has to

disclose any administrative or other

charges he is collecting from

members over and above the

premium charged by the insurance

company

 

Click here for Group Insurance Guidelines   dtd 14 July 2005

 

Click here for Group Insurance Guidelines   dtd   4 January 2011

History of insurance in IndiaRef: IRDA/GEN/06/2007 Date: 12-07-

2007

 

In India, insurance has a deep-rooted history. It finds mention in the writings of Manu ( Manusmrithi ), Yagnavalkya (Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk in terms of pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest traces of insurance in the form of marine trade loans and carriers’ contracts. Insurance in India has evolved over time heavily drawing from other countries, England in particular.    1818 saw the advent of life insurance business in India with the establishment of the Oriental Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870 saw the enactment of the British Insurance Act and in the last three decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in the Bombay Residency. This era, however, was dominated by foreign insurance offices which did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian offices were up for hard competition from the foreign companies.      In 1914, the Government of India started publishing returns of Insurance Companies in India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business. In 1928, the Indian Insurance Companies Act was enacted to enable the Government to collect statistical information about both life and non-life business transacted in India by Indian and foreign insurers including provident insurance societies. In 1938, with a view to protecting the interest of the Insurance public, the earlier legislation was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for effective control over the activities of insurers.    The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a large number of insurance

companies and the level of competition was high. There were also allegations of unfair trade practices. The Government of India, therefore, decided to nationalize insurance business.       An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies—245 Indian and foreign insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector.      The history of general insurance dates back to the Industrial Revolution in the west and the consequent growth of sea-faring trade and commerce in the 17th century. It came to India as a legacy of British occupation. General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd, was set up. This was the first company to transact all classes of general insurance business.1957 saw the formation of the General Insurance Council, a wing of the Insurance Associaton of India. The General Insurance Council framed a code of conduct for ensuring fair conduct and sound business practices.     In 1968, the Insurance Act was amended to regulate investments and set minimum solvency margins. The Tariff Advisory Committee was also set up then.     In 1972 with the passing of the General Insurance Business (Nationalisation) Act, general insurance business was nationalized with effect from 1st January, 1973. 107 insurers were amalgamated and grouped into four companies, namely National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a company in 1971 and it commence business on January 1sst 1973.      This millennium has seen insurance come a full circle in a journey extending to nearly 200 years. The process of re-

opening of the sector had begun in the early 1990s and the last decade and more has seen it been opened up substantially. In 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector.The objective was to complement the reforms initiated in the financial sector. The committee submitted its report in 1994 wherein , among other things, it recommended that the private sector be permitted to enter the insurance industry. They stated that foreign companies be allowed to enter by floating Indian companies, preferably a joint venture with Indian partners.      Following the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market.      The IRDA opened up the market in August 2000 with the invitation for application for registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards framed various regulations ranging from registration of companies for carrying on insurance business to protection of policyholders’ interests.     In December, 2000, the subsidiaries of the General Insurance Corporation of India were restructured as independent companies and at the same time GIC was converted into a national re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002.      Today there are 28 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 24 life insurance companies operating in the country.      The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together with banking services,

insurance services add about 7% to the country’s GDP. A well-developed and evolved insurance sector is a boon for economic development as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country.  

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