INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY

INTRODUCTION
The Insurance Regulatory and Development Authority (IRDA) is a national agency of
the Government of India, based in Hyderabad. It was formed by an act of Indian
Parliament known as IRDA Act 1999.

The Insurance Regulatory and Development Authority IRDA was constituted as an

autonomous body to regulate and develop the business of insurance and re-insurance in
India. The Authority was constituted on April 19, 2000. The Insurance Regulatory and
Development Authority Act, 1999, were enacted by Parliament. IRDA was set up in 1996
but it was formally constituted as a regulator of the insurance industry in April 2000.The
objectives of IRDA are policyholder protection and healthy growth of the insurance
market.

IRDA has constituted the Insurance Advisory Committee and in consultation with the
committee has brought out seventeen regulations. A leading consumer activist has also
been inducted into the Insurance Advisory Committee. In addition, representatives of
consumers, industry, insurance agents, women’s organizations, and other interest groups
are a part of this committee.

Insurance Regulatory and Development Authority (IRDA, which was constituted by an

act of parliament) specify the composition of Authority.

The Authority is a ten member team consisting of

(a) a Chairman;
(b) five whole-time members;
(c) four part-time members,
all members are appointed by the Government of India.

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MISSION STATEMENT OF IRDA

1. To protect the interest and secure fair treatment to policyholders.

2. To bring about speedy and orderly growth of the insurance industry (including
annuity and superannuation payments) for the benefit of the common man, and to
provide long-term funds for accelerating growth of the economy.
3. To set, promote, monitor, and enforce high standards of integrity, financial
soundness, fair dealing, and competence of those it regulates.
4. To ensure that insurance customers receive precise, clear and correct information
about products and services and make them aware of their responsibilities and
duties in this regard.
5. To ensure speedy settlement of genuine claims, to prevent insurance frauds, and
other malpractices and put in place effective grievance redressal machinery.
6. To promote fairness, transparency, and orderly conduct in financial markets
dealing with insurance and to build a reliable management information system to
enforce high standards of financial soundness amongst market players.
7. To take action where such standards are inadequate or ineffectively enforced.
8. To bring about optimum amount of self-regulation in day-to-day working of the
industry, consistent with the requirements of prudential regulation.

DUTIES, POWER AND FUNCTIONS OF IRDA

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

Subject to the provisions of this Act and any other law for the time being in force, the
Authority shall have the duty to regulate, promote, and ensure orderly growth of the
insurance business and re-insurance business.

Without prejudice to the generality of the provisions contained in sub-section (1), the
powers and functions of the authority shall include:

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1) Issuing to the applicant a certificate of registration, renew, modify, withdraw,
suspend or cancel such registration .
2) Protection of the interests of the policy-holders in matters concerning assigning
of policy, nomination by policy holders, insurable interest, settlement of
insurance claim, surrender value of policy, and other terms and conditions of
conditions of contracts of insurance.
3) Specifying requisite qualifications, code of conduct and practical training for
intermediary or insurance intermediaries and agents.
4) Specifying the code of conduct for surveyors and loss assessors.
5) Promoting efficiency in the conduct of insurance business.
6) Promoting and regulating professional organizations connected with the insurance
and re-insurance business.
7) Levying fees and other charges for carrying out the purpose of this Act.
8) Calling for information from, undertaking inspection of, conducting inquiries and
investigations, including audit of the insurer, intermediaries, insurance
intermediaries, and other organizations connected with the insurance business.
9) Control and regulation of the rates, advantages, terms and conditions that may be
offered by insurers in respect of general insurance business not so controlled and
regulated by Tariff Advisory Committee.
10) Specifying the form and manner in which the books of account shall be
maintained and statement of accounts shall be rendered by insurers and other
insurance intermediaries.
11) Regulating investment of funds by insurance companies.
12) Regulating maintenance of margin of solvency.
13) Adjudication of disputes between insurers and intermediaries or insurance
intermediaries.
14) Supervising the functioning of the Tariff Advisory Committee.
15) Specifying the percentage of premium income of the insurer to finance schemes
for promoting and regulating professional organizations Referred to in clause (f).
16) Specifying the percentage of life insurance business and of general insurance
business to be undertaken by the insurer in the rural or social sector, and

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 exercising such other powers as may be prescribed

OPERATIONS OF IRDA

A. IRDA has developed its internal parameters to assess the promoters’ credentials.
The promoters’ long term commitment to stay in the market, their ability to bring
in new techniques in insurance underwriting and administration are some of the
parameters. Subsequent to this preliminary assessment, IRDA conducts an in
depth assessment of the business plans submitted by the promoter.

B. All insurance intermediaries, such as agents and corporate agents, have to

undergo compulsory training prior to their obtaining a license, IRDA also
specified the minimum educational qualifications for these intermediaries. IRDA
conducts examinations and then issues licenses to these agents. IRDA believes
that well trained and informed intermediaries can service the consumers better.

C. The Insurance Association and Life Insurance and General Insurance Councils
have been revived and they are responsible for setting the norms for market
conduct, ethical behaviour of the insurers, and breach of regulations. Continuous
training has been stipulated to enhance the efficiency of the intermediaries. New
players have set up call centers which are functioning on 24/7 basis.

D. IRDA has recognized the Actuarial Society of India and Insurance Institute of
India as nodal organization responsible for actuarial and insurance education.
IRDA has drafted separate bills of the Actuarial society of India and the Institute
of Surveyors and loss Assessors in order to grant them statutory status.

E. IRDA has also entered into MOU with the Indian Institute of Management,
Bangalore, to further its objective of insurance research and education. It has set
up a risk management resource centre in Bangalore.

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 F. IRDA has come out with the Insurance Advertisement and Disclosure Regulations
to ensure that the insurance companies adhere to fair trade practices and
transparent disclosure norms while addressing the policy holders or the prospects.

EXPECTATIONS FROM IRDA

The law of India has following expectations from IRDA

1. To protect the interest of and secure fair treatment to policyholders.

2. To bring about speedy and orderly growth of the insurance industry (including
annuity and superannuation payments), for the benefit of the common man, and to
provide long term funds for accelerating growth of the economy.

3. To set, promote, monitor and enforce high standards of integrity, financial soundness,
fair dealing and competence of those it regulates.

4. To ensure that insurance customers receive precise, clear and correct information about
products and services and make them aware of their responsibilities and duties in this
regard.

5. To ensure speedy settlement of genuine claims, to prevent insurance frauds and

other malpractices and put in place effective grievance redressal machinery.

6. To promote fairness, 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.

7. To take action where such standards are inadequate or ineffectively enforced.

8. To bring about optimum amount of self-regulation in day to day working of the

industry consistent with the requirements of prudential regulation.

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TYPES OF INSURANCE POLICIES
Insurance provides compensation to a person for an anticipated loss to his life, business
or an asset. Insurance is broadly classified into two parts covering different types of risks:
1. Long-term (Life Insurance)
2. General Insurance (Non-life Insurance)
 1. Long-term Insurance
Long term insurance is so called because it is meant for a long-term period which
may stretch to several years or whole life-time of the insured. Long-term
insurance covers all life insurance policies. Insurance against risk to one's life is
covered under ordinary life assurance. Ordinary life assurance can be further
classified into following types:

1. Whole Life Assurance-

In whole life assurance, insurance company collects premium from the insured for whole
life or till the time of his retirement and pays claim to the family of the insured only after
his death.
2. Endowment Assurance-
In case of endowment assurance, the term of policy is defined for a specified period say
15, 20, 25 or 30 years. The insurance company pays the claim to the family of assured in
an event of his death within the policy's term or in an event of the assured surviving the
policy's term.
3. Assurances for Children-
i). Child's Deferred Assurance: Under this policy, claim by insurance company is
paid on the option date which is calculated to coincide with the child's eighteenth or
twenty first birthday. In case the parent survives till option date, policy may either be
continued or payment may be claimed on the same date. However, if the parent dies
before the option date, the policy remains continued until the option date without any
need for payment of premiums. If the child dies before the option date, the parent
receives back all premiums paid to the insurance company.

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 ii) School fee policy: School fee policy can be availed by effecting an endowment
policy, on the life of the parent with the sum assured, payable in installments over the
schooling period.

4. Term Assurance-
The basic feature of term assurance plans is that they provide death risk-cover. Term
assurance policies are only for a limited time, claim for which is paid to the family of the
assured only when he dies. In case the assured survives the term of policy, no claim is
paid to the assured.
5. Annuities-
Annuities are just opposite to life insurance. A person entering into an annuity
contract agrees to pay a specified sum of capital (lump sum or by installments) to the
insurer. The insurer in return promises to pay the insured a series of payments until
insured's death. Generally, life annuity is opted by a person having surplus wealth and
wants to use this money after his retirement.
There are two types of annuities, namely:
Immediate Annuity: In an immediate annuity, the insured pays a lump sum amount
(known as purchase price) and in return the insurer promises to pay him in
installments a specified sum on a monthly/quarterly/half-yearly/yearly basis.
Deferred Annuity: A deferred annuity can be purchased by paying a single premium
or by way of installments. The insured starts receiving annuity payment after a lapse
of a selected period (also known as Deferment period).
6. Money Back Policy-
Money back policy is a policy opted by people who want periodical payments. A
money back policy is generally issued for a particular period, and the sum assured is
paid through periodical payments to the insured, spread over this time period. In case
of death of the insured within the term of the policy, full sum assured along with
bonus accruing on it is payable by hte insurance company to the nominee of the
deceased.

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 2. General Insurance
Also known as non-life insurance, general insurance is normally meant for a
short-term period of twelve months or less. Recently, longer-term insurance
agreements have made an entry into the business of general insurance but their
term does not exceed five years. General insurance can be classified as follows:
1. Fire Insurance-
Fire insurance provides protection against damage to property caused by accidents
due to fire, lightening or explosion, whereby the explosion is caused by boilers not
being used for industrial purposes. Fire insurance also includes damage caused due to
other perils like strom tempest or flood; burst pipes; earthquake; aircraft; riot, civil
commotion; malicious damage; explosion; impact.
2. Marine Insurance-
Marine insurance basically covers three risk areas, namely, hull, cargo and freight.
The risks which these areas are exposed to are collectively known as "Perils of the
Sea". These perils include theft, fire, collision etc. Marine Cargo: Marine cargo policy
provides protection to the goods loaded on a ship against all perils between the
departure and arrival warehouse. Therefore, marine cargo covers carriage of goods by
sea as well as transportation of goods by land. Marine Hull: Marine hull policy
provides protection against damage to ship caused due to the perils of the sea. Marine
hull policy covers three-fourth of the liability of the hull owner (shipowner) against
loss due to collisions at sea. The remaining 1/4th of the liability is looked after by
associations formed by shipowners for the purpose (P and I clubs).
3. Miscellaneous-
As per the Insurance Act, all types of general insurance other than fire and marine
insurance are covered under miscellaneous insurance. Some of the examples of
general insurance are motor insurance, theft insurance, health insurance, personal
accident insurance, money insurance, engineering insurance etc.

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NEW LAWS AND GUIDELINES:

The Insurance Regulatory and Development Authority (IRDA) have issued disclosure
norms for insurance companies, mandating them to publish accounts on a half-yearly
basis. The disclosure norms are seen as a precursor to allowing insurance companies to
hit the primary market.

According to the new norms, insurers will have to publish their balance sheet on half-
yearly basis starting from the period ending March 31, 2010, i.e. beginning with the
October-March period. Such disclosures will be necessary for all insurers even if they are
not listed on any stock exchange, the IRDA said.

IRDA said several insurance companies will be completing 10 years shortly, after which
they may be allowed to go for an initial public offer (IPO).

It is also essential that investors are made fully aware of the financial performance,
company profile, financial position, the risk exposure, elements of corporate governance
in place and the management of the insurance companies. 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.

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.

Insurers have also been asked to host all the forms including revenue account, profit &
loss account, balance sheet, segmental reporting, schedules to accounts and other forms,
on their websites, on a quarterly/half-yearly/ yearly basis.

According to the IRDA, the International Association of Insurance Supervisors (IAIS)

has recognised that insurers have an equal if not greater responsibility towards
policyholders than their duty towards the investors.

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This is because if insurers become insolvent, loss to policyholders is much more than that
to investors.

Public disclosures, on the risks faced by the insurers, provide information to

policyholders that help them make informed decisions before entering into an insurance
contract.

At present, in India, it may not be possible for an individual policyholder to have

necessary ability and resources to undertake the task of assessing the insurers.

However, various expert stakeholders in the market can provide necessary inputs based
on the disclosures, which will help them in assessing the risk exposure of an insurer while
entering into a contract with an insurer.

For better understanding of Unit-linked life insurance products (ULIP) by intending

investors/policyholders, the Insurance Regulatory and Development Authority (IRDA)
have put forth detailed guidelines for companies selling these. 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, with a linkage to the premium payment during
the term of the contract, along with availability of the greater part of the targeted sum at
the longer end.

For better understanding of the complexities of ULIP, the insurance companies should
provide separate training to all agents/intermediaries before they are authorised to sell
ULIP. Also, periodical in-house refresher training to those involved in soliciting business.
Insurance companies are being asked to follow a uniform practice for rounding off the
unit prices.

Further, 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.

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IRDA has also asked all life insurers to furnish data on switching options exercised by
policyholders,

IRDA New Guidelines for Life Insurance Agents

In a first of its kind measure, Insurance Regulatory & Development Authority has
decided to penalize agents if the insurance policies are not renewed. The move, aimed at
curtailing wrong selling, will entail commissions being retracted from agents and credited
to the policyholders account. And such not renewed policy to be treated as Single
Premium Policy".

Examination system of IRDA:

When you join the training program of IRDA insurance you will get model question
paper and books from the appropriate branch of insurance office. They collect the amount
both of them.
On behalf of “Insurance Regulatory and Development Authority of India” Insurance
institute of India conduct “pre recruitment test” for insurance advisors. To facilitate
insurance companies to deploy more agents and also to offer choice to the candidates
who are tech savvy we conduct this examination in electronic mode. Eligibility for
examinations --- Regulation 4 of the regulations (i.e. IRDA (licensing of Insurance
Agents) /Regulations, 2000) requires that a person desiring to obtain or renew a license to
act as an insurance agent or a composite insurance agent shall possess the minimum
qualification of a pass in 12th standard or equivalent examination conducted by any
recognized Board/Institution, where the applicant resides in a place with a population of
five thousand or more as per the last census, and a pass in 10th standard or equivalent
examination from a recognized Board/Institution if the applicant resides in any other
place.According to the Regulation 5 of the regulations (i.e. IRDA (licensing of Insurance
Agents) /Regulations, 2000), the person desiring to obtain or renew a license to act as an
agent is required to: I) complete from an approved institution 50 hrs of training (i.e. In
case of candidate seeking agency license for the first time) and 25 hrs of training (i.e. In
case of candidate seeking renewal of license), candidate who is seeking license for the

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first time to act as composite (i.e. Life/General) insurance agent has to complete 75 hrs
of training.

(To become an insurance agent one has to fill the application form and than submit to the
appropriate branch of insurance office. (LIC, reliance)
Applicants have two options- to give online or to give offline .i.e. to undergo training... at
their respective offices and than give exam and enroll for membership. For online one has
to fill application form and than take online training and than take exam at Panaji. For
Goa centre.

After becoming an agent one has to sell minimum12 policies per year.. and if they sell
policy of more than 15 yr duration(term period than they get 25% commission on sum
assured. And if less than 15 yr .duration than only 20% commission.) Info from LIC
office Ponda
1. Registrations will be accepted between 10.30 AM to 5.30 PM from Monday to Friday
except public holidays at Mumbai office of III.
2. Contact details for the III’s Mumbai registration center are
Insurance Institute of India - ONLINE EXAM CENTRE
Bombay Mutual Building Annexe
2nd Floor, Casawaji Patel Street
Behind City Bank, Opp. Residency Hotel
Fort, Mumbai -400 001
• Tel. - 22651856/22651857
• E-mail address – iiionline@iii.org.in
3. Registrations for the examination will be done only after receipt of the
o Registration forms (complete with all details) available from III ,
o Attested copies (signed and stamped by insurance company) of Training
Completion Certificates (Xerox or fax copy will not be accepted). Name of
the person attesting the certificate should be clearly mentioned.
o Payment of Rs. 400/- per candidate
o Covering letter of the insurance company (required in case of bulk
registrations).

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(To become an insurance agent one has to fill the application form and than submit to the
appropriate branch of insurance office.(LIC, reliance) applicants have two options- to
give online or to give offline i.e. to undergo training... at their respective offices and than
give exam and enroll for membership.. For online one has to fill application form and
than take online training and than take exam at Panaji. For centre of Goa.

after becoming an agent one has to sell minimum12 policies per year and if they sell
policy of more than 15 yr duration(term period than they get 25% commission on sum
assured. And if less than 15 yr .duration than only 20% commission.) Info from LIC
office Ponda
Covering letter of insurance company should provide following information
o Name of the authorized contact person of the insurance company
o Both, telephone number (Direct) and mobile number of the contact person
o E-mail id of the contact person
o Document containing name of the candidate, date of commencement of
training, date of completion of training, attested training completion certificate
submitted or not with the registration form.
4. Only Demand Drafts are accepted as mode of payment.
5. Demand drafts should be in favor of “Insurance Institute of India” payable at
Mumbai.

6. Scheduling of examination on any particular day will be subject to availability and

will be done on “first cum first served” basis. In case of availability, registrations for
same or next day will also be accepted.
The Insurance Act, 1938 laws down that an insurance agent must possess a license under
Section 42 of that Act. The license is to be issued by the IRDA. The IRDA has authorized
designated persons, in each insurance company, to issue the licenses on behalf of the
IRDA. The fee for the license, the manner of making an application, etc., have been
described in the IRDA Regulations. A license issued by the IRDA will be valid for three
years. The license may be to act as an agent for a life insurer, for a general insurer or as a

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"composite insurance agent" working for a life insurer as well as a general insurer. No
agent is allowed to work for more than one life insurer or more than one general insurer.

The qualifications necessary before a license can be given are that the person (individual
or corporate insurance executive) must

• be at least 18 years old

• have passed at least the 12th standard or equivalent examination, if he is to be
appointed in a place with a population of 5000 or more, or 10th standard
otherwise
• Have undergone practical training for at least 100 hours in life or general
insurance business, as the case may be, from an institution, approved and notified
by the IRDA. In the case of a person wanting to become composite insurance
agent, the applicant should have completed at least 150 hours practical training in
life and general insurance business, which may be spread over six to eight weeks.
• Have passed the pre-recruitment examination conducted by the Insurance Institute
of India or any other examination body recognized by the IRDA.

A person with the following disqualifications is debarred from holding a license

• He has been found to be of unsound mind by a court of competent jurisdiction

• He has been found guilty of criminal breach of trust, misappropriation, cheating,
forgery or abetment or attempt to commit any such offence.

The license once issued, can be cancelled whenever the person acquires a
disqualification. Applications for renewal have to make at least thirty days before the
expiry of the license, along with the renewal fee of Rs. 250. If the application is not made
at least thirty days before the expiry, but is made before the date of expiry of license, an
additional fee of Rs.100 is payable. If the application is made after the date of expiry, it
would be normally be refused. Prior to renewal of the license, the agent should have
completed at least 25 hours practical training in life or general insurance business or at
least 50 hours practical training in life and general insurance business in the case of a
composite insurance agent. Insurers, who select agents for appointment, make

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arrangements for training, for appearing in the prescribed examinations, and obtaining the
license from the IRDA. The procedures have been streamlined and there is little loss of
time for any step in the process.

HOW TO BECOME AN AGENT

The licensing process would start with the insurer sponsoring a candidate for practical
training. On completion of the mandated training, the applicant has to make an
application in specified format for undergoing a written exam. On clearing of his written
exam, the applicant will make an application to the “designated person” of the sponsoring
insurer. Based on meeting all the above requirements and submission of application fee,
the designated persons will issue the license, along with identity card. The license is valid
for a period of 3 years unless terminated or surrendered. For any renewal of license, the
agent needs to undergo additional 25 hours of training in either life or general from an
approved institution, if the designated person refuses to grant or renew a license under
this regulation, he shall give the reasons therefore to the applicant.
Insurance agency is one of the most rewarding professions. The IRDA have set out strict
rules governing the conduct of agents and insurance companies. The insurers have been
given the guidelines based on which they can issue license to eligible candidates.

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