Industry Regulator

IRDA
12-Oct-14
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 compliance
Summarizing:
IRDA is one the strongest regulator across industries
Its 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 31
st
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 Margin
Company 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 31
st
March
????
Prospects 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
Shareholders Funds












Solvency margins









Reserves




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Customer
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