Mithibai College of Arts, Chauhan Institute of Science

and Amrutben Jivanlal College of Commerce & Economics

Bhaktivedanta Swami Marg, Vile Parle (West) Mumbai
400056

PROJECT REPORT ON

IRDA
SUBMITTED BY:
KARISHMA SHAH

BACHELOR OF COMMERCE
BANKING & INSURANCE
SEMESTER VI

MITHIBAI COLLEGE
VILE PARLE (W)

SUBMITTED TO
UNIVERSITY OF MUMBAI
ACADEMIC YEAR
2016 - 2017

PROJECT GUIDE
PROF. MANDAR THAKUR

CERTIFICATE

This is to certify that Kumari KARISHMA SHAH of B.Com. (Banking
& Insurance) - Semester VI (2016 – 2017) has successfully
completed the project on IRDA under the guidance of
Prof.MANDAR THAKUR. The information submitted is true and
original.

_______________________ _____________________

Project Guide External Examiner
(Prof. MANDAR THAKUR)

_________________________

Signature of Principal

College Seal

DECLARATION

I, KARISHMA SHAH OF MITHIBAI COLLEGE of TYBBI [Semester
VI] hereby declare that I have compiled this project on IRDA in the
academic year 2016-17. The information submitted is true and
original to the best of my knowledge.

DATE:

PLACE:

Signature of Student
(KARISHMA SHAH)
Roll No: 40

ACKNOWLEDGEMENT

I would like to thank Mithibai College & the faculty members of
BBI for giving me an opportunity to prepare a project on "IRDA". It
has truly been an invaluable learning experience. Completing a task
is never one man's effort. It is often the result of invaluable
contribution of number of individuals in direct or indirect way in
shaping success and achieving it.

I would like to thank principal of the college Dr. RAJPAL
SHRIPATH HANDE and Co-coordinator Prof. MANDAR THAKUR
for granting permission for this project. I would like to extend my
sincere gratitude and appreciation to Prof. VINAY JHADAV who
guided me in the study of this project. It has indeed been a great
learning, experiencing and working under him during the course of
the project.

I would like to appreciate all my colleagues and family members
who gave me support and backing and always came forward
whenever a helping hand was needed. I would like to express my
gratitude to all those who gave me the possibility to complete this
project study.

TABLE OF CONTENTS
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5 | Page .

Another definition for Insurance is the equitable transfer of the risks from the possibility of occurrence of losses. the practice of appraising and controlling ever pervading risks. promoting and selling the insurance products and services amongst the public. INTRODUCTION OF INSURANCE Insurance is a federal subject in India. Risk management. 1. An Insurer is a company designing. It is a subject matter of solicitation. As a result the ramifications of a large and devastating loss can be minimized to a great extent. An insured or policyholder is the person or entity purchasing the insurance products and services. The legislations that deal with insurance business in India are Insurance Act. 1938 and Insurance Regulatory & Development Authority Act (IRDA). has evolved as a discrete field of study and practice. 1999. Insurance is defined as is a form of risk management primarily used to hedge against unforeseen risks of contingent losses. 6 | Page . The study of Insurance incorporates the discipline of Risk Management which acts as a driving force. from one entity to another (or host of others). by the method of diversification in exchange for a premium.

The LIC absorbed 154 Indian. however. the journey of Insurance in India before IRDA came into existence. was dominated by foreign insurance offices which did good business in India. They stated that foreign companies are allowed to enter by floating Indian companies. 1956 nationalizing the Life Insurance sector and Life Insurance Corporation came into existence in the same year. This era. The Bombay Mutual (1871). In 1928. the Government set up a committee under the chairmanship of RN 7 | Page . An Ordinance was issued on 19th January. Yagnavalkya (Dharmasastra ) and Kautilya ( Arthasastra ). The Indian Life Assurance Companies Act. Oriental (1874) and Empire of India (1897) were started in the Bombay Residency. 2. 16 non-Indian insurers as also 75 provident societies—245 Indian and foreign insurers in all. In India. insurance has a deep-rooted history. It finds mention in the writings of Manu ( Manusmrithi ). In 1993. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector. preferably a joint venture with Indian partners. Head Office : is in HYDERABAD. Andhra Pradesh (INDIA ). 1912 was the first statutory measure to regulate life business. INTRODUCTION OF IRDA Insurance Regulatory and Development Authority (IRDA) is an autonomous apex statutory body which regulates and develops the insurance industry in India. The Insurance Amendment Act of 1950 abolished Principal Agencies.e. This was the stages before IRDA existed i. 1818 saw the advent of life insurance business in India with the establishment of the Oriental Life Insurance Company in Calcutta. 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. 1999 and duly passed by the Government of India. It was constituted by the Parliament of India act called Insurance Regulatory and Development Authority Act.

The IRDA was incorporated as a statutory body in April. The Authority has the power to frame regulations under Section 114A of the Insurance Act.Today there are 24 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 23 life insurance companies operating in the country. former Governor of RBI. 3. The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. 2000. in 1999. 1938 and has from 2000 onwards framed various regulations ranging from registration of companies for carrying on insurance business to protection of policyholders‘ interests. A well-developed and evolved insurance sector is a boon for economic development as it provides long. 2002. Foreign companies were allowed ownership of up to 26%. insurance services add about 7% to the country‘s GDP. to propose recommendations for reforms in the insurance sector. Parliament passed a bill de-linking the four subsidiaries from GIC in July.Malhotra. In December. The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums. 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. EVOLUTION OF IRDA Following the recommendations of the Malhotra Committee report. while ensuring the financial security of the insurance market. Together with banking services. The IRDA opened up the market in August 2000 with the invitation for application for registrations. the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. 2000.term funds for 8 | Page .

financial soundness. for the benefit of the common man. To ensure speedy settlement of genuine claims. fair dealing and competence of those it regulates. monitor and enforce high standards of integrity. promote. MISSION OF IRDA  To protect the interest of and secure fair treatment to policyholders  To bring about speedy and orderly growth of the insurance industry (including annuity and superannuation payments). 4. and to provide long term funds for accelerating growth of the economy  To set.infrastructure development at the same time strengthening the risk taking ability of the country. transparency and orderly conduct in financial markets dealing with insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players  To take action where such standards are inadequate or ineffectively enforced 9 | Page . to prevent insurance frauds and other malpractices and put in place effective grievance redressal machinery  To promote fairness.

the Authority shall have the duty to regulate. renew. modify.  To bring about optimum amount of self-regulation in day-to-day working of the industry consistent with the requirements of prudential regulation. 5. nomination by policy holders. 1999 lays down the duties. code of conduct and practical training for intermediary or insurance intermediaries and agents  specifying the code of conduct for surveyors and loss assessors. 10 | P a g e .  specifying requisite qualifications..  promoting efficiency in the conduct of insurance business. settlement of insurance claim. Subject to the provisions of this Act and any other law for the time being in force. suspend or cancel such registration. the powers and functions of the Authority shall include. DUTIES POWERS AND FUNCTIONS OF IRDA Section 14 of IRDAI Act.  promoting and regulating professional organisations connected with the insurance and re-insurance business. withdraw.  protection of the interests of the policy holders in matters concerning assigning of policy. -  issue to the applicant a certificate of registration. powers and functions of IRDA. insurable interest. surrender value of policy and other terms and conditions of contracts of insurance. Without prejudice to the generality of the provisions contained in sub-section (1). promote and ensure orderly growth of the insurance business and re-insurance business.

 calling for information from.  adjudication of disputes between insurers and intermediaries or insurance intermediaries. 1938 (4 of 1938). levying fees and other charges for carrying out the purposes of this Act.  regulating maintenance of margin of solvency. undertaking inspection of.  specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries.  specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f). conducting enquiries and investigations including audit of the insurers. intermediaries.  regulating investment of funds by insurance companies.  specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector. advantages. insurance intermediaries and other organisations connected with the insurance business.  control and regulation of the rates. terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under section 64U of the Insurance Act.  supervising the functioning of the Tariff Advisory Committee. and  exercising such other powers as may be prescribed 11 | P a g e .

hold and dispose of property. be useful to the Authority: Provided that the Central Government shall. both movable and immovable. or (b) Any appointment in any company in the insurance sector.  BAR ON FUTURE EMPLOYMENT OF MEMBERS The Chairperson and the whole-time members shall not. namely:- (a) A Chairperson. and (c) Not more than four part-time members. integrity and standing who have knowledge or experience in life insurance. economics. appoint. by Notification. 6. finance. accountancy. for the purposes of this Act. ensure that at least one person each is a person having knowledge or experience in life insurance. to acquire. 12 | P a g e . accept: (a) Any employment either under the Central Government or Under any State Government. ESTABLISHMENT AND INCORPORATION OF THE AUTHORITY With effect from such date as the Central Government may. administration or any other discipline which would. for a period of two years from the date on which they cease to hold office as such. subject to the provisions of this Act. general insurance. by the said name. The Authority shall be a body corporate by the name aforesaid having perpetual succession and a common seal with power. respectively.  COMPOSITION OF AUTHORITY The Authority shall consist of the following members. sue or be sued. actuarial science. To be appointed by the Central Government from amongst persons Of ability. law. except with the previous approval of the Central Government. (b) Not more than five whole-time members. and to contract and shall. while appointing the Chairperson and the whole-time members. an Authority to be called "the Insurance Regulatory and Development Authority". there shall be established. general insurance or actuarial science. in the opinion of the Central Government.

submit to the Central Government a report giving a true and full account of its activities including the activities for promotion and development of the insurance business during the previous financial year. statements and other particulars in regard to any proposed or existing programme for the promotion and development of the insurance industry as the Central Government may.  FURNISHING OF RETURNS TO CENTRAL GOVERNMENT The Authority shall furnish to the Central Government at such time and in such form and manner as may be prescribed. (c) The percentage of prescribed premium income received from the insurer. officers and other employees of the Authority.  CONSTITUTION OF FUND There shall be constituted a fund to be called "the Insurance Regulatory and Development Authority Fund" and there shall be credited thereto- (a) All Government grants. fees and charges received by the Authority. ESTABLISHMENT OF INSURANCE ADVISORY COMMITTEE 13 | P a g e . The Fund shall be applied for meeting - (a) The salaries. (b) The other expenses of the Authority in connection with the discharge of its functions and for the purposes of this Act. or as the Central Government may direct to furnish such returns. Copies of the reports received under sub-section (2) shall be laid . the Authority shall. Without prejudice to the provisions of sub-section(1). (b) All sums received by the Authority from such other source as may be decided upon by the Central Government. 7. from time to time. as soon as may be after they are received. require. before each House of Parliament. allowances and other remuneration of the members. within nine months after the close of each financial year.

Employ any auditor or actuary or both for the purpose of assisting him in any investigation under this section. It shall be the duty of every manager. consumer fora.The Authority may. direct any Person (hereafter in this section referred to as "Investigating Authority") specified in the order to investigate the affairs of any insurer and to report to the Authority on any investigation made by such Investigating Authority: Provided that the Investigating Authority may. wherever necessary. the Insurance Advisory Committee may advise the Authority on such other matters as may be prescribed. on being directed so to do by the Authority. at any time. managing director or other officer of the insurer to produce before the Investigating Authority 14 | P a g e . by notification. organisations engaged in safety and loss prevention. cause an inspection to be made by one or more of his officers of any insurer and his books and account. intermediaries. agriculture. and shall. a Committee to be known as the Insurance Advisory Committee. The Insurance Advisory Committee shall consist of not more than twenty-five members excluding ex-officio members to represent the interests of commerce. The objects of the Insurance Advisory Committee shall be to advise the Authority on matters relating to the making of the regulations under section 26. agents. and the Investigating Authority shall supply to the insurer a copy of this report on such inspection. surveyors.  Power of investigation and inspection by Authority The Authority may. transport. The Chairperson and the members of the Authority shall be the ex- officio Chairperson and ex-officio members of the Insurance Advisory Committee. Notwithstanding anything to the contrary contained in section 235 of the time. establish with effect from such date as it may specify in such notification. research bodies and employees' association in the insurance sector. Without prejudice to the provisions of sub-section (4). by order in writing. industry.

any manager. seems reasonable. if a company. The Authority may by the regulations made by it specify the minimum information to be maintained by insurers in their books. report to the Authority on any inspection made under this section. by order in writing: (a) require the insurer. the checks and other verifications to be adopted by insurers in that connection and all other matters incidental thereto as are. and may. 15 | P a g e . in any other case. after giving reasonable notice to the insurer. whether the registration of the insurer has been cancelled under clause (b) or not. or (c) direct any person to apply to the court for the winding up of the insurer. or (b) cancel the registration of the insurer. directed to make an investigation under sub-section (1). managing director or other officer of the insurer in relation to his business and may administer oaths accordingly. The Investigating Authority shall. or inspection under sub-section (2).directed to make the investigation under sub-section (1). necessary to enable the Investigating Authority to discharge satisfactorily his functions under this section. may examine on oath. in the opinion of the Authority. the Authority may. publish the report submitted by the Investigating Authority under sub section (5) or such portion thereof as may appear to it to be necessary. registers and other documents in his custody or power and to furnish him with any statement and information relating to the affairs of the insurer as the said Investigating Authority may require of him within such time as the said Investigating Authority may specify. the manner in which such information shall be maintained. if he has been directed by the Authority to cause an inspection to be made. all such books of account. after giving such opportunity to the insurer to make a representation in connection with the report as. or inspection under sub-section (2). Any Investigating Authority. The Authority may. On receipt of any report under sub-section (1) or sub-section (5). to take such action in respect of any matter arising out of the report as the Authority may think fit. in its opinion.

 Penalty for failure to comply with section 32C If an insurer fails to comply with the provisions of section 32C. or is attributable to any neglect on the part of. the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. and was responsible to. if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. manager. secretary or other officer of the company. any director. secretary or other officer shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. manager. he shall be liable to a penalty not exceeding five lakh rupees for each such failure and shall be punishable with imprisonment which may extend to three years or with fine for each such failure.  Offences by Companies Where any offence under this Act has been committed by a company. at the time the offence was committed. where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of. every person who. such director. was in charge of. Notwithstanding anything contained in sub-section (1). Provided that nothing contained in this sub-section shall render any such person liable to any punishment.  Penalty for failure to comply with section 32B If an insurer fails to comply with the provisions of section 32B. he 16 | P a g e .

monitor and enforce high standards of integrity. To bring about speedy and orderly growth of the insurance industry (including annuity and superannuation payments). transparency and orderly conduct in financial markets dealing with insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players. the registration granted to such insurer under section 3 shall be cancelled by the Authority. 4. 3. promote. To ensure speedy settlement of genuine claims. To ensure that insurance customers receive precise. 6. To protect the interest of and secure fair treatment to policyholders. OMBUDSMEN The Ombudsmen are appointed in accordance with the Redressal of Public Grievances Rules. clear and correct information about products and services and make them aware of their responsibilities and duties in this regard. for the benefit of the common man.  Objectives of IRDA Act. 1999 1. to prevent insurance frauds and other malpractices and put in place effective grievance Redressal machinery. 5. To bring about optimum amount of self-regulation in day to day working of the industry consistent with the requirements of prudential regulation. and to provide long-term funds for accelerating growth of the economy. To promote fairness. 1998 to resolve all complaints relating to 17 | P a g e . To take action where such standards are inadequate or ineffectively Enforced 8. 7. fair dealing and competence of those it regulates. 2. To set.shall be liable to a penalty not exceeding twenty-five lakh rupees for each such failure and in the case of subsequent and continuing failure. financial soundness. 8.

efficient and effective manner. The Ombudsmen are also empowered to receive and consider any partial or total repudiation of claims by an insurer. if the complaint is not settled by agreement. However. delay in settlement of claims and the non-issue of any insurance document to customers after receipt of premium. prior to making a complaint. Further. such person should have made a representation to the insurer and either the insurer has rejected the complaint or has not replied to it. the Ombudsman may pass an award of compensation within three months of the complaint. such person should have made a representation to the insurer and either the insurer has rejected the complaint or has not replied to it. any dispute on the legal construction of the policies in as much such a dispute relates to claims. which shall not be in excess of which is necessary to cover the loss suffered by the complainant as a direct consequence of the insured peril. The Ombudsmen act as a Counsellor and mediator and make recommendations to both parties in the event that the complaint is settled by agreement between both the parties. any dispute in regard to the 18 | P a g e . in the manner specified. Further. the complaint should be made not later than a year from the date of rejection of the complaint by the insurer and should not be any other proceedings pending in any other court. or for an amount not exceeding rupees two million (including ex gratia and other expenses). whichever is lower. any dispute in regard to the premium paid in terms of the policy.settlement of claims on the part of insurance companies in a cost effective. in the manner specified. the complaint should be made not later than a year from the date of rejection of the complaint by the insurer and should not be any other proceedings pending in any other court. However. However. prior to making a complaint. Ombudsman within his jurisdiction. Consumer Forum or arbitrator pending on the same subject matter. Consumer Forum or arbitrator pending on the same subject matter. The Ombudsmen are also empowered to receive and consider any partial or total repudiation of claims by an insurer. Any person who has a grievance against an insurer may make a complaint to an Ombudsman within his jurisdiction.

any dispute on the legal construction of the policies in as much such a dispute relates to claims. delay in settlement of claims and the non-issue of any insurance document to customers after receipt of premium. 9. The Ombudsmen act as a counsellor and mediator and make recommendations to both parties in the event that the complaint is settled by agreement between both the parties. the Ombudsman may pass an award of compensation within three months of the complaint. or for an amount not exceeding rupees two million (including ex gratia and other expenses).premium paid in terms of the policy. if the complaint is not settled by agreement. which shall not be in excess of which is necessary to cover the loss suffered by the complainant as a direct consequence of the insured peril. REGISTRATION OF INSURANCE COMPANIES Every insurer seeking to carry out the business of insurance in India is required to obtain a certificate of registration from the IRDA 19 | P a g e . whichever is lower.14 However.

(b) The aggregate equity participation of a foreign company (either by itself or through its subsidiary companies or its nominees) in the applicant company cannot not exceed twenty six per cent of the paid up capital of the insurance company. In determining the aforesaid capital requirement. any person intending to carryon insurance business in India would need to set up a separate entity in India. (d) The name of the applicant needs to contain the words “insurance company” or “assurance company”. Consequently. 1956. the IRD Act and the various regulations prescribed by the Authority. (b) A minimum paid-up equity capital of rupees two billion.prior to commencement of business. (c) The applicant can carry on anyone of life insurance business. in case of a person carrying on exclusively the business of reinsurance.  General Registration Requirements The following are some of the important general registration requirements that an applicant would need to fulfill: (a) The applicant would need to be a company registered under the provisions of the Indian Companies Act. the Insurance Act and the regulations there under provide for the manner of computation of such twenty-six per cent. However. the deposits to be made and any preliminary expenses incurred in the formation and 20 | P a g e .  Capital Structure Requirements The applicant would need to meet with the following capital structure requirements: (a) A minimum paid up equity capital of rupees one billion in case of an applicant which seeks to carry on the business of life insurance or general insurance. general insurance business or reinsurance business. Separatecompanies would be needed if the intent were to conduct more than one business. The pre-conditions for applying for such registration have been set out under the Act of 1938.

with a new set of promoters and for a class of insurance business different than the one originally applied for. The IRDA may accept the requisition on being satisfied of the bona fides of the applicant. the applicant may apply to the Authority within thirty days of such rejection for re-consideration of its decision. A “promoter” of the company is not permitted to hold. In the event that the Authority accepts the requisition for registration application. However. An applicant. over a period of ten years from the date of commencement of business. more than twenty-six per cent of the paid-up capital in any Indian insurance company. the Authority may after giving the applicant a reasonable opportunity of being heard. an interim measure has been permitted percentages higher than twenty six percent are permitted if the promoters divest. life insurance business consisting of linked business.registration of the company would be included. whose requisition has been accepted. Additionally. or general insurance business including health insurance business. the completeness of the application and that the applicant will carry on all the functions in respect of the insurance business including management of investments etc. it shall direct supply of the application for registration to the applicant. reject the requisition. In the event that the aforesaid requirements are not met with. may make an application along with the relevant documents evidencing deposit. non-linked business or both. at any time. The applicant is required to make a separate requisition for registration for each class of business i. an applicant whose requisition for registration has been rejected may approach the Authority with a fresh request for registration application after a period of two years from the date of rejection. in a phased manner.  Procedure for obtaining a certificate of registration An applicant desiring to carryon insurance business in India is required to make a requisition for a registration application to the IRDA in a prescribed format along with all the relevant documents. Thereafter. the share capital held by them in excess of twenty six per cent. 21 | P a g e .e.

advantages. In the event that the Authority rejects the application forregistration. and such application should be accompanied by evidence of fees that should the higher of: o fifty thousand rupees for each class of insurance business. The Authority would. when considering an application.  Renewal of Registration An insurer who has been granted a certificate of registration should renew the registration before the 31st day of December each year. appeal to the Central Government for reconsideration of the decision and the decision of the Central Government in this regard would be final.capital and other requirements in the prescribed form for grant of a certificate of registration. After consideration of the matters inter alia capital structure. it appears to the Authority that the assured rates. If. or the application for renewal of certificate 22 | P a g e . and o one fifth of one per cent of total gross premium written direct by an insurer in India during the financial year preceding the year in which the application for renewal of certificate is required to be made. record of performance of each promoters and directors and planned infrastructure of the company. give preference in grant of certificate of registration to those applicants who propose to carry on the business of providing health covers to individuals or groups of individuals. he may require that a statement thereof to be submitted to an actuary appointed by the insurer and the Authority shall order the insurer to make such modifications as reported by the actuary. An applicant granted a certificate of registration may commence the insurance business within twelve months from the date of registration. the applicant aggrieved by the decision of the Authority may within a period of thirty days from the date of communication of such rejection. terms and conditions offered or to be offered in connection with life insurance business are in any respect not workable or sound. the Authority may grant the certificate of registration. however.

o does not co-operate in any inquiry conducted by the Authority. in any case than fifty thousand rupees for each class of insurance business. during the year preceding the year in which the application is required to be made by the insurer in the class of insurance business to which the registration relates but shall not exceed one-fourth of one percent of such premium income or rupees fifty million. o fails to furnish any information as required by the Authority relating to its insurance business. the total premiums in respect of facultative reinsurance accepted by him in India shall be taken into account.  Cancellation of certificate of registration The Authority. may impose a penalty in the 23 | P a g e . is required to be made. the total premium in respect of facultative re-insurance accepted by him in India shall be taken into account).  Suspension of registration The registration of an Indian insurance company or insurer may be suspended for a class or classes of insurance business. in addition to any penalty that may be imposed or any action that may be taken. o does not submit periodical returns as required under the Act or by the Authority. or rupees fifty million whichever is less. instead of the total gross premium written direct in India. o fails to make investment in the infrastructure or social sector as specified under the Insurance Act. However. This fee may vary according to the total gross premium written direct in India. in the following cases: o conducts its business in a manner prejudicial to the interests of the policy-holders. for such period as may be specified by the Authority. or be less. (and in case of an insurer carrying on solely re-insurance business. whichever is less. in the case of an insurer carrying on solely re-insurance business. o indulges in manipulating the insurance business. in case of repeated defaults of the grounds for suspension of a certificate of registration.

or o if the insurer is in liquidation or is adjudged an insolvent. to comply with the provisions relating to the excess of the value of his assets over the amount of his liabilities. or o if the whole of the deposit made in respect of the insurance business has been returned to the insurer. any requirement of the Insurance Act or of any rule or any regulation or order made or. The Authority is compulsorily required to cancel the registration of an insurer either wholly or in so far as it relates to a particular class of insurance business. the standing contract is cancelled or is suspended and continues to be suspended for a period of six months. In addition to the above. in the case of an insurer. o if. or o if the insurer fails. or 24 | P a g e . or acts in contravention of. as the case may be o if the insurer fails to comply with the provisions relating to deposits. or o if the Central Government of India so directs. or o if the business or a class of the business of the insurer has been transferred to any person or has been transferred to or amalgamated with the business of any other insurer. or o if the Authority has reason to believe that may claim upon the insurer arising in India under any policy of insurance remains unpaid for three months after final judgment in regular course of law. at any time. or o if the insurer carries on any business other than insurance business or any prescribed business. any direction issued there under. the Authority has the discretion to cancel the registration of an insurer o if the insurer makes default in complying with.form of cancellation of the certificate.

to revive the registration. The order of cancellation shall take effect on the date on which notice of the order of cancellation is served on the insurer. or o complies with the provisions as to the excess of the value of his assets over the amount of his liabilities. or to wind up the affairs of the company in respect of a class of insurance business. 1999. CONSUMER PROTECTION 25 | P a g e .  Revival of registration The Authority has discretion. o if the insurer makes a default in complying with any direction issued or order made. or the GIC Act or the FEMA. 2000. apply to the Court for an order to wind up the insurance company. unless the registration of the insurance company has been revived or an application for winding up has already been presented to the Court. by the Authority under the IRDA Act. or the LIC Act. if the insurer within six months from the date on which the cancellation took effect: o makes the deposits. or acts in contravention of. Thereafter. where the registration of an insurer has been cancelled. The Authority may. the insurer would be prohibited from entering into any new contracts of insurance. or o has his standing contract restored. after the expiry of six months from the date on which the cancellation order takes effect. as the case may be. 10. any requirement of the Companies Act. but all rights and liabilities in respect of contracts of insurance entered into by him before the cancellation takes effect shall continue as if the cancellation had not taken place. o If the insurer makes a default in complying with.

Premium notices. rendering a service to the client commences at the stage of solicitation itself when the insurer offers to bring the prospect into its fold. in the non-life domain. it is unlikely that he would pose a challenge for the competitors in acquiring business. and take stock of the situation in ensuring that there is discernible progress over a period of time In insurance. In order to obviate such a scenario. hand holding etc. In the domain of financial services in general. While the grievances of the second kind can be managed by counselling. this is one aspect that is hard to achieve. extent of coverage etc. 26 | P a g e . if both the parties to the contract are totally at agreement with the reciprocal obligations and their fulfilment. amount of claims.. and in this regard. This compels us to analyse the various types of grievances. Apart from mis-selling which continues to be a very commonly reported reason for customer grievances. in the life sector. Especially in a world where communication is very fast. there is hardly any space for deficiency of service. such negative trends of functioning would have a serious impact on the business interests of the players.There are different ways of looking at a consumer’s grievance – ranging from a genuine grievance arising out of a deficiency of service. the competitive market plays a very vital role. Change of address and other administrative services etc. there must be continuous analysis of the reasons for customer grievances and wherever necessary. there is a dire need to take a serious look at the genuine grievances of customers. to the manifestation of one's frustration over an avoidable non-issue. put in place methods to ensure that such grievances do not recur. If one of the players holds an ill reputation for disservice. some other frequently observed areas of operation where insurers need to concentrate are: Claims Management. and surveyor-related issues. and insurance in particular. Ideally.

Given that even normal insurance purchase tends to produce anxiety for the buyer. customer confidence building is possible only when insurers free the customer from the many potential pain points that can arise for the customer across the insurance value chain. a corporate agent or a broker. the extent of customer dissatisfaction still existing in the insurance domain leaves a lot to be desired. A life insurance value chain from the consumer view point may be as seen as shown below: Policy Renewal Claim Advice under admin and Grievance and sales writing service service redressal service  Advice and sales The advice and sales area is rife with pain points which ultimately results in mis-selling and loss of confidence in insurance services per se. Therefore an insurance advisor or sales person. sooner than later. The starting point is misleading. are essential in creating value. Insurers must ensure a major turnaround in this area. who may be an in- company employee. While there is no doubt that there has been great progress in this regard. courts and other consumer bodies often comment about the poor service rendered. improper or ignorant advice. but in rendering trust building advice which needs perceptive product knowledge in the context of customer’s life cycle moment – in terms 27 | P a g e .Special attention must be paid to such of those areas where press reports. an external tied agent. and financial indemnification (assured payment is made to the extent of covered loss). where contract certainty (the promise made is adhered to). needs to be trained (not merely in mandated training). The adoption of technological support wherever possible and necessary. Insurance is a service. must be quickly accomplished as it would certainly add to the levels of efficiency in customer service.

The context of insurance is primarily risk transfer for the customer. or other vulnerability contexts. demographic. non-disclosure and misrepresentation so that genuine customers can be served better and wrong costs are not added to the insurer pool. life cycle. Thus the intermediary service is vital in removing knowledge and service asymmetries for both the contracting parties as under: VALUES THAT INTERMEDIARIES OFFER 28 | P a g e . social. not investment or covering loan ‘risks’ and so on. many of the sales and advice teams do not see customer needs in terms of customer good only. So the concept of 'treating customers fairly'. However. The insurance advisor must be guided by the underwriter in assuring the contextualization of risk for the customer and offering a suitable product. keeping in mind the level of risk aversion that the customer has. The second aspect is the offer that the customer needs to make to the insurer and the disclosures on risk that needs to be elicited so that the insurer has all relevant information as disclosed by the customer to understand the real risk exposures.of economic. so as to fashion the right product and price point for the customer. Insurance is not to be hard sold today. but push products in terms of the urgencies of the insurer. the commission returns for the intermediary and the concerns of other stakeholders such as lenders and so on. but to be discussed in the risk milieu of the customer and the financial planning needed to meet the life situation of the customer. needs to become an active concept from the starting of the relationship itself. The intermediary needs to play the lead role in preventing attempt at fraud.

renewals. by distinguishing the risks as per the risk Advises the right products and the methods to categories made by the underwriters determine the best buy and remove the search Reduces the frictional costs that can arise costs for the insured out of asymmetric information Explains the complex language of insurance The intermediary brings to the table the and reduces the uncertainty costs of the insured behavioural aspects of the insured’s risk Intermediaries reduce the procedural hassles Intermediaries match buyer needs with involved as also the complexity costs involved. informational. They assist in policy renewal and the They help customers to trade up to better lifelong retention of the customer products when made available They give feedback on the quality of They offer relevant risk management. They help insurer competitiveness by The intermediary can offset the actuarial mind. test and it provides the security as needed by the develop new products.collection of risk specific or general set of an insurer who may treat insureds as a information. Intermediaries provide the full They evaluate customer needs and help to sell information required to help proper the full line of products based on life cycle and underwriting and rating. or new services. mere risks to berated. service rendered by the insurer. To the Customer To the Insurer Consumers to be motivationally pushed as they Insurer aided to attract good risks by may not enjoy buying insurance reducing the knowledge asymmetry between insurer and the insured. and relational services to the insured. customer. occupational needs.  Underwriting 29 | P a g e . insurer requirements in case of claim and In claims the insured needs all the hand holding to help in speedy settlement of the claim he can get to speed assessment and settlement. Makes pricing of risks far more accurate. refunds etc. They can make transparent the product and how They help to carry out research. to The intermediary helps to communicate enhance the value of the coverage. insurer’s products and also give feedback They help insured in additional services such as on customer demands and aspirations endorsements.

the rating approach and the many limitations set in the policy. conditions and warranties make underwriting service very value oriented. the relevance of the exclusions. Here the pain points can be many arising from numerous occasions for errors that significantly affect the validity and utility of the cover due to inaccuracies and omissions creeping in the underwriting assumptions made. The type of cover given. and therefore take stock of the frequency and size of claims. The practice of redlining or rejecting or improper loading of rates based on arbitrary reasons becomes serious pain points for customers and is against legal. and obtain a price based on the merit of the risk to be insured. Real service in underwriting is the possibility of introducing scientific risk rating factors based on IT platforms to ensure that more and more factors relevant to the risk are introduced so that the best merit rating possible can be offered to the insured using real time data bases. so that the loss probability of the matter insured is equal to the risk premium charged. grow markets. and to tackle any unnecessary costs in the service of insurance. and improve customer experience in the mastery of risk.  Policy Administration and Service 30 | P a g e .Underwriting is the most important service that helps insured customers in analysing and understanding their risks. An underwriter's aim is to prevent. By doing this. regulatory and actuarial ruling sand principles. and good underwriters can help them to minimise their risks through better risk management based on compliance to warranties and conditions. The underwriting process helps the underwriter to be familiar with the peculiarities of the risk to be accepted and how potential losses can arise. insurers help to bring down the cost of insurance. the width and depth of coverage. reduce and transfer risk. and to what extent the onus can be put on the insured to take steps to prevent the occurrence of a loss.

acceptance of the premium. email. such as increase in premium 31 | P a g e . It was expected that agents would personally hand over renewal notices and take the premium cheque but it is natural for the insurer to establish direct contact to avoid any service failure and especially so when the renewal terms may undergo change. In the logistics of service insurers are injecting (and need to inject even more) technology and IT services to get services rendered hassle free and to the extent possible cost free. Scrutiny of the proposal. and benefit entitlements like no claim bonus or discounts. over phone or by sms. sending a copy of the proposal form back to the insured.This is an area where the logistical services of the insurer need to be efficient and the process flow error free. making available channels for the further guidance to the insured etc. In this regard the use of vernacular in policy language along with the original version in English is also a definite value addition. issuance and checking of the policy with relevant clauses.  Renewal Service Renewal service is of utmost importance and every effort must be to contact the insured by letter. past history of insurance coverage and claims. Anywhere. adding the names of nominees or others interested in the policy such as the bank. despatching the policy to the insured in time. better hand holding during times of claims etc. amendments to the policy. Toll free call numbers. FAQs on websites. co creation of relevant product packages and in reporting their requirements on electronic platforms so as to get instant service. ‘dos and don'ts’ for the customer while the policy cover is running are some of the services that are given to ensure that customers can manage the tenure of the policy against any error or misunderstanding. form part of the policy administration and service. Similarly small customers will not get ignored or elbowed out if technology aids them in self-service. anytime service. are issues on which customers will seek instant services and relief. conditions and exclusions.

updating of insured details. as good underwriting is supposed to forecast the claim frequency and severity to a large extent in a normal year. the regulator and so on. Management of renewal can remove many pain points such as gaps in insurance. everyone is afraid of the failures in claim service as the focus of insurance is on protection in case of the unforeseen eventuality of claims. Where customers understand that the final amount to be paid may take time. Even though under policy terms and conditions there may be no obligation to renew or invite to renew. other changes may be made by the company. Insurance presupposes the fact that what may be uncertain to an individual is more certain when there are large numbers and this is how claims are forecasted based on past experience tempered with current realities. A bad perception about a company’s claim service attitude can damage irreparably a company’s brand equity and reputation. when a claim arises. Even good customers. This need not be so. taking on new add-ons and so on. upgrading the policy coverage. changes in the risk details. who try to avoid losses and not claim.  Claim service In the context of insurance. there are increasing moral and regulatory compulsions to ensure that proper renewal services are offered as foundational to ensure lifelong coverage service to the customer. Insurers are fixated about reducing the claims outgo and in the process they let go the time urgencies felt by the insured and those others like banks that are waiting for the loss amount to restart the economic activity impaired. have nightmares about claim service. they would be highly relieved if an ‘on account’ payment can be released because it makes it clear 32 | P a g e . if claims are within their tolerance. In claims there are two types of urgencies – time and correctness of the settlement.rates. changes in terms and conditions. revision of sum insured. by the industry or as directed by courts. Insurers need to check as whether the body language of the company changes.

etc. Lack of access to the sites of loss. where the resources of insurers. Grievances can arise in all areas of insurance service. there are occasions of great disasters such as floods. and insurer pro-activeness is fundamental to this service and insurer commitments are to be made transparent in this area. repairers and public authorities are stretched. but some of them are routine and can be handled quickly by insurers if tight processes and timelines are maintained in service.that liability has been admitted and the initial finance to restart operations can be had. Ombudsmen. the lack of sufficient repairers. the non-availability of insureds who may have to leave their houses/localities. there are many processes and requirements on the part of the insurer. earthquakes. the higher costs of parts and other logistical problems. Managing these extraordinary situations calls for insurers/ reinsurers and all intermediaries and public authorities to act together and show the resolve to settle such claims quickly to demonstrate commitment to the underlying insurance concept of social solidarity and public good. There are two types of claims from the perspective of service delivery. 33 | P a g e . surveyors. the difficulty in obtaining insured's documents and the inability of public authority to record losses for the purposes of claim processing are all part of the hurdles in service. but the driver of the service is the insurer.  Grievance Management Customer complaints are common in the financial services area. However. Hence Regulators. From the time of claim intimation to the final payment of the claim cheque. Any slackness from any side is bad for the outcome. intermediary and the insured. It is more or less simple to handle random claims from various customers at various time points. Consumer Forums and the Judiciary are hard on insurers who fail to honour their commitments by using interpretations that are one sided or rely on the fine print without the application of mind.

there are areas of dispute where insurers may have been unable to take the right decision in the first instance. Grievances are also the feedback mechanism for insurers to sense the emerging pain points and take the opportunity to become proactive to plug them. the community and local society and the larger political economy. This is where grievances have a real role for a merit based relook. innovation and sensitiveness to customers' changing needs are rendered necessary for sustainability and success and is done by deepening.g. Therefore grievance management can emerge as a point for strategic approaches in customer engagement and better customer experiences. and to move on from the corrective to the creative. However. there is still great scope in reaching assured risk mitigating services. Traditionally. in the area of claims. and this service offers multi-tier benefits because losses impact individuals and families. Technical reasons have validity when they touch the core areas of the claim but in some cases they are invoked ignorantly or owing poor interpretational capability. widening and sharpening service offerings. when the insured comes up with a grievance. the insurer must utilise more experienced people to examine the grievance and take a decision based on the new inputs given by the customer. renewal service e. insurers are blamed for not distinguishing between real and technical reasons for denying claims. insurers need to examine the root causes that create frequent grievances and take action to remove such causes to prevent the flow of repeating grievances.However. In any industry. gap in renewal and in similar issues. After repeated grievances are reported regarding the same matter. business success is the result of actual customer experience and the resulting customer advocacy based on a day to day 34 | P a g e . In the emerging area of risk management through insurance. In conclusion. The flow of grievances and customer queries through the many channels of communication to the company should be sieved through for collecting the points for setting new directions for product offering and service standards.

systems and processes. The Indian insurance sector is set to grow by leaps and bounds in the years to come. but its real mettle will be tested in the maturity of organisations to deliver real value and error free service. knowledge power. using the right technology. proving that the insurer/intermediary delivers on promises enshrined in the vision and mission of the organisation. 11. This must be even more so in case of service failures. So there is a need for holistic investment in achieving positive customer experiences.excellence in service. the right attitude and service culture to power the organisation's service-speak. NEW LAWS AND GUIDELINES 35 | P a g e .

The disclosure norms are seen as a precursor to allowing insurance companies to hit the primary market.e. 36 | P a g e . It is also essential that investors are made fully aware of the financial performance. profit &loss account. the IRDA said. company profile. According to the new norms.The Insurance Regulatory and Development Authority (IRDA) have issued disclosure norms for insurance companies. beginning with the October-March period. segmental reporting. after which they may be allowed to go for an initial public offer (IPO). the risk exposure. on a quarterly/half-yearly/ yearly basis. Insurers have also been asked to host all the forms including revenue account. mandating them to publish accounts on a half-yearly basis. schedules to accounts and other forms. 2010. elements of corporate governance in place and the management of the insurance companies. Such disclosures will be necessary for all insurers even if they are not listed on any stock exchange. IRDA has also said that key analytical ratios of insurance companies have to be published in at least one English daily circulating substantially in the whole of India and in one regional language newspaper. i. financial position. IRDA said several insurance companies will be completing 10 years shortly. insurers will have to publish their balance sheet on half-yearly basis starting from the period ending March 31. balance sheet. Such data shall preferably be made available for at least a 5-year period prior to the IPO. The regulator has directed all firms to come up with a public disclosure framework to ensure a fair and stable insurance market. on their websites.

At present. provide information to policyholders that help them make informed decisions before entering into an insurance contract. Public disclosures. For better understanding of the complexities of ULIP. However. various expert stakeholders in the market can provide necessary inputs based on the disclosures. on the risks faced by the insurers. which will help them in assessing the risk exposure of an insurer while entering into a contract with an insurer. it may not be possible for an individual policyholder to have necessary ability and resources to undertake the task of assessing the insurers. There has to now be a minimum lock-in period of three years and all insurance companies selling ULIP need to provide for reasonable insurance cover. in India. 37 | P a g e . For better understanding of Unit-linked life insurance products (ULIP) by intending investors/policyholders. along with availability of the greater part of the targeted sum at the longer end. periodical in-house refresher training to those involved in soliciting business. the insurance companies should provide separate training to all agents/intermediaries before they are Authorized to sell ULIP. loss to policyholders is much more than that to investors. the International Association of Insurance Supervisors (IAIS) has recognized that insurers have an equal if not greater responsibility towards policyholders than their duty towards the investors. Insurance companies are being asked to follow a uniform practice for rounding off the unit prices.According to the IRDA. with a linkage to the premium payment during the term of the contract. Also. the Insurance Regulatory and Development Authority (IRDA) have put forth detailed guidelines for companies selling these. This is because if insurers become insolvent.

and also disclose the agency appointment letter to the prospect on demand. aimed at curtailing wrong selling. will entail commissions being retracted from agents and credited to the policyholders account. 38 | P a g e . any advertisement by insurance companies should clearly distinguish ULIP from traditional life insurance products and also make clear that the premiums and funds are subject to certain charges related to the fund or to the premium paid. he should dispassionately advice the policyholder on the products of all Insurers whom he is representing and the product best suited to the specific needs of the prospect.Further. IRDA has also asked all life insurers to furnish data on switching options exercised by policyholders. Insurance Regulatory & Development Authority has decided to penalize agents if the insurance policies are not renewed. iv) where the Insurance agent represents more than one insurer offering same line of products. i) identify himself and the insurer of whom he is an insurance agent. iii) disseminate the requisite information in respect of insurance products offered for sale by his insurer and take into account the needs of the prospect while recommending a specific insurance plan. Every insurance agent shall. The move.  IRDA New Guidelines for Insurance Agents In a first of its kind measure. And such not renewed policy to be treated as Single Premium Policy". ii) show the agency identity card to the prospect.

and also the importance of disclosure of material information in the purchase of an insurance contract. ix) advise every prospect to effect nomination under the policy x) inform promptly the prospect about the acceptance or rejection of the proposal by the insurer. within the knowledge of the agent. in the form of a report called “Insurance Agent’s Confidential Report” along with every proposal submitted to the insurer wherever applicable. by making all reasonable enquiries about the prospect.v) disclose the scales of commission in respect of the insurance product offered for sale. including any adverse habits or income inconsistency of the prospect. viii) obtain the requisite documents at the time of filing the proposal form with the insurer. and any material fact that may adversely affect the underwriting decision of the insurer as regards acceptance of the proposal. v) indicate the premium to be charged by the insurer for the insurance product offered for sale. xi) render necessary assistance and advice to every policyholder on all policy servicing matters including assignment of policy. xii) render necessary assistance to the policyholders or claimants or beneficiaries in complying with the requirements for settlement of claims by the insurer. change of address or exercise of options under the policy or any other policy service. and other documents subsequently asked for by the insurer for completion of the proposal. 39 | P a g e . vi) explain to the prospect the nature of information required in the proposal form by the insurer. vii) bring to the notice of the insurer every fact about the prospect relevant to insurance underwriting. wherever necessary. if asked by the prospect.

advantages. f) interfere with any proposal introduced by any other insurance agent. e) behave in a discourteous manner with the prospect. j) apply for fresh agency appointment to act as an insurance agent. No insurance agent shall. terms and conditions other than those offered by his insurer. and a period of five years has elapsed from the date of such cancellation. c) induce the prospect to submit wrong information in the proposal form or documents submitted to the insurer for acceptance of the proposal. g) offer different rates. d) resort to multilevel marketing for soliciting and procuring insurance policies and/or induct any prospect/policyholder to join a multilevel level marketing scheme. k) become or remain a director of any insurer. if his agency appointment was earlier cancelled by the designated official. i) force a policyholder to terminate the existing policy and to effect a new policy from him within three years from the date of such termination of the earlier policy. 40 | P a g e . h) demand or receive a share of proceeds from the beneficiary under an insurance contract.---- a) solicit or procure insurance business without being appointed to act as such by the insurer b) induce the prospect to omit any material information in the proposal form.

 Impact Over Awareness to Insurance IRDA is not only emphasizing over the introduction of different rules and regulations in the insurance sector in order to protect the interests of policyholders but also it is trying to make the activities of insurance sector transparent and taking different steps so as to increase the awareness of the society to the insurance. The IRDA is having close observation over the different activities of insurance sector in India in order to ensure the proper protection of the policyholders' interests and scope of regulation is constantly increasing. There is a great change in the insurance market whether 41 | P a g e .  Impact Over Customers Education IRDA is attempting to make all the significant and material information associated with insurance products public and it has also made mandatory for the insurers to disclose all the secret information to the customers.  Impact Over Policyholders Interests Protection As far as the matter of protection of policyholders' interests is concerned. it is clear that the impact of IRDA over policyholders' interests' protection is significant.  Impact Over Insurance Market The impact of IRDA over the insurance market is not hidden to any one of us. Thus. IMPACR OF IRDA  Impact Over Regulation of Insurance Sector There is great impact of IRDA in the overall regulation of the India Insurance sector. 12. it is the core objective of the IRDA and IRDA is also trying its level best in this context.

 Impact Over Life Insurance Corporation of India Life Insurance Corporation of India was a single player in the life insurance sector prior to the introduction of the IRDA and LIC of India had monopoly over the life insurance market. Thus.  Impact Over Insurance Objective The introduction of private players in the insurance sector has made the insurance sector diversified. IRDA has also given due attention towards the development of insurance intermediaries (Distribution Channel) in order to make available insurance to everyone.  Impact Over Distribution Channel (Insurance Intermediaries) of Insurance Product It is very natural phenomena that only good distribution (demand) can sustain the constant production (product development). marketing. The development of ULIPs is the outcome of privatization of the insurance sector. which has also brought an amazing change in the trends of 42 | P a g e . dynamic and competitive. there are twenty three other private life insurers apart from the LIC of India the existing life insurance market. But now. therefore.with respect to insurance product. competition and customers' awareness.  Impact Over Development of Insurance Product One of the significant impacts of IRDA amongst its different impacts over the insurance sector is its impact over the development of insurance products. The IRDA has brought a revolution in the direction of development of insurance products. the LIC of India has to make it so strong that it may compete with its rivals and secure its previous position in the market.

43 | P a g e .policyholders and as a result insurance objective for the people of the society has been thoroughly changed. It is a natural impact over insurance sector.  Impact Over Contents of Insurance Product (Multipurpose Insurance Product) At the outset. But in the present market.  Impact Over Competition in the Insurance Sector There was no competition term in the insurance market prior to the introduction of private players in the life insurance sector. Competition in the existing insurance market is gradually increasing.  Impact Over Expenses of Insurers There was nothing like competition in the insurance market before the introduction of private companies in the life insurance sector and as a result there was no need to expend huge money over different activities related to the insurance except over some fixed activities. Thus. competition has brought a great change in the expenditure size of the insurers. insurance was concerned with insurance not any other issue or requirement. insurance products are being designed and developed so that they may cater different other as much as the needs of the prospective customers apart from the core need of the insurance.  Impact Over Workforce (Employment Opportunity of Insurance Sector) A gradual increase in the number of insurers in the insurance sector is creating competition amongst pre-existing insurers and this trend directly or indirectly demands a large workforce.

It also emphasises the need for such agents to have appropriate aims and objectives. such as. The regulation also creates a new intermediary called the micro-insurance agent. with our without an accident benefit rider. either on individual or group basis. livestock or tools or instruments or any personal accident contract. any contract covering the belongings. “Life micro insurance product” means any term insurance contract with or without return of premium. Regulations on micro- insurance were officially gazette by the IRDA on 30 November 2005. 13. as per terms stated in Schedule-II appended to these regulations. This has been 44 | P a g e . either on individual or group basis. The micro-insurance regulations promote extensive use of intermediaries by the insurers for selling and servicing various micro-insurance products. as per terms stated in Schedule-I appended to these regulations. transparency and accountability stated in the bye-laws with demonstrated involvement of committed people. hut. The regulation clearly defines MI agents and has imposed minima in terms of the number of years of experience (at least 3) of working with low income groups. a good track record. IRDA AND MICROINSURANCE Insurance Regulatory and Development Authority of India (IRDAI) has created a special category of insurance policies called micro- insurance policies to promote insurance coverage among economically vulnerable sections of society. The regulation provides definitions of micro-insurance products covering life and general insurance “General micro insurance product” means any health insurance contract. and endowment insurance contract or health insurance contract.

They abide by the code of conduct defined by the IRDA and attend 25 hours of training (down from 100 hours originally required for conventional insurance agents but now reduced to 50 hours) in the local language at the expense of the insurer. rule. MFI or other community organization such as Self Help Groups (SHG) appointed by an insurer to distribute micro-insurance through specified persons. According to the regulation. There is no qualifying examination. the onus for the selection of appropriate MI agents and their capacity building lies with the insurance company. (b) Self Help Groups (SHG) means any informal group consisting of ten to twenty or more persons and has been working at least for 45 | P a g e . clearly stated aims and objectives. Intermediary: The micro insurance agent. Micro-insurance agents enter into a “deed of agreement” with the insurer. transparency and accountability as outlined in its memorandum. unlike the case of ordinary insurance agents. with proven track record. and has been working at least for three years with marginalized groups. can be a Non-Governmental Organization (NGO). by-laws or regulations as the case may be. (a) Non-Government Organization (NGO) means a non-profit organization registered as a society under any law. However. done in order to prevent the engagement of unscrupulous operators in the activity. and demonstrates involvement of committed people.

inter alia. three years with marginalized groups. for sanctioning loan/finance to its members. with proven track record. agents. IRDA has recognized four categories of intermediaries: brokers. as the case may be. and demonstrates involvement of committed people. (c) Micro-Finance Institutions (MFI) means any institution or entity or association registered under any law for the registration of societies or co-operative societies. by-laws or regulations. clearly stated aims and objectives. rules. Categories other than MI agents may sell micro-insurance but they do not benefit from the concessions allowed for the MI agents. corporate agents. (c) Collection and remittance of premium (d) Distribution of policy documents 46 | P a g e . and Micro-insurance (MI) agents. The regulation provides for MI agents to perform the following functions (a) Collection of proposal forms (b) Collection of self declaration from the proposer that he/she is in good health. as the case may be. transparency and accountability as outlined in its memorandum. a micro-insurance agent shall not distribute any product other than a micro insurance product. However.

(e) Maintenance of registers of all those insured and their dependants covered under the micro insurance scheme. together with details of name. sex. nominees and thumb impression/signature of the policyholder. MI agents may thus receive commission at 47 | P a g e . (f) Assistance in the settlement of claims (g) Ensuring nomination to be made by the insured (h) Any policy administration service A cap has been put on commission. This is based on the logic that an MI agent has to perform a number of functions which mainstream agents do not have to undertake. address. between 10 and 20% of premiums per year according to type and mode of insurance payment. which is in excess of what conventional agents would normally earn. age. The rates of commission applicable to MI agents are Life insurance business General insurance business Single Premium policies – 15% of the premium 15% of the single premium Non-single premium policies – 20% of the premium for all the years of the premium paying term The commission rates prescribed above are more liberal than the 60% (of a single year’s premium) payable under ordinary business in the case of life insurance and 10% in the case of general insurance.

The commission structure is. MI agents may route premiums and claims payments through their books (such as receive individual premiums and pay it over as one amount). This is not allowed for other intermediaries and is considered important in managing the cost of intermediation. the insurer may decide the commission subject to the overall limits specified by IRDA. 48 | P a g e . For group insurance products. however.different rates from those applicable to other intermediaries. changed to remove up-front payments in favour of payments upon the performance of certain functions.