Basics

of
Insurance
& IRDA
Prepared By
Deepak Sachdeva
10, Nov 2010

1
 Insurance

 What Is Insurance
Insurance is concerned with protection
of economic value of assets.Tangible
assets are human beings, house,
furniture, motor cycle etc.Intangible
assets are liabilities

2
 History of Insurance

 It started from Lloyd’s coffee house

London
 First policy issued in England in 1583
 In India first policy issued in 1870

3
 History of Insurance
 LIC of India formed in 1956 after
nationalization of life insurance
Business of 245 private insurance
companies
 General insurance business of 107
insurance companies was
nationalized in 1972 & four public sector General
Insurance Companies were formed

4
 Classes of
Insurance

A. Life insurance
B. General insurance
General insurance is further
classified:-
1.Fire insurance
2.Marine insurance
3.Miscellaneous insurance
5
 Miscellaneous Insurances:-

1.Motor insurance
2.Mediclaim insurance
3.Householders insurance
4.Shopkeepers insurance
5.Engineering insurances
etc.
6
 Fundamental
Principles of Insurance

1.Insurable interest- Means financial interest

2.Utmost good faith- Greater duties of faith

on proposer & insurer

3.Indemnity- Actual compensation of loss.

not applicable in life policies

7
 Market Scenario before Irda Act
1999
Life insurance company
1. LIC of India
General insurance companies
1.National insurance company ltd
2.New India assurance company ltd
3.Oriental insurance company ltd
4.United India insurance company ltd

8
 Market Scenario after Irda Act 1999

Stage of
Liberalization,
Privatization &
Globalization
(Competition between public sector & private
sector)
9
 Life Insurance Companies
1.Bajaj Allianz Life Insurance Company Ltd

2.Birla Sun Life Insurance Company Ltd

3.HDFC Standard Life Insurance Company Ltd

4.ICICI Prudential Life Insurance Company Ltd

5.ING Vysya Life Insurance Company Ltd

10
 General Insurance Companies
1.Bajaj Allianz General Insurance Company
Ltd
2.Icici Lombard General Insurance
Company Ltd
3.Iffco Tokio General Insurance Company
Ltd
4.Reliance General Insurance Company Ltd
5.Royal Sundaram Alliance Insurance
Company Ltd
11
 Market Intermediaries
Who procure the
insurance business:-
 Agents
 Corporate agents
 Insurance brokers
 Banks (Bancassurance)

12
 Other market Intermediaries
 Surveyors
Who assess the loss in Non-Life Insurance
Claims
 TPA ( Third Party Administrators)
Who provide the claim settlement service
in health insurance policies

13
 General Insurance Policies
 Fire policies
 Marine policies
 Motor vehicle policies
 Personal line policies
 Health insurances
 Liability insurances
 Rural insurance policies
 Engineering insurances

14
 Insurance Law

 The Insurance Act 1938

(amended)
 Insurance Regulatory & Development
Authority Act 1999

15
 IRDA
 Insurance Regulatory & Development
Authority is the controlling and regulatory
apex body in the country for insurance
sector and its chairman and members are
appointed by Government of India. IRDA’s
HQ is located at Hyderabad

16
 Insurance Regulations
(Regulations issued by IRDA)
 IRDA Actuarial Report and Abstract 2000
 IRDA Registration of Indian Insurance
Companies 2000
 IRDA Insurance Advertisement and
Disclosure 2000
 IRDA The IRDA (Meetings) 2000
 IRDA Investments (Life and General) 2000
 IRDA Statements of Accounts 2000
17
 Insurance Regulations
(Regulations issued by IRDA)
 IRDA The Insurance Advisory Committee
(Meetings) Regulations, 2000
 IRDA Assets, Liabilities, and Solvency
Margin of Insurers Regulations, 2000
 IRDA Obligations of Insurers to Rural
Social Sectors Regulations, 2000
 IRDA Licensing of Insurance Agents
Regulations, 2000
 IRDA Appointed Actuary 2000
18
 Insurance Regulations
(Regulations issued by IRDA)
 IRDA General Insurance - Reinsurance
Regulations, 2000
 IRDA The IRDA (Staff) 2000
 IRDA Surveyors and Loss Assessors 2000
 IRDA Reinsurance –Life 2000
 IRDA Revised Investment Regulations in April
2001

19
 Insurance Regulations

 Irda (third party administrators) regulations 2001

 Irda (protection of policyholder’s interest )

regulations, 2002

 Irda ( licencing of corporate agents) regulations 2002

20
 Insurance Regulations

 Irda (manner of receipt of premium)

regulation 2002
 Irda (licencing of brokers) regulation 2002
 Irda (micro-insurance) regulations, 2005
 IRDA (Treatment of Discontinued Linked
Insurance Policies) Regulations, 2010
 IRDA (Sharing of Database for Distribution
of Insurance Products) Regulations, 2010
21
 IRDA Guidelines on Corporate Governance
for the Insurance Sector

 IRDA vide letter no. IRDA/F&A/CIR/025/2009-10 dated

05-08-2009 has issued detailed guidelines to all insurers
on corporate governance for the insurance sector for
compliance with effect from 01-04-2010 and an
Amendment No.1 has been issued vide letter
no.IRDA/F&I/CIR/F&A/014/01/2010 dated 29-01-
2010

22
 NEED FOR REGULATORY
OVERSIGHT
 Balance bet. interests of insurers, insured
and other members of the public
 Ensure fair terms
 Look into the adequacy of disclosures &
transparency
 Compliance with legal requirements
 RATING WATCH

 No excessive or unfairly discriminatory rates

 Monitor inadequacy/ deficiency in rates
 Compliance with Actuarial oversight
 Analysis of costs through experience data
 NEED TO REVIEW EXISTING
FILE & USE REGULATIONS 2001

 Removal of tariffs
 Need for more comprehensive approach
 Need to enforce more self-regulatory &
governance norms
NEED FOR STANDARDISATION
OF POLICIES/TERMS

 Helps Consumer
Insurer
Coinsurer
Reinsurer
Intermediary
Third Parties
 Need for model policy/clauses at company
level/industry level.
MODEL INSURANCE COVERS
CAN BE IMPOSED BY

 Legislation
 Regulation
 Self-regulation
 An effect of standard cover
- Derogation – i.e., if less than
standard cover draw insured’s attention
ISSUE OF TIED INSURANCE

 Tied, ancillary, undisclosed insurance

Goods/services purchased – insured charged
but not informed
 To be informed
 Cost of insurance to be disclosed
 Problem of excessive commissions to be
avoided
REFUSAL OF COVER ISSUES

 Non-acceptance of proposal
 Renew on special difficult, impossible terms
 Cancellation of cover
 Not renew existing cover
Disclose reasons – except when an
informant/employee is at risk
 CANCELLATION ISSUES
 Types - automatic cancellation
- cancellation without notice
- cancellation immediately on
notice
- 14 day notice period
- no allowance of misdirection
of notice/delay in post

GIVE TIME/REASONS
 (Contd…)

 Effect of cancellation on further insurance

 Cancellation owing to premium deficiency
 Long term cover – annual/installment cover
facility – automatic cancellation on failure to
pay premium
 Cancellation due to non-insurability issues
 Avoidance of a cancellation clause in policy
Thank you
Presented by
Deepak Sachdeva
05.03.2011