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Laws & Regulation

v_1.0_Sept_09

Objectives
By the end of the session you will be able to :

• The salient features of:
• Insurance act 1938 • Life insurance corporation act,1956 • IRDA Act,1999

• Consumer protection act,1986
• Ombudsman • Income tax act • Married women’s property act • Understand the importance of financial planning • Understand the difference between savings and investment and know various savings and investment instruments • Understand the concept of safety, liquidity and return

• Draw out advantages of life insurance products over other savings/investment instruments

1939 • Amendments have been made in the Insurance Act 1938 in 1950 and later through the IRDA Act 1999 .Insurance Act 1938 • Aimed to consolidate and amend the law relating to the business of insurance • Came into force with effect from 1st July.

appoint additional directors. Protection of policyholder’s interest Provisions placing limits on the expenses of the insurers. Issue instructions. Use of funds and patterns of investments. to take over management of an insurer and to appoint administrators The IRDA has powers to adjudicate on disputes between the insurers and intermediaries or between intermediaries up to Rs. and their remunerations.2000 . Maintaining the solvency levels The Act vests IRDA with powers to inspect documents. Prohibition of rebates.Insurance Act 1938 The Act contains provisions regarding Licensing of agents.

• This exclusive privilege ceased as a result of the amendment made in 1999. • Section 30 of this Act gave LIC the privilege to transact life insurance business in India.Life Insurance Corporation Act 1956 • The act was the basis for the establishment of the LIC of India. • LIC is a corporate body. • Consists of not more than 16 members appointment by Central Government • One member is appointed as Chairman .

IRDA Act 1999 Passed by the Parliament in December 1999 provided for the establishment of the authority to protect the interest of policy holders. promote and ensure orderly growth of insurance industry of India. To regulate. .

agriculture. surveyors etc.IRDA Act 1999 IRDA IS A CORPORATE BODY • It is advised by insurance advisory committee consisting of not more than 25 members • These members represent the interest of commerce. . transport. industry. consumer forums.

licensing and laying down regulations for proper conduct of business and protection of the interest of policy holders .IRDA Act 1999 It replaces the ‘controller of insurance’ to administer the provisions of the act Including registrations.

imperfection or shortcoming or inadequacy in the quality.Consumer Protection Act 1986(COPA) Consumerism is a movement to safeguard the interest of the customer It has developed as a reaction to business ignoring the rights of consumers and exploiting them Under this act an individual can approach various forums for redress in case he is not satisfied with the goods or services provided A defect or deficiency is a fault. nature or manner of performance in any goods or services .

Consumer Protection Act 1986 The following are the four basic consumer rights The Right To Safety The Right To Be Informed The Right To Choose The Right To Be Heard(Redress) .

1crore National Commission .00.000 District Level Complaints Up to Rs.20. CONSUMER FORUM Complaints Up to Rs. consumer dispute redressal forums are established in each district and state.1 Crore State Level Complaints Above Rs.Consumer Protection Act 1986 In order to attend to complaints under this Act .

Consumer Protection Act 1986 COPA also applies to the insurance business The agent can help to mitigate the complaint or grievance by taking due care at the time of proposal The majority of disputes are related to repudiation of or delay in settlement of claims When giving a written presentation always to ensure correct information is being given Personal intervention of agent can help reduce the delay in office procedures which are mainly due to non-compliance with requirements or ambiguity in title .

.Ombudsman • Ombudsmen are appointed by the governing body of the insurance council. • Their function is to resolve complaints in respect of dispute between policyholders and insurers in cost effective. efficient and impartial manner.

Ombudsman: Types Of Complaints Received Partial Or Total Repudiation Of Claims Any Dispute Regarding Premium Paid Or Payable In Terms Of The Policy Any Dispute On The Legal Construction Of The Policy Relating To Claims Delay In Settlement Of Claims Non Issue Of Any Insurance Document To Customer After Receipt Of Premium .

Ombudsman : Consideration Of The Complaint • Ombudsman shall act as councilor and mediator in matter's within its term of reference. • It is not a judicial authority and has no rights to summon witnesses • It has to make its decision on the basis of documents submitted to it • The complainant and insurer are permitted to make their personal submissions but lawyers are not permitted to argue in this case .

Ombudsman : Consideration Of The Complainant • His decision as to whether the complaint is fit and proper for being considered by it or not shall be final. • Complaint to the ombudsman shall be entertained only when insurer has rejected the complaint or no reply was received within 1 month of the complaint to the insurer or the reply was unsatisfactory. .

Ombudsman : Consideration On The Complaint • A complaint can be made within 1 year after the insurer has rejected the representation. . • The subject matter should not be before any court or consumer forum or arbitration.

• A copy of the recommendation shall be sent to a insurer who shall comply within 15 days of such recommendation and inform the ombudsman accordingly. .Ombudsman: Acceptance Of The Recommendation • Shall make a recommendation within 1 month from the date of receipt of complaint. • The complainant may accept this recommendation.

20. .00. stating the amount awarded The amount shall not be in excess of what is required to cover the loss suffered by the complainant as a direct consequence of the insured peril or for an amount not exceeding Rs.Ombudsman : Non Acceptance Of The Recommendation If the complainant does not accept ombudsman’s recommendation The ombudsman shall pass an award in writing.000 which ever is lower.

the award shall not be implemented .Ombudsman : Award • Award has to be passed within 3 months of the receipt of the complainant • Complainant has to be intimated within 1 month of the award • The insurer has to comply with the award within 15 days and inform the ombudsman • If the complainant does not intimate the acceptance.

Income Tax Act The tax laws in India encourage people to save through life insurance and other instruments by providing relief from tax liabilities Knowledge of tax provisions is important for an agent as it affects the benefits under a policy .

Income Tax Act Exemption Exempts the income from tax-no tax is payable The income tax provisions affecting insurance are of three types Deduction Reduces the taxable Income Rebate Reduces the income tax payable .

Exemption • Income tax exemption on maturity/death claim proceeds • Any sum received under life insurance policy including the bonus additions is exempt from income tax • Maturity claim payments are taxable if the premium paid in any one year exceeds 20% of the sum assured Exception• Insurance premiums paid under partnership insurance or key man insurances are allowed as expenses .Income Tax Act.

40.000 • Section 80D . NSC .PPF. 1961 • Section 80C.50.on amounts paid or deposited in any investment like insurance .000 . the claim amount will be treated as non-taxable. KVP etc -to the extent of Rs.000/- • Section 10(10d)-on claim of life insurance. 10. • Section 80 DD.on amount deposited in a plan taken for the maintenance of a handicapped relative-to the extent of Rs.Income Tax Act Some income tax provisions under it Act.on amount invested for medical insurance to the extent of Rs.1.

Wealth Tax Act • The wealth tax act exempts life insurance policies totally provided premiums are payable for more than 10 years or more • If the policy term is less than 10 years proportionate value of the right or interest of the assesses in the policy will be exempted • Such policies have to be included in the net wealth as on the date of the valuation .

. shall be deemed to be a trust for the benefit of his wife and children and shall not be subject to the control of the life assured or his creditor or form part of his estate.Married Women’s Property Act (MWPA) 1874 Section 6 of the MWP Act provides that a policy of insurance effected by any married man on his own life and expressed on the face of it for the benefit of his wife and children.

000 lives • 4th financial year – 14% • 5th financial year – 16% On total policies written direct .000 lives • 5th financial year.7500 lives • 3rd financial year-10.every insurer has to do a minimum business from this sectors In case of rural areas • 1st financial year – 7 % • 2nd financial year – 9 % • 3rd financial year – 12% In case of social areas • 1st financial year .5000 lives • 2nd financial year .000 lives • 4th financial year-15.20.Rural And Social Sector As per IRDA regulation 2002.

000 SA.5000 to Rs. Micro insurance agents receive 10% Commission on single premium and 20% on Regular premiums .000 SA. • Term plan cover ranging from Rs.5.5000 to Rs. 30. • Health Insurance Cover Range Rs.30.000 Sa.50. Livestock Or Tools Of Instruments And Personnel Accidents.Micro Insurance (IRDA Regulation 2005) Provides smaller risk coverage • Covers small families including husband wife. • Covers Health Insurance. Hut. • Endowment cover limit Rs. • Policy term should be within 5 to 15 years. • For Health Insurance Policy Term Should Be In Between 1 To 7 Years. dependent parents and up to three children. • Age of entry between 18 to 60 years Micro insurance agents have to go for 25 hours training • For Accidental Benefit The Term Is 5 To 15 Years.000 To Rs.

Thank You .