INSURANCE

AND
IRDA

PRESENTED BY – GURJOT
 LEARNING OBJECTIVES
• Introduction
• Background of Insurance Regulation in India
• The Insurance Act, 1938
• The Insurance Regulatory and Development
Authority (IRDA)
• Salient Features of The IRDA, ACT
 INTRODUCTION
• Insurance is a contract between the insurer and the
insured whereby the insurer agrees to compensate
the insured from the loss suffered from a risk against
which he took the insurance policy.
• In view of interest involved ,the business of
insurance all over the world is regulated by state .
• The main purpose of regulation is to ensure that the
business is run fairly ,providing protection to insurers
in case of mis-management and insolvency.
 THE INSURANCE ACT , 1938
• The Insurance Act ,1938 was the most comprehensive and
balanced Act covering both life and non life business of
insurance .
• Provide regulations to prevent the mushroom growth of
companies and to enforce working on sound principles.
• This Act applies to all types of insurance business –
Life ,Fire ,marine, etc.
• It governs the provident companies , mutual offices and co-
operative societies.
 SALIENT FEATURES OF THE ACT
• Registration of Insurance Companies
• Duties of Insurance companies after Registration
• Powers and functions of Controller of Insurance
• Rules relating to Agency
• Rules relating to the formation and organizations of
Insurance Companies
• Tariff Advisory Committee.
 REGISTRATION OF INSURANCE COMPANIES

• Section 3 lays down that every insurer ,in order to carry on

insurance business in India, is required to obtain a certificate of
registration form from ‘CONTROLLER OF INSURANCE’.
• The certificate is issued for a period of one year and may be
renewed each year.
• Section 2 of the Act lays down that only specific companies are
required to register their company, such companies are ,
registered co-operative companies , public companies , a
company registered under any foreign act.
• To obtain certificate the organization must deposit a sum of 10
lakhs with the Reserve Bank of India before making an
application.
 Procedure For Registration
The application for registration must have the following
documents attached to it:
• Memorandum of association and articles of association of the
applicant company.
• Names , occupations and addresses of directors and their
main business in India.
• Scope of proposed insurance business.
• A statement declaring that required security amount is
deposited with RBI.
• Forms and rates of premiums , provision , terms and
conditions of various insurance policies.
DUTIES OF INSURER AFTER REGISTRATION
• After getting a certificate of registration ,the insurer is
required to maintain proper registers and accounts and file
returns regularly.
• Section 14 lays that insurer is required to maintain registers of
policies , claims and of agents.
• Section 10 lays that account books to be maintained , also
annual accounts related to revenue account and balance
sheet.
• Insurance companies are required to submit periodically
various returns and reports to the Controller of Insurance.
 POWERS AND FUNCTIONS OF THE
CONTROLLER OF INSURANCE
• Registration and renewal of registration of insurance companies (sec
3 and 3A)
• Power to check security deposits of insurance companies (section 7)
• Power to receive periodically annual accounts ,reports and returns
from insurance companies.
• Power to issue licences to the underwriters ,indemnifies and
insurers ,etc.
• Powers to solve disputes of settlement of claims involving small
amounts(section 47A)
• Also have powers to investigate the affairs of any insurance company
so as to judge its financial position and report the facts to the
government.
 RULES REGARDING AGENCY
Under insurance act,1938 agents are classified as:
• Chief Agents
• Special Agents
• Principal Agents
• Insurance Agents
Any person desirous of becoming an insurance agent is
required to obtain license from the Controller Of Insurance
under section 42. It is issued for 3 years and may be renewed
further.
Section 40 deals with the fixation of remuneration and
commission of the agents.
 ORGANISATION OF THE INSURANCE
COMPANIES
• Every insurer is required to become member
of Insurance Association of India.
• There are two types of councils constituted to
this asscociation:
1. Life Insurance Council
2. General Insurance Council
 Tariff Advisory Committee
• Constituted in 1968 under section 64 U of the
Act.
• The main object is to control , regulate and
suggest the rates of premium, rules ,terms and
conditions of various insurance policies by
various insurance companies.
• Its head office is in Bombay.
• There are 16 members nominated on the
recommendation of the Central Government.
POWERS OF TARIFF ADVISORY COMMITTEE

• Power to regulate ,recommend and control rates of

premium, rules ,terms and conditions of various
insurance policies.
• In order to determine tariff rules, may invite some
information from any corporation by serving a proper
notice on them .
• May further constitute and organise Regional
Committee.
• The committee may collect fees from member
corporations to meet its expenditures.