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HISTORY OF INSURANCE IN INDIA
In India, insurance has a deep-rooted history. It finds mention in the writings of Manu ( Manusmrithi ), Yagnavalkya ( Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk in terms of pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest traces of insurance in the form of marine trade loans and carriers’ contracts. Insurance in India has evolved over time heavily drawing from other countries, England in particular.
1818 saw the advent of life insurance business in India with the establishment of the Oriental Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870 saw the enactment of the British Insurance Act and in the last three decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in the Bombay Residency. This era, however, was dominated by foreign insurance offices which did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian offices were up for hard competition from the foreign companies.
In 1914, the Government of India started publishing returns of Insurance Companies in India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business. In 1928, 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. In 1938, with a view to protecting the interest of the Insurance public, the earlier legislation was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for effective control over the activities of insurers.
The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a large number of insurance companies and the level of competition was high. There were also allegations of unfair trade practices. The Government of India, therefore, decided to nationalize insurance business.
An Ordinance was issued on 19th January, 1956 nationalizing the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies—245 Indian and foreign insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector.
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The history of general insurance dates back to the Industrial Revolution in the west and the consequent growth of sea-faring trade and commerce in the 17 th century. It came to India as a legacy of British occupation. General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd was set up. This was the first company to transact all classes of general insurance business.
1957 saw the formation of the General Insurance Council, a wing of the Insurance Association of India. The General Insurance Council framed a code of conduct for ensuring fair conduct and sound business practices.
In 1968, the Insurance Act was amended to regulate investments and set minimum solvency margins. The Tariff Advisory Committee was also set up then.
In 1972 with the passing of the General Insurance Business (Nationalization) Act, general insurance business was nationalized with effect from 1st January, 1973. 107 insurers were amalgamated and grouped into four companies, namely National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a company in 1971 and it commence business on January 1sst 1973.
Related Acts:-
The insurance sector went through a full circle of phases from being unregulated to completely regulate and then currently being partly deregulated. It is governed by a number of acts, with the first one being the Insurance Act, 1938.
The Insurance Act, 1938
The Insurance Act, 1938 was the first legislation governing all forms of insurance to provide strict state control over insurance business.
Life Insurance Corporation Act, 1956
Even though the first legislation was enacted in 1938, it was only in 19 January 1956, that life insurance in India was completely nationalized, through a Government ordinance; the Life Insurance Corporation Act, 1956 effective from 1.9.1956 was enacted in the same year to, inter-alia, form LIFE INSURANCE CORPORATION after nationalization of the 245 companies into one entity. There were 245 insurance companies of both Indian and foreign origin in 1956. Nationalization was accomplished by the govt. acquisition of the management of the companies. The Life Insurance
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Corporation of India was created on 1 September, 1956, as a result and has grown to be the largest insurance company in India as of 2006.
General Insurance Business (Nationalization) Act, 1972
The General Insurance Business (Nationalization) Act, 1972 was enacted to nationalize the 100 odd general insurance companies and subsequently merging them into four companies. All the companies were amalgamated into National Insurance, New India Assurance, Oriental Insurance, and United India Insurance which were headquartered in each of the four metropolitan cities.
Insurance Regulatory and Development Authority (IRDA) Act, 1999
Till 1999, there were not any private insurance companies in Indian insurance sector. The Govt. of India then introduced the Insurance Regulatory and Development Authority Act in 1999, thereby de-regulating the insurance sector and allowing private companies into the insurance. Further, foreign investment was also allowed and capped at 26% holding in the Indian insurance companies. In recent years many private players entered in the Insurance sector of India. Companies with equal strength competing in the Indian insurance market. Currently, in India only 2 million people (0.2 % of total population of 1 billion), are covered under Med claim, whereas in developed nations like USA about 75 % of the total population are covered under some insurance scheme. With more and more private players in the sector this scenario may change at a rapid pace.
The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta.
Some of the important milestones in the life insurance business in India are:
1912 - The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.
1928 - The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.
1938 - Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.
1956 - 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz.
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LIC Act, 1956, with a capital contribution of Rs. 5 core from the Government of India.
The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British.
Some of the important milestones in the general insurance business in India are:
1907 - The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business.
1957 - General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices.
1968 - The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up.
1972 - The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973.
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CURRENT SCENARIO:-
This millennium has seen insurance come a full circle in a journey extending to nearly 200 years. The process of re-opening of the sector had begun in the early 1990s and the last decade and more has seen it been opened up substantially. In 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector. The objective was to complement the reforms initiated in the financial sector. The committee submitted its report in 1994 wherein, among other things, it recommended that the private sector be permitted to enter the insurance industry. They stated that foreign companies be allowed to enter by floating Indian companies, preferably a joint venture with Indian partners.
In December, 2000, 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. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002.
Today there are 14 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 14 life insurance companies operating in the country.
The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together with banking services, insurance services add about 7% to the country’s GDP. A well-developed and evolved insurance sector is a boon for economic development as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country.
At present GIC is insuring both ways. A whopping increase in foreign insurance premium at Rs. 600crore has pushed the national re-insurers total premium to over Rs. 3800crore in 2002-03. GIC is willing to write more risks back home for domestic insurance companies. The knock on this account has been primarily from the motor portfolio. GIC apparently does not have much control on its motor, marine or fire losses as the entire chunk comes from the public and private insurance companies. At present every public and private general insurance company has to necessarily cede 20% of its risk with GIC. The reinsurer is in talks with a host of companies to increase their cession limits back home. The quantum of foreign inward premium may be low in the total premium income but the increase in its share over the last one year is significant. In 2002-03, the share of foreign premium has been over 15% compared to
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just 6% the previous year.
GIC is keen to write more risks back home and looking at picking up a strategic stake in African reinsurance major East Africa Re. apart from establishing its presence in London, Moscow and Dubai. Besides, it is examining new Asian markets like China, Korea and Malaysia. With the existing net worth of about Rs. 2800crore, the capacity to write business is almost four times. Going by the huge capacity for retention back home, GIC has approached life insurers to cede 10% of their reinsurance risk.
INTER-COMPETITION AMONG INSURERS:-
Private insurance companies can give a good competition to the PSUs in terms of customer orientation and quick settlements. There is a big scope for financiers to book a good fee based income by becoming corporate agents. Before the industry was opened up, the four public sector insurance companies were underwriting Rs. 14000/-core premium a year. So far, the eight private insurers had taken away only 14% of the business. They have an uphill task in taking on the four PSUs which have big network of officers, market reach and a vast development force. The need for de-tariffing premium for the sake of removing unfair trade practices has been stressed upon by all the private players. While there is a big business potential, the regulators, in a bid to create entry barriers, have forced the promoters to pump over Rs. I00crore as capital. This will result in longer payback period of six to seven years. The insurance companies so far have been providing separate insurance cover for each and every segment but the efforts are on to provide a comprehensive insurance cover to machines, assets and the people. Attempts are also on to include the health and accident insurance for the IT companies where the insurers are trying to bundle the existing services to provide a comprehensive package. Three leading insurance companies are preparing a blueprint for offering the policy to IT companies. However, these companies are yet to approach the insurance Regulatory and Development Authority for seeking approval. IT companies are still major clients for the country’s budding insurance industry; attempts are on to roll out an exclusive insurance cover for IT Companies. Insurance broking Companies like India Insure, Helios Insurance Services and Kadel Insurance Services for IT Companies. Insurance companies are today looking at different segments where there is business potential and are trying to customize policies to suit the specific needs of their clients.
WHAT IS GOING ON?
Public Sector Insurance Companies have finally ceased to be the GIC Subsidiaries. The Rs. 100 Core of equity has been transferred to Government from GIC. The transfer of equity follows amendments in the General Insurance Business Nationalization Act, passed by Parliament. The possibility of tapping the capital market
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by public sector Insurers cannot be ruled out in future. There are visible signs of market expansion and therefore, all the insurers are expanding the targets and concentrating on most profitable personal and health segment. The Commission structure has been the focus of debate today. The insurance players are trying to balance the diverse objectives of providing enough incentives upfront to draw full time agents and at the same time ensuring that commissions are spread over at increased rates to ensure persistency of service. IRDA cannot of its own notify changes as commission payments are fixed by law. Any change in commission structures would require a change in legislation. The insurer’s cup of woes has been similar to that of its peers In the industry. Third party claims in motor insurance have hit these companies hard with some companies having to shell out as high as 300% of the motor insurance premium collected. The new line of thinking is to tap the profitable personal lines of business. Companies are looking to banc assurance tie-ups. Emphasis also laid upon recruitment of unemployed graduates as agents. This would also provide some social stability. Companies have necessary infrastructure in the form of training centers to provide the mandatory IRDA training. Public Sector insurers expect banks to report good fee income through referrals to them. The insurance agents are able to earn 15% discount, if the sum assured is less than a crore of rupees, with an investment of just about Rs. 250/- per annum while the insurance brokers earn 12.5% return after having invested Rs. 50 lakhs for registering themselves.
Existing Insurance Companies/Corporations:-
1. Bajaj Allianz Life Insurance Company Limited
2. Birla Sun Life Insurance Co. Ltd
3. HDFC Standard life Insurance Co. Ltd
4. ICICI Prudential Life Insurance Co. Ltd.
5. ING Vysya Life Insurance Company Ltd.
6. Life Insurance Corporation of India
7. Max New York Life Insurance Co. Ltd
8. Met Life India Insurance Company Ltd.
9. Kotak Mahindra Old Mutual Life Insurance Limited
10.SBI Life Insurance Co. Ltd
11.Tata AIG Life Insurance Company Limited
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12. Reliance Life Insurance Company Limited.
13. Aviva Life Insurance Co. India Pvt. Ltd.
14. Sahara India Life Insurance Co, Ltd.
15. Shriram Life Insurance Co, Ltd.
16. Bharti AXA Life Insurance Company Ltd.
17. Future Generali Life Insurance Company Ltd.
18. IDBI Fortis Life Insurance Company Ltd.
19.Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd
20. AEGON Religare Life Insurance Company Limited.
21. DLF Pramerica Life Insurance Co. Ltd.
22. Star Union Dai-ichi Life Insurance Comp. Ltd.
23. National Insurance Company Ltd.
TRENDS IN LIFE INSURANCE BUSINESS—UNIT LINKED INSURANCE PLANS
Unit Linked Business (%) Non-linked Business (%)
2005-06 2006-07 2007-08 2005-06 2006-07 2007-08
Private 82.30 88.75 90.33 17.70 11.25 9.67
LIC 29.76 46.31 62.31 70.24 53.69 37.69
Industry 41.77 56.91 70.30 58.23 43.09 29.70
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WELCOME TO RELIGARE INTERPRISES
Religare is a diversified financial services group of India offering a multitude of investment options.
The diverse bouquet of financial services which Religare offers can be broadly clubbed across three key verticals - Retail, Institutional and Wealth spectrums. The services extend from asset management, Life Insurance, wealth management to equity broking, commodity broking, investment banking, lending services, private equity and venture capital. Religare has also ventured into the alternative investments sphere through its holistic arts initiative and Film fund. With a view to expand, diversify and introduce offerings benchmarked against global best practices, Religare operates in the life insurance space under 'Aegon Religare Life Insurance Company Limited’ and wealth management under the brand name 'Religare Macquarie Private Wealth'.
Religare has a pan India presence, 1837* locations across 498* cities and towns. It also currently operates from nine international locations following its acquisition of London's brokerage & investment firm, Hichens, Harrison & Co. plc. (now Religare Hichens, Harrison Plc).
The vision is to build Religare as a globally trusted brand in the financial services domain and present it as the 'Investment Gateway of India'. All employees of the group guided by an experienced and professional management team are committed to providing financial care, backed by the core values of diligence, innovation, ambition and passion
Religare has been constantly innovating in terms of product and services and
to offer such incisive services to specific user segments it has also started the
NRI, FII, HNI and Corporate Servicing groups. These groups take all the
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portfolio investment decisions depending upon a client’s risk / return parameter.
Religare has a very credible Research and Analysis division, which not only
caters to the need of our Institutional clientele, but also gives their valuable
inputs to investment dealers.
Religare is also providing in-house Depository services to its clientele and is
one of the leading depository service providers in the country.
VISION AND MISSION STATEMENT OF RELIGARE INRTERPRIZES:-
Vision - To build Religare as a globally trusted brand in the financial services domain and present it as the ‘Investment Gateway of India'.
Mission - Providing complete financial care driven by the core values of diligence and transparency.
Brand Essence - Core brand essence is Diligence and Religare is driven by ethical and dynamic processes for wealth creation.
RELIGARE’S BRAND IDENTITY:-
Name
Religare is a Latin word that translates as 'to bind together'. This name has been chosen to reflect the integrated nature of the financial services the company offers.
Symbol
The Religare name is paired with the symbol of a four-leaf clover. Traditionally, it is considered good fortune to find a four-leaf clover as there is only one four-leaf clover for every 10,000 three-leaf clovers found.
For religare, each leaf of the clover has a special meaning. It is a symbol of Hope. Trust. Care. Good Fortune.
For the world, it is the symbol of Religare.
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The first leaf of the clover represents Hope. The aspirations to succeed. The dream of becoming. Of new possibilities. It is the beginning of every step and the foundation on which a person reaches for the stars.
The second leaf of the clover represents Trust. The ability to place one’s own faith in another. To have a relationship as partners in a team. To accomplish a given goal with the balance that brings satisfaction to all, not in the binding, but in the bond that is built.
The third leaf of the clover represents Care. The secret ingredient that is the cement in every relationship. The truth of feeling that underlines sincerity and the triumph of diligence in every aspect. From it springs true warmth of service and the ability to adapt to evolving environments with consideration to all.
The fourth and final leaf of the clover represents Good Fortune. Signifying that rare ability to meld opportunity and planning with circumstance to generate those often looked for remunerative moments of success.
Hope. Trust. Care. Good Fortune. All elements perfectly combine in the emblematic and rare, four-leaf clover to visually symbolize the values that bind together and form the core of the Religare vision.
Accent usage
The diacritical tilde mark ( ˜ ) over the letter A in the Religare typeface indicates a palatal emphasis sound of the letter A.
Pronunciation
rel•i•ga•re (rel'i-gâir)
PHILOSOPHY
Define…Refine….Achieve
At Religare we believe “Our clients are people, not accounts” hence successful
investment management relationship begins with a clear understanding of each clients
specific needs, concerns and long term objectives. Our investment philosophy applies
a disciplined approach to building a customized strategy designed to meet your
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individual financial goals and tolerance for risk.
PROCESS
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THREE VERTICAL SPECTRUMS OF RELIGARE INTERPRIZES:-
1. RETAIL SPRECTRUM:-
Equity Trading
Trading in Equities with Religare truly empowers you for your investment needs. Religare ensure you have a superlative trading experience through -
A highly process driven, diligent approach Powerful Research & Analytics and One of the "best-in-class" dealing rooms
Commodities Trading
Religare Commodities Limited (RCL), a wholly owned subsidiary of Religare Enterprises Limited was initiated to spearhead Exchange based Commodity Trading. As a member of NCDEX, MCX and NMCE, RCL, present in 529 locations provides options in both agric and non-agric commodities for Exchange based commodity trading backed by incisive dedicated research.
Online Investment Portal
Religare Online is your single gateway for all your financial needs. Now you not just trade online in Equities, Commodities, apply for IPOs, invest in Mutual Funds, buy Insurance, but also get Trade Rewards each time you invest online with our 360 degree portal.
Personal Financial Services
Today, more and more people look up to ways and means which can fulfill their financial aspirations such as Savings, Retirement planning, Tax planning & Wealth planning, etc. All this coupled with multiple and cut throat competitive offerings makes it very difficult for an individual to come to a decision and this leads to the search of a partner who can help an individual understand the complex investment instruments and make the best use of them to meet his/her short-term and long-term financial objectives.
Loans
Structurally all business are operated through various subsidiaries held through the holding company Religare Enterprises Limited. One such wholly owned subsidiary of REL is Religare Finevest Limited registered with the Reserve Bank of India as a Non-Banking Finance Company (NBFC) and is a Member of CDSL.
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Religare Finevest Limited offers loans for all your needs.
Insurance Solutions
Religare with one of the largest retail networks in the country offers a complete range of insurance solutions though its 100% subsidiary company, Religare Insurance Broking Limited (RIBL). The company holds a composite broker's license operating in the Life, General and Reinsurance domains.
2. WEALTH SPECTRUM:-
To provide customized wealth advisory services to high net worth individuals (HNIs), Religare offers an exceptional selection of investment opportunities, in every asset class. Our market knowledge and formidable resources facilitate wealth acceleration, diversification and capital preservation.
Wealth Management
Religare operates its wealth management business in partnership with Macquarie through the joint venture - Religare Macquarie Wealth Management Limited (a 50:50 joint venture). The JV is a combination of strengths - Macquarie's strong global expertise with Religare's strong local insights.
Portfolio Management Services (PMS)
Religare offers PMS to address varying investment preferences. As a focused service, PMS pays attention to details, and portfolios are customized to suit the unique requirements of investors.
Religare PMS currently extends six portfolio management schemes, viz Monique, Panther, Tortoise, Elephant, Caterpillar and Leo. Each scheme is designed keeping in mind the varying tastes, objectives and risk tolerance of our investors
Arts Initiative
Today's complex market structures have spun art out of the cocoon of mere aestheticism into a more rooted role as a recognized financial asset, a derivative with immense powers of wealth generation, equal to those of any brick and mortar industry. Given this base, it is now for the greater public-driven organizations concerned with the well being of art, to ensure that all the diverse dimensions of art are nurtured and given the right exposure, so that art permeates more completely into the societal fabric and enriches a wider consciousness.
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Film Fund
Religare Enterprises Limited and Vistaar Entertainment Ventures Private Limited launched India´s first ever film fund - Vistaar Religare Film Fund (VRFF) for the Film/Media business.
3. INSTITUTIONAL SPECTRUM:-
Institutions, Banks and the Corporate have their own unique investment needs. Religare recognizes this and strives to offer a superlative investment experience for institutions and FIIs globally and would like to be seen as their preferred investment gateway.
Institutional Broking Services
With the mission to institutionalize and implement a process driven approach, the Institutional Broking Services at Religare cater to the investment needs of leading corporate houses and institutions. Backed by incisive research, this division would like to be seen as a one stop investment gateway and knowledge repository for its clients, servicing their unique and sophisticated needs.
Investment Banking
Our Investment Banking business offered through Religare Capital Markets Limited (RCML), a wholly owned subsidiary of the holding company, Religare Enterprises Limited, deals in merchant banking, transaction advisory and corporate finance servicing the Corporate, Entrepreneurs and Investors.
Insurance Advisory
Religare Insurance Broking Limited (RIBL), a Religare Enterprises Limited venture is one of India's leading insurance broking firms, with one of the largest retail networks in the country. The company holds a composite broker's license operating in the Life, General and Reinsurance domains.
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Group structure:-
Religare Securities Limited Equity Broking Online Investment Portal Portfolio Management Services Depository Services
Religare Commodities Limited Commodity Broking
Religare Capital Markets Limited Investment Banking Proposed Institutional Broking
Religare Realty Limited In house Real Estate Management Company
Religare Hichens Harrison** Corporate Broking Institutional Broking Derivatives Sales Corporate Finance
Religare Finvest Limited Lending and Distribution business Proposed Custodial business
Religare Insurance Broking LimitedLife Insurance General Insurance Reinsurance
Religare Arts Initiative Limited Business of Art Gallery launched - arts-i
Religare Venture Capital LimitedPrivate Equity and Investment Manager
Religare Asset Management*
* Religare Asset Management Company (P) Limited is a wholly owned subsidiary of Religare Securities Limited (RSL), which in turn is a 100% subsidiary of Religare Enterprises Limited.
** Religare Hichens, Harrison plc. (RHH) is a part of Religare Enterprises Limited (REL) – a leading integrated financial services group of India. Hichens, Harrison & Co. plc. (HH), established in 1803 is London’s oldest brokerage and investment firm with a global footprint. Post its acquisition through REL’s indirect subsidiary - Religare Capital Markets International (UK) Limited, HH has been rechristened as Religare Hichens Harrison plc.
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CHAPTER – 3
WELCOME TO RELIGARE INSURANCE BROKING LIMITED
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RELIGARE INSURANCE BROKING LIMITED
Introduction: -
Religare Insurance Broking Limited (RIBL), a 100% subsidiary of Religare Enterprises Limited is one of India’s leading insurance broking firms, with one of the largest retail networks in the country. The company holds a composite broker’s license operating in the Life, General and Reinsurance domains
An insurance portfolio is designed from a choice of more than 3000 life and general insurance products & plans from more than 30 companies. This one easy window for any brand of insurance, any kind of cover, offers tailor made insurance solutions with not just the right kind of cover but also the right mix of cover.
RIBL not only provides customized solutions to individual clients, but also to some of the leading corporate houses and institutions across the country. Our team across the country is driven by the core philosophy of creating and delivering value to its customers. Our strengths are a team of passionate professionals, a robust IT infrastructure and strong risk analysis teams adept at identifying & analyzing your risks and providing you with tailor made solutions.
Vision and Mission: -
• Vision - "To be India's most trusted insurance partner"
• Mission - "To create and institutionalize an ethical, process driven, advisory led approach, backed by the right expertise & sharp insights, benchmarked against global best practices
Religare as an Insurance Broker: -
Religare Insurance Broking Limited, a wholly owned subsidiary of Religare Enterprises Limited is one of India's leading insurance broking firms, with one of the largest retail networks in the country. The company holds a composite broker's license for operating in the Life, General and Reinsurance domains.
As an Insurance Broker, Religare offers you a single window for everything you need to insure. Our domain knowledge, backed by our expertise and multi-brand multi-
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product business model, ensures you get tailor-made insurance solutions. We design your insurance portfolio from diversified life and general insurance products and plans from over 30 companies. So you get both the right kind and the right mix of cover. All under one roof
Advantages:
• Freedom of choice to the customer
• Represents clients to insurance companies
• Gets the best deals to the clients - Cost, Coverage & Service
• Technical and functional expertise
• Proactive assistance and claims management
• Professional and unbiased approach
• Services the client at zero cost
Offering complete range of personal insurance products through the Nationwide Network
A. Life Insurance
B. Pure Insurance Solutions
C. Investment Linked Plans
D. Guaranteed Saving Plans
E. General Insurance
G. Motor Insurance
H. Health Insurance Program
I. Travel Protection Schemes
J. Package Policies for SMEs
K. Financial Wellness
I. Child Plans
L. Protection Plans
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WELCOME TO INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY
As per the section 4 of IRDA Act' 1999, 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 appointed by the Government of India)
This millennium has seen insurance come a full circle in a journey extending to nearly 200 years. The process of re-opening of the sector had begun in the early 1990s and the last decade and more has seen it been opened up substantially. In 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector. The objective was to complement the reforms initiated in the financial sector. The committee submitted its report in 1994 wherein, among other things, it recommended that the private sector be permitted to enter the insurance industry. They stated that foreign companies be allowed to enter by floating Indian companies, preferably a joint venture with Indian partners.
Following the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market.
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The IRDA opened up the market in August 2000 with the invitation for application for registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards framed various regulations ranging from registration of companies for carrying on insurance business to protection of policyholders’ interests.
In December, 2000, 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. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002.
Today there are 14 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 14 life insurance companies operating in the country.
The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together with banking services, insurance services add about 7% to the country’s GDP. A well-developed and evolved insurance sector is a boon for economic development as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country.
Prior to passage of the IRDA Act, IRA had one chairperson and one member, and lessThan 30 professional staff recruited from the existing life and nonlife insurers in India. The current chairperson has almost 40 years experience in the Government. The only full-time member has worked for more than 30 years in domestic insurance companies. All 12 senior and midlevel officers have bachelor or postgraduate degrees and backgrounds in risk management, actuarial science, the law, etc. They have generally more than 10 years of experience but only in the protected domestic insurance industry, and do not possess up-to-date skills for more modern, competitive insurance systems.
PROFILES OF CHAIRMAN AND MEMBERS OF AUTHORITY:-
Mr. J. Hari Narayan (Chairman)
Mr. C. R. Muralidharan, Member(F & A)
Mr. K. K. Srinivasan, Member(Non-Life)
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Mr. G. Prabhakara, Member(Life)
Mr. R. Kannan, Member(Actuary)
DUTIES, POWERS AND FUNCTIONS OF IRDA:-
(1) 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.
(2) Without prejudice to the generality of the provisions contained in sub-section (1), the powers and functions of the Authority shall include, -
(a) issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration;
(b) 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 contracts of insurance;
(c) specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents;
(d) specifying the code of conduct for surveyors and loss assessors;
(e) promoting efficiency in the conduct of insurance business;
(f) promoting and regulating professional organizations connected with the insurance and re-insurance business;
(g) levying fees and other charges for carrying out the purposes of this Act;
(h) calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organizations connected with the insurance business;
(i) 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 the Tariff Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938);
(j) specifying the form and manner in which books of account shall be maintained and
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statement of accounts shall be rendered by insurers and other insurance intermediaries;
(k) regulating investment of funds by insurance companies;
(l) regulating maintenance of margin of solvency;
(m) adjudication of disputes between insurers and intermediaries or insurance intermediaries;
(n) supervising the functioning of the Tariff Advisory Committee;
(o) specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organizations referred to in clause (f);
(p) specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; and
(q) Exercising such other powers as may be prescribed.
REGULATIONS PASSED BY IRDA:-
I would like to discuss few regulations that are given by IRDA to insure. That makes IRDA an effective body.
1. REGULATIONS PASSED IN ORDER TO DISCLOSE ASSETS, LIBALITIES AND SOLVENCY MARGIN BY COMPANIES ON 14TH, JULY, 2000.
Short title and commencement.----(1) These regulations may be called the Insurance Regulatory and Development Authority (Assets, Liabilities, and Solvency Margin of Insurers) Regulations, 2000.
(2) They shall come into force from the date of their publication in the Official Gazette.
2. Definitions.—(1) In these regulations, unless the context otherwise requires ----
(a) “Act” means the Insurance Act, 1938 (4 of 1938);(b) “Authority” means the Insurance Regulatory and Development Authority
established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);
(2) All words and expressions used herein and not defined but defined in the Insurance Act, 1938 (4 of 1938), or in the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), or in any Rules or Regulations made there under,
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shall have the meanings respectively assigned to them in those Acts or Rules or Regulations.
Valuation of Assets.--Every insurer shall prepare a statement of the value of assets in Form IRDA- Assets- AA in accordance with Schedule I.
4. Determination of Amount of Liabilities.--Every insurer shall prepare a statement of the amount of liabilities in accordance with Schedule II-A, in respect of life insurance business, and in Form HG in accordance with Schedule II-B, in respect of general insurance business, as the case may be.
5. Determination of Solvency Margin.--Every insurer shall prepare a statement of solvency margin in accordance with Schedule III-A, in respect of life insurance business, and in Form KG in accordance with Schedule III-B, in respect of general insurance business, as the case may be.
6. Health Insurance Business. -- Where the insurer transacts health insurance
business, providing health covers, the amount of liabilities shall be determined in accordance with the principles specified under these Regulations.
7. Business outside India. -- Where the insurer transacts insurance business in a country outside India, and submits statements or returns or any such particulars to a public authority of that country, he shall enclose the same along with the Forms specified in accordance with these Regulations and the Insurance Regulatory and Development Authority (Actuarial Report and Abstract) Regulations, 2000.
8. Provided that if the appointed actuary is of the opinion that it is necessary to set additional reserves over and above the reserves shown in the statements or returns or any such particulars submitted to the public authority of a country outside India, he may set such additional reserves.
9. Furnishing of Forms. --- The Forms, namely, Form IRDA- Assets- AA, Form HG, and Form KG, shall be furnished separately for Business within India and Total Business transacted by the insurer.
10. Personal visit of appointed actuary to the Authority. -- The Authority may, if considered necessary and expedient, ask the appointed actuary to make a personal visit to the office of the Authority to elicit from him any further information.
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Schedule I
VALUATION OF ASSETS
1. Interpretation. In this Schedule, unless the context otherwise requires, ‘non-mandated investments’ means neither those investments that are neither approved securities nor approved investments.
2. Values of Assets.—(1) The following assets should be placed with value zero,--(a) Agent’s balances and outstanding premiums in India, to the extent they are not
realized within a period of thirty days;(b) Agents’ balances and outstanding premiums outside India, to the extent they are
not realizable ;(c) Sundry debts, to the extent they are not realizable;(d) Advances of an unrealizable character;(e) Furniture, fixtures, dead stock and stationery;(f) Deferred expenses; (g) Profit and loss appropriation account balance and any fictitious assets other than
pre-paid expenses;(h) Reinsurer’s balances outstanding for more than three months;(i) Preliminary expenses in the formation of the company;
(2) The value of computer equipment including software shall be computed as under:--(I) seventy five per cent. of its cost in the year of purchase;
(ii) fifty per cent. of its cost in the second year;
(Iii) twenty-five per cent. of its cost in the third year; and
(iv) Zero per cent. Thereafter.
(3) All other assets of an insurer have to be valued in accordance with the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor’s Report of Insurance Companies) Regulations, 2000.
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(4)Statement of Assets.--Every insurer shall prepare a statement of assets in Form IRDA-Assets- AA.
Item No.
(1)
Category of Asset
(2)
Policyholders' funds:
Amount ( in rupees lakhs) as per (a) below
(3)
Shareholders' funds: Amount ( in rupees lakhs) as per (a) below
(4)
01 Approved Securities
02 Approved Investments
03 Deposits
04 Non-Mandated Investments
05 Other Assets, specify
06 Total
07 Fair Value Change Account
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08 Adjusted Value of Assets:
(6) - (7)
Schedule II-A
Valuation of Liabilities - Life Insurance
1. Interpretation.--In this Schedule, --
“Valuation date”, in relation to an actuarial investigation, means the date to which the investigation relates.
“Universal life contracts” means those contracts that are presented in an unbundled form. The contracts where policyholders have an option to invest in units of insurer’s segregated fund(s) shall be treated as “linked business”; and others shall be treated as “non-linked business”.
“Segregated funds” means funds earmarked in respect of linked business.
Method of Determination of Mathematical Reserves.—(1) Mathematical Reserves shall be determined separately for each contract by a prospective method of valuation in accordance with sub-pares (2) to (4)..
(2) The valuation method shall take into account all prospective contingencies under which any premiums (by the policyholder) or benefits (to the policyholder/beneficiary) may be payable under the policy, as determined by the policy conditions. The level of benefits shall take into account the reasonable expectations of policyholders (with regard to bonuses, including terminal bonuses, if any) and any established practices of an insurer for payment of benefits.
(3) The valuation method shall take into account the cost of any options that may be
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available to the policyholder under the terms of the contract.
(4) The determination of the amount of liability under each policy shall be based on prudent assumptions of all relevant parameters. The value of each such parameter shall be based on the insurer’s expected experience and shall include an appropriate margin for adverse deviations (hereinafter referred to as MAD) that may result in an increase in the amount of mathematical reserves.
(5) (i) The amount of mathematical reserve in respect of a policy, determined in accordance with sub-Para (4), may be negative (called “negative reserves”) or less than the guaranteed surrender value available (called “guaranteed surrender value deficiency reserves”) at the valuation date.
The appointed actuary shall, for the purpose of section 35 of the Act, use the amount of such mathematical reserves without any modification;
The appointed actuary shall, for the purpose of sections 13, 49, 64V and 64VA of the Act, set the amount of such mathematical reserve to zero, in case of such negative reserve, or to the guaranteed surrender value, in case of such guaranteed surrender value deficiency reserves, as the case may be.
(6) The valuation method shall be called “Gross Premium Method’.
(7) If in the opinion of the appointed actuary, a method of valuation other than the Gross Premium Method of valuation is to be adopted, then, other approximations (e.g. retrospective method) may be used.
Provided that the amount of calculated reserve is expected to be at least equal to the amount that shall be produced by the application of Gross Premium Method.
(8) The method of calculation of the amount of liabilities and the assumptions for the valuation parameters shall not be subject to arbitrary discontinuities from one year to the next.
(9) The determination of the amount of mathematical reserves shall take into account the nature and term of the assets representing those liabilities and the value placed upon them and shall include prudent provision against the effects of possible future changes in the value of assets on the ability of the insurer to meet its obligations arising under policies as they arise.
3. Policy Cash Flows.--- The gross premium method of valuation shall discount the following future policy cash flows at an appropriate rate of interest,---
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(a) premiums payable, if any, benefits payable, if any, on death; benefits payable, if any, on survival; benefits payable, if any, on voluntary termination of contract, and the following, if any, :-
(i) basic benefits, (ii) rider benefits,(iii) bonuses that have already been vested as at the
valuation date, (iv) bonuses as a result of the valuation at the valuation date,
and(v) future bonuses (one year after valuation date) including
terminal bonuses (consistent with the valuation rate of interest);
(b) commission and remuneration payable, if any, in respect of a policy (This shall be based on the current practice of the insurer). No allowance shall be made for non-payment of commissions in respect of the orphaned policies;
(c) policy maintenance expenses, if any, in respect of a policy, as provided under sub-Para (4) of Para 5;
(d) allocation of profit to shareholders, if any, where there is a specified relationship between profits attributable to shareholders and the bonus rates declared for policyholders.
Provided that allowance must be made for tax, if any.
4. Policy Options. –Where a policy provides built-in options, that may be exercised by the policyholder, such as conversion or addition of coverage at future date(s) without any evidence of good health, annuity rate guarantees at maturity of contract, etc., the costs of such options shall be estimated and treated as special cash flows in calculating the mathematical reserves.
5. Valuation Parameters.—(1) the valuation parameters shall constitute the bases on which the future policy cash flows shall be computed and discounted. Each parameter shall have to be appropriate to the block of business to be valued. An appointed actuary shall take into consideration the following,--
(a) The value(s) of the parameter shall be based on the insurer’s experience
study, where available. If reliable experience study is not available, the
value(s) can be based on the industry study, if available and appropriate. If
neither is available, the values may be based on the bases used for pricing the
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product. In establishing the expected level of any parameter, any likely
deterioration in the experience shall be taken into account;
(b) The expected level, as determined in clause (a) of this sub-Para, shall be
adjusted by an appropriate Margin for Adverse Deviations (MAD), the level of
MAD being dependent on the degree of confidence in the expected level, and
such MAD in each parameter shall be based on the Guidance Notes issued by
the Actuarial Society of India, with the concurrence of the Authority
(c) The values used for the various valuation parameters should be consistent
among themselves.
(2) Mortality rates to be used shall be by reference to a published table, unless the insurer has constructed a separate table based on his own experience:
Provided that such published table shall be made available to the insurance industry by the Actuarial Society of India, with the concurrence of the Authority.
Provided further that such rates determined by reference to a published table shall not be less than hundred per cent. Of that published table.
Provided further that such rates determined by reference to a published table may be less than hundred per cent. Of that published table if the appointed actuary can justify a lower per cent.
(3) Morbidity rates to be used shall be by reference to a published table, unless the insurer has constructed a separate table based on his own experience:
Provided that such published table shall be made available to the insurance industry by the Actuarial Society of India, with the concurrence of the Authority:
Provided further that such rates determined by reference to a published table shall not be less than hundred per cent. Of that published table.
Provided further that such rates determined by reference to a published table may be less than hundred per cent. Of that published table if the appointed actuary can justify a lower per cent.
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(4) Policy maintenance expenses shall depend on the manner, in which they are analyzed by the insurer, viz., fixed expenses and variable expenses. The variable expenses shall be related to sum assured or premiums or benefits. The fixed expenses may be related to sum assured or premiums or benefits or per policy expenses. All expenses shall be increased in future years for inflation; the rate of inflation assumed should be consistent with the valuation rate of interest.
(5) Valuation rates of interest, to be used by appointed actuary -
(a) shall be not higher than the rates of interest, for the calculation of the present value of policy cash flows referred to in Para 4, determined from prudent assessment of the yields from existing assets attributable to blocks of life insurance business, and the yields which the insurer is expected to obtain from the sums invested in the future, and such assessment shall take into account ---
the composition of assets supporting the liabilities, expected cash flows from the investments on hand, the cash flows from the block of policies to be valued, the likely future investment conditions and the reinvestment and disinvestment strategy to be employed in dealing with the future net cash flows;
(i) the risks associated with investment in regard to receipt of income on such investment or repayment of principal;
(ii) the expenses associated with the investment functions of the insurer;
(b) Shall not be higher than, for the calculation of present value of policy cash flows in respect of a particular category of contracts, the yields on assets maintained for the purpose of such category of contacts.
(c) in respect of non-participating business, shall recognize the risk of decline in the future interest rates;
(d) in respect of participating business , shall be based on the assumption (with regard to future investment conditions), that the scale of future bonuses used in the valuation is consistent with the valuation rate of interest, and
(e) in respect of single premium business, shall take into account the effect of changes in the risk-free interest rates.
(6) Other parameters may be taken into account, depending on the type of policy. In establishing the values of such parameters, the considerations set out in this Schedule shall be taken into account.
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6. Applicability to Reinsurance.—(1) This Schedule shall also apply to the valuation of business in the books of reinsurers.
(2) As regards the business ceded by insurers, this Schedule shall be applicable to the net sums at risk retained by the insurer.
(3) Reinsurance arrangement with an element of borrowing in the form of deposit or credit of any kind from insurer’s reinsurers without the prior approval of the Authority shall not be treated as credit for reinsurance for the purpose of determination of required solvency margin
7. Additional Requirements for Linked Business.—(1) Reserve in respect of linked business shall consist of two components, namely, unit reserves and general fund reserves.
(2) Unit reserves shall be calculated in respect of the units allocated to the policies in force at the valuation date using unit values at the valuation date.
(3) General fund reserves (non-unit reserves) shall be determined using a prospective valuation method set out in this Schedule, which shall take into account of the following, namely:-
a. premiums, if any, payable in future;
b. death benefits, if any, provided by the general fund (over and above the value of units);
c. management charges paid to the general fund; d. guarantees, if any, relating to surrender values or minimum death and maturity
benefits; e. fund growth rates and management charges. (The values of these parameters,
along with others, shall be determined in accordance with Para 5); f. negative reserves, if any, shall be dealt with in accordance with sub-Para (5) of
Para 2
8. Additional Requirements for Provisions.--- The appointed actuary shall make aggregate provisions in respect of the following, where it is not possible to calculate mathematical reserves for each policy, in the determination of mathematical reserves:-
a. Policies in respect of which extra premiums have been charged on account of underwriting of under-average lives that are subject to extra risks such as occupation hazard, over-weight, under-weight, smoking history, health, climatic
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or geographical conditions;
b. Lapses policies not included in the valuation but under which a liability exists or may arise;
c. Options available under individual and group insurance policies; d. Guarantees available to individual and group insurance policies; e. The rates of exchange at which benefits in respect of policies issued in foreign
currencies have been converted into Indian Rupees and what provision has been made for possible increase of mathematical reserves arising from future variations in rates of exchange;
f. Other, if any.
9.Statement of Liabilities-- An insurer shall furnish a statement of liabilities in accordance with the Insurance Regulatory and Development Authority (Actuarial Report and Abstract) Regulations, 2000.
Schedule II-B
Valuation of Liabilities (General Insurance)
1. Interpretation.--In this schedule,----(a) "Reserve for claims incurred but not reported (IBNR") means the reserve for
claims incurred but not reported on the balance sheet date, and includes reserve for claims which may be inadequately reserved;
(b) "Reserve for outstanding claims" means the reserve for outstanding claims as mentioned in Para 2(1)(b)(iii) of this Schedule
2. Determination of Liabilities.— An insurer shall ---
(i) place a proper value in respect of the following items, namely:-
(I) provision for bad and doubtful debts, (II) reserve for dividends declared or recommended, and outstanding dividends
in full,(III) amount due to insurance companies carrying on insurance business, in full,(IV) amount due to sundry creditors, in full,(V) provision for taxation, in full, and(VI) foreign exchange reserve.
(ii) determine the amount of following reserves, in the manner specified herein below for each reserve:-
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(a) reserve for unexpired risks, shall be, in respect of,---
(I) Fire business, 50 per cent, (II) Miscellaneous business, 50 per cent, (III) Marine business other than marine hull business, 50 per cent; and(IV)Marine hull business, 100 per cent,
Of the premium, net of re-insurances, received or receivable during the preceding twelve months.
(b) reserve for outstanding claims shall be determined in the following manner:-
(I) where the amounts of outstanding claims of the insurers are known, the amount is to be provided in full;(II) where the amounts of outstanding claims can be reasonably estimated according to the insurer, he may follow the 'case by case method' after taking into account the explicit allowance for changes in the settlement pattern or average claim amounts, expenses and inflation;
(c) Reserve for claims incurred but not reported (IBNR) shall be determined using actuarial principles. In such determination, the appointed actuary shall follow the Guidance Notes issued by the Actuarial Society of India, with the concurrence of the Authority, and any directions issued by the Authority, in this behalf.
3. Statement of Liability.--Every general insurer shall prepare a statement of liabilities in Form HG, certified by an auditor approved by the Authority in accordance with Section 64V of the Act, and also certified by its appointed actuary in respect of IBNR reserves. The statement shall be furnished to the Authority along with the returns mentioned in section 15 of the Act.
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STATEMENT OF LIABILITIES
Item No.
Description Reserves for unexpired risks
Reserve for Outstanding Claims
IBNR Reserves
Total Reserves
(1) (2). (3) (4) (5) (6)
01Fire
02MarineSub class:
Marine Cargo
Marine Hull
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03MiscellaneousSub class:
Motor
Engineering
Aviation
Liabilities
Rural insurance
Others
04 Health Insurance
05 Total Liabilities
Schedule III-A
DETERMINATION OF SOLVENCY MARGINS—LIFE INSURERS
1. Interpretation.-- In this Schedule–
(a) ‘Available Solvency Margin’ means the excess of value of assets (furnished in IRDA- Form- AA) over the value of life insurance liabilities (furnished in Form H as specified in Regulation 4 of Insurance Regulatory and Development Authority (Actuarial Report and Abstract) Regulations, 2000) and other liabilities of policyholders’ fund and shareholders’ funds;
(b) “Solvency Ratio” means the ratio of the amount of Available Solvency Margin to the amount of Required Solvency Margin.
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2. Determination of Solvency Margin.--Every insurer shall determine the required solvency margin, the available solvency margin, and the solvency ratio in Form K as specified under Insurance Regulatory and Development Authority (Actuarial Report and Abstract), Regulations, 2000.
Schedule III-B
DETERMINATION OF SOLVENCY MARGINS—GENERAL INSURERS
1. Interpretation.--In this Schedule–
(a) “Available Solvency Margin” means the excess of value of assets (furnished in Form IRDA-Assets- AA) over the value of liabilities (furnished in Form HG), with further adjustments as shown in Table III of Form KG.
(b) “Solvency Ratio” means the ratio of the amount of Available Solvency Margin to the amount of Required Solvency Margin.
3. Determination of Solvency Margin.--Every insurer shall determine the required solvency margin, the available solvency margin, and the solvency ratio in Form KG.
Item Description Notes No... Amount
(1) (2) (3) (4)
Available Assets in Policyholders' Funds:
Deduct:
Liabilities
Other Liabilities
Excess in Policyholders' funds (01 - 02 - 03)
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Available Assets in Shareholders’ Funds:
Deduct:
Other Liabilities
Excess in Shareholders' funds: (05 -06)
Total ASM (04)+(07)
Total RSM
Solvency Ratio (Total ASM/ Total RSM)
2. REGULATION PASSED FOR APPOINTED ACTUARY: -
An insurer registered to carry on insurance business in India shall, subject to sub-regulation (2), appoint an actuary, who shall be known as the 'Appointed Actuary' for the purposes of the Act.
(2) A person shall be eligible to be appointed as an appointed actuary for an insurer, if he or she shall be------
(i) ordinarily resident in India;(ii) a Fellow Member of the Actuarial Society of India; (iii) an employee of the life insurer, in case of life insurance business;(iv) an employee of the insurer or a consulting actuary, in case of general insurance business;(iv) a person who has not committed any breach of professional conduct;(v) a person against whom no disciplinary action by the Actuarial Society of India or any other actuarial professional body is pending; (vi) not an appointed actuary of another insurer; (vii) a person who possesses a Certificate of Practice issued by the Actuarial Society of India; and(viii) not over the age of seventy years.
(3) An insurer shall seek the approval of the Authority for the appointment of appointed actuary, submitting the application in Form IRDA-AA-1.
(4) The Authority shall, within thirty days from the date of receipt of application, either accept or reject the same:
Provided that before the rejecting the application, the Authority shall give an opportunity of being heard to the insurer.
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(5) If an insurer does not receive approval within thirty days of the receipt of such application by the Authority, the insurer shall deem that the approval has been granted by the Authority.
(6) An insurer, who is unable to appoint an appointed actuary in accordance with sub-regulation (2), shall make an application to the Authority in writing for relaxation of one or more conditions mentioned in sub-regulation 2.
(7) The Authority shall, on receipt of the application referred to in sub-regulation (6), communicate its decision to the insurer within thirty days of receipt of such application.
(8) The appointment of an appointed actuary shall take effect from the date of approval by the Authority.
Effect of rejection of the application.---The insurer shall, within four weeks of rejection of the application referred to under regulation 3, apply to the Authority for the appointment of a person other than the one rejected by it under regulation 3 as an appointed actuary, for the purposes of these regulations.
Life Insurer not to carry on business of insurance without an appointed actuary.-- A life insurer shall not carry on business of insurance without an appointed actuary.
Cessation of Appointment of Appointed Actuary.-(1) An appointed actuary shall cease to be so, if he or she has been given notice of withdrawal of approval by the Authority on the following grounds:-
(a) That he or she ceases to be eligible in accordance with sub-regulation (2) of regulation (3), or;
(b) That he or she has, in the opinion of the Authority, failed to perform adequately and properly the duties and obligations of an appointed actuary under these regulations.
(2) The Authority shall give an appointed actuary a reasonable opportunity of being heard, if he or she has been given a notice of withdrawal of approval by it.
(3) If a person ceases to be an appointed actuary of an insurer otherwise than on the grounds mentioned in sub-regulation (1), the insurer and the appointed actuary shall intimate the Authority the reasons therefore within fifteen days of such a cessation.
Powers of Appointed Actuary.--(1) An appointed actuary shall have access to all information or documents in possession, or under control, of the insurer if such access is necessary for the proper and effective performance of the functions and
45
duties of the appointed actuary.
(2) The appointed actuary may seek any information for the purpose of sub-regulation (1) of this regulation from any officer or employee of the insurer.
(3) The appointed actuary shall be entitled, --
(a) to attend all meetings of the management including the directors of the insurer;
(b) to speak and discuss on any matter, at such meeting,--(i) that relates to the actuarial advice given to the directors;(ii) that may affect the solvency of the insurer; (iii) that may affect the ability of the insurer to meet the reasonable expectations of policyholders; or (iv) on which actuarial advice is necessary;
(c) to attend,--(i) any meeting of the shareholders or the policyholders of the insurer; or(ii) any other meeting of members of the insurer at which the insurer's annual accounts or financial statements are to be considered or at which any matter in connection with the appointed actuary's duties is discussed.
Duties and obligations.-- In particular and without prejudice to the generality of the foregoing matters, and in the interests of the insurance industry and the policyholders, the duties and obligations of an appointed actuary of an insurer shall include:--
(a) rendering actuarial advice to the management of the insurer, in particular in the areas of product design and pricing, insurance contract wording, investments and reinsurance;(b) ensuring the solvency of the insurer at all times;
(c) complying with the provisions of the section 64V of the Act in regard to certification of the assets and liabilities that have been valued in the manner required under the said section;
(d) complying with the provisions of the section 64 VA of the Act in regard to maintenance of required solvency margin in the manner required under the said section;
(e) drawing the attention of management of the insurer, to any matter on which he or she thinks that action is required to be taken by the insurer to avoid--
(i) any contravention of the Act; or (ii) prejudice to the interests of policyholders;
(f) complying with the Authority's directions from time to time;
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(g) in the case of the insurer carrying on life insurance business,--(i) to certify the actuarial report and abstract and other returns as required under
section 13 of the Act;(ii) to comply with the provisions of section 21 of the Act in regard to further
information required by the Authority;(iii) to comply with the provisions of section 40-B of the Act in regard to the
bases of premium;(iv) to comply with the provisions of the section 112 of the Act in regard to
recommendation of interim bonus or bonuses payable by life insurer to policyholders whose policies mature for payment by reason of death or otherwise during the inter-valuation period;
(v) to ensure that all the requisite records have been made available to him or her for the purpose of conducting actuarial valuation of liabilities and assets of the insurer;
(vi) to ensure that the premium rates of the insurance products are fair;(vii) to certify that the mathematical reserves have been determined taking into
account the guidance notes issued by the Actuarial Society of India and any directions given by the Authority;
(viii) to ensure that the policyholders' reasonable expectations have been considered in the matter of valuation of liabilities and distribution of surplus to the participating policyholders who are entitled for a share of surplus;
(ix) to submit the actuarial advice in the interests of the insurance industry and the policyholders;
(h) in the case of the insurer carrying on general insurance business to ensure, -- (i) that the rates are fair in respect of those contracts that are governed by the insurer's in-house tariff;(ii) that the actuarial principles, in the determination of liabilities, have been used in the calculation of reserves for incurred but not reported claims (IBNR) and other reserves where actuarial advice is sought by the Authority;
(i) informing the Authority in writing of his or her opinion, within a reasonable time, whether,--(i) the insurer has contravened the Act or any other Acts; (ii) the contravention is of such a nature that it may affect significantly the interests of
the owners or beneficiaries of policies issued by the insurer;(iii) the directors of the insurer have failed to take such action as is reasonably
necessary to enable him to exercise his or her duties and obligations under this regulation; or
(iv)An officer or employee of the insurer has engaged in conduct calculated to prevent him or her exercising his or her duties and obligations under this regulation.
Absolute Privilege of Appointed Actuary.--(1) An appointed actuary shall enjoy absolute privilege to make any statement, oral or written, for the purpose of the performance of his functions as appointed actuary. This is in addition to any other
47
privilege conferred upon an appointed actuary under any other Regulations.
(2) Any provision of the letter of appointment of the appointed actuary, which restricts or prevents his duties, obligations and privileges under these regulations, shall be of no effect.
Applicability to reinsurance business.-- These regulations shall apply to reinsurers carrying on reinsurance business in India.
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CHAPTER – 5
RESEARCH ON IRDA
RESEARCH
OBJECTIVE:-
The main objective of the study through questionnaire was to get the managers point of view of different insurance companies about the effectiveness of IRDA as a regulator of Indian insurance sector. The responses given by them was clearly depends on their knowledge and understanding about IRDA and there is also a comparison of IRDA with china insurance regulatory commission.
Sample size: - 60 respondent
Duration of study: - 2 months
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Area covered: - Dehradun city (Insurance companies)
Methodology: - primary data collection- questionnaire
Secondary data analyses (comparisons with china)
Statistical tools: - ms excel-graphs, charts etc
Limitation:-
1. Time period constrain.
2. Financial constrain.
3. Small sample size because questionnaire can only be filled my senior managers (area head, branch manager etc).
4. limited area.
5. Sometimes respondent paid little attention while filling the questionnaire.
6. Sometimes respondents do not want to give the internal information about the company.
COMPARISON BETWEEN INDIAN INSURANCE MARKET WITH CHINA’S ANDTHEIR REGULATORS.
SOME FACTS ABOUT THE TWO COUNTRIES: -
FACTORS INDIA CHINA
POPULATION 1,147,995,904 1,330,044,554
LITERACY RATE 61% 90.9%
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PER CAPITA INCOME
RS 29,382 RS 82,510
INSURANCE COMPANIES
30 79
COTRIBUTION OF SECTOR IN GDP
7% 1.7%
INSURERS TOTAL ASSETS
2.1 TRILLION 3.5 TRILLION
INSURANCE PREMIUM COLLECTED IN 2008
156 BILLION 255 BILLION
GROWTH RATE 15-20% 40%
INSURANCE ADVISORS
20,00,000 (APP) 25,00,000 (APP)
GROWTH RATE OF INSURANCE PREMIUM
30% 39.1%
China Insurance Regulatory Commission: -
China Insurance Regulatory Commission, a ministerial institution directly under the State Council, supervises and manages the insurance market and maintains the legal and stable operation of insurance operations in the country, in accordance with the functions of administrative management authorized by the State Council and relevant laws, rules and regulations.
1. Main functions and responsibilities:
(1) To formulate guidelines and policies for developing insurance business, to draw up development strategies and plans for the industry; to formulate laws, rules and regulations for insurance supervision; and to introduce rules and regulations for the
51
insurance industry;
(2) To examine and approve the establishment of insurance companies and their subsidiaries, insurance group companies, and insurance holding companies; together with other departments concerned, to examine and approve the establishment of insurance assets management companies; to examine and approve the setup of representative offices of overseas insurance institutions in China, insurance intermediary institutions such as insurance agencies, broker companies, appraisal companies and their subsidiaries; to examine and approve insurance agencies to be established overseas by Chinese insurance and non-insurance institutions; to examine and approve the merger, split, change and dissolving of insurance institutions, to decide whether to take over or reallocate assets; to be involved and organize the bankruptcy and clearance of insurance companies;
(3) To examine and approve the qualifications of senior managers of various types of insurance institutions; to formulate basic standards for the qualifications of staff engaged in insurance;
(4) To examine and approve the categories of insurance schemes related to public interests, to impose insurance articles and rates of premium for compulsory insurance schemes and newly developed life insurance schemes, and to accept filing for the record of articles and premium rates of other insurance schemes according to law;
(5) To supervise the payment ability and market conduct of insurance companies; to be in charge of the management of insurance guarantee fund, supervise insurance deposit; to formulate regulations according to law and state policies in regard to the operation of insurance funds and to supervise the operation of funds of insurance companies according to law;
(6) To supervise policy-oriented insurance and compulsory insurance operations; to supervise such organizational forms and business operations as special self-insurance and mutual insurance. To oversee such organizations as insurance trade associations and societies;
(7) To investigate and mete out punishment against unfair competition and illegal conduct of insurance institutions and individuals as well as the operations of non-insurance institutions and disguised insurance operations;
(8) To supervise and oversee organizations stationed overseas by domestic insurance and non-insurance institutions according to law;
(9) To draw up information standard for the insurance industry; to establish insurance risk appraisal, forecast and supervision systems, to trace, monitor and forecast operations in the insurance market, to take charge of compiling data and statements of the national insurance industry, copy them to the People's Bank of
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China and promulgate according to relevant regulations of the state; and
(10) To undertake other jobs delegated by the State Council.
COMPARISION BETWEEN THE REGULATOR: -
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA
CHINA INSURANCE REGULATORY COMMISSION
IRDA is an autonomous body formed under Indian parliament act, 1999.
China Insurance Regulatory Commission is a ministerial institution directly under
the State Council.Main aim of IRDA is to protect the interest
of policyholder.Its main aim is to manage the insurance
market and maintains the legal and stable operation of insurance operations in the
country.IRDA is an autonomous body. It also undertakes other jobs delegated by
the State Council.
There is no such help given by IRDA. It examines and approves the setup of representative offices of overseas
insurance institutions in China.There is no compulsory insurance
operation in India.It supervises policy-oriented insurance and compulsory insurance operations.
All the documents and financial statements are kept in IRDA
The financial statements and documents that are collected by the regulator are deposited in people’s bank of china
There is one office of IRDA IN INDIA China Insurance Regulatory Commission exercises vertically management of all the
agent offices stationed in various localities.
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CHAPTER – 6
ANALYSIS ON OUESTIONNAIRE
ANALYSIS OF QUESTIONNAIRE
For this questionnaire I had visited ten insurance companies in Dehradun like Tata Aig, Birla sun life and Religare and asked senior level managers like operations head and branch managers to fill the questionnaire and following was the response which I have presented in charts and graphs.
1. Your work experience in insurance sector in years.
YEARS NUMBERS OF RESPONDENTS
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0-5 30
5-10 27
10-15 3
15-20 0
MORE 0
0-5 5-10 10-15 15-20 more
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
30.00
27.00
3.00
0.00 0.00
work experience of managers in years
work experience of managers in years
Out of 60 respondents, 30 belonged to the experience group of 0-5 years. 27 respondents belonged to the group of 5-10 years. Only 3 respondents belonged to the group of 10-15. It was found that in Dehradun city the managers was having experience between 0 to 15 years and managers who have more than 15 years of experience are posted to the head offices which are in Delhi or Mumbai.
2. Does IRDA interfere in the adjudication of disputes in your company?
RESPONSE NUMBER OF RESPONDENTS
YES 39
55
NO 21
39
21
interference of IRDA
yesno
In total of 60 responses 39 managers said that IRDA interfere in the adjudication of disputes in their company while 21 said no. It was evident that those managers who said no was actually not will to disclose the cases in which IRDA has interfered in past in their company. It is clear from the responses that IRDA monitor the working of the companies closely and interfere timely and protects the interest of the policyholder. I was also told that there is ombudsmen committee made IRDA that settle the disputes of policyholders and companies.
3. If yes are you satisfied with the solution/suggestions provided by IRDA?
RESPONSE NUMBER OR RESPONDENTS
YES 39
NO 21
56
yes
no
05
10152025303540
39
21
satisfied with the solution
satisfied with the solution
From the total of 60 responses 39 managers said that they were satisfied with the solution provided by IRDA when it had interfered in the adjudication of disputes in there company. While other 21 managers said they were not happy with the solution that IRDA has given them. So it is clear from the response that 66% of managers are satisfied with solutions that IRDA provides to solve the disputes in their companies. Ombudsmen committee is setup by IRDA to do the out of court settlements in disputed cases.
4. Are you satisfied with the working of IRDA as a regulator of insurance sector in India?
RESPONSE NUMBER OF RESPONDENTS
YES 45
NO 9
57
CAN’T SAY 6
45
9
6
satisfied with the working of IRDA
yesnocan't say
From the total of 60 managers 45 says that they are satisfied with working of IRDA as a regulator of Indian insurance sector. Whereas 9 managers said they are not and 6 managers were not having any answer to this question. So it means that 75% of managers are happy and satisfied with the working of IRDA. This itself shows the effectiveness of IRDA in insurance market.
5. Are you satisfied with the working of tariff advisory committee?
RESPONSE NUMBER OF RESPONDENTS
YES 30
58
NO 21
CAN’T SAY 9
30
21
9
satisfied with tariff advisory committee
yesnocan't say
On this question I got to know that tariff advisory committee was no longer working on the aim for which it was setup. Actually it was formed to regulate the general insurance business in India its aim was to decide the discount rate and premiums of motor vehicles and fire insurance but now companies are giving their own discounts to their customer. So the response on this question was mixed as 30 of them said they are satisfied, 21 of them said they are not and 9 of them was not having any answer.
6. Is IRDA providing proper training for intermediaries and agents?
RESPONSE NUMBER OF RESPONDENTS
59
YES 48
NO 12
yesno
05
101520253035404550
48
12
providing proper training to agents
providing proper training to agents
It is clear from the manager’s response that IRDA is successful in providing proper training to agents and intermediaries. 48 managers out of 60 say it which is 80% of the total response. It was found that IRDA has established INSURANCE INSTITUTE OF INDIA (III) that provides proper training as per IRDA’S standard.
7. Is IRDA successful in insuring orderly growth of insurance sector India?
RESPONSE NUMBER OF RESPONDENTS
60
YES 39
NO 9
CAN’T SAY 12
39
9
12
insuring oderly growth
yesnocan't say
Out of 60 respondent 39 said it is successful in insuring orderly growth of insurance sector in India, 9 says it does not and 12 had no answer to this question. So 65% of total managers admit that IRDA is successful in insuring the proper growth of insurance sector.
8. Do you think that IRDA is successful in putting a check on fraud companies entering into the market?
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RESPONSE NUMBER OF RESPONDENTS
YES 42
NO 9
CAN’T SAY 9
It is
clear from the response that IRDA is successful in putting a check on Fraud Company entering in the market. As 42 managers out of 60 admits this which is 70% of the total responses. IRDA has also put the 100cr margin money to be deposited in IRDA before entering into the market. This money is used to settle the claims if company is not able to repay to their customers.
yesno
can't say
05
1015202530354045
42
99
success in putting a check on fraud com-panies
success in putting a check on fraud companies
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CHAPTER – 7
FINDINGS ON IRDA
FINDING’S ON IRDA ON THE BASES OF QUESTIONNAIRE
9. What are the codes of conducts that are laid by IRDA for you as a manager and for your company?
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A. Every company has to take an approval of the plans that they are launching in the market.
B. Companies also need approval for setting of offices.
C. Companies need to give proper training 50 hours prescribed by IRDA to their agents and intermediaries.
D. Anti Money Landings (AML) is banned by IRDA.
E. Every insurance companies need to follow then policy of K.Y.C (know your customer) before issuing the policy to the customer.
F. IRDA has also given the policy of TEHFE (transparency, ethics, honesty, fair play and equal opportunities) which companies have to follow strictly.
G. IRDA has regulated that right person should be recruited in the companies like for insurance agent working in urban areas minimum qualification is graduation and for rural area it is senior secondary.
H. IRDA has regulated that for insurance companies who had for worked more than 7 years in the market has to collect their insurance premium in following manner. 80% from the urban area and 20% from the rural area.
I. Generally what companies do is that they split the rural customers like if company is earning a premium of RS 500 from one customer. What they do is they show 10 customers paying RS 50 as premium. So IRDA has put a check on it.
J. IRDA has also regulated that all charges like mortality rate etc should be given in the broachers.
K. Photocopy of proposal form should be attached with the policy bond.
L. Signed illustrations should be attached with the proposal.
M. There should be transparency in the product.
FINDING’S ON THE BASES OF COMPARISON’S
1. Despite opening up at roughly the same time in the late nineties, the insurance sector in China has raced ahead of India.
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2. Standard & Poor's latest Asia Insurance review puts the Chinese market ahead of India due to more positive regulatory environment, higher asset quality and better performing companies. There are 79 insurance companies in China, compared to the 30 odd firms in India.
3. Connie Wong, senior analyst, S&P, said, "Compared to China, although regulations have been proactive, they have been less effective in India, especially on issues like solvency requirements. As a result, insurance companies in China have better underwriting and capitalization than India.”
4. Low levels of market sophistication in the life industry and the impending de-tariffing in general insurance are the reasons for placing India in the high-risk category. Compared to this, though China is placed as high in terms of economic risk, it is placed at moderately high in terms of industry risk.
5. Wong said apart from favorable norms on foreign investment, other positive factor for China was that it had progressed towards risk-based solvency requirement.
6. While all the life insurance companies made losses in fiscal 2005, two companies in China have reported profits. Indian sector reported much better investment yields at around 6%.
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CHAPTER – 8
RECOMMENDATIONS
RECOMMENDATIONS
Following are some of the recommendations that were given by the managers of different insurance companies while filling up the questionnaire.
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1. IRDA should intervene in the commission system of insurance companies and agents should be given salaries with commission.
2. IRDA official should also visit local branches of companies.
3. IRDA should make strong regulations for the documentation of the policy.
RECOMMENDATIONS ON THE BASIS OF THE COMPARISION WITH CHINA INSURANCE REGULATORY COMMISSION:-
4. In china there is policy oriented insurance and compulsory insurance operations. So that there is more insurance awareness in china than in India. In India IRDA can make such operation for insurance awareness.
5. China Insurance Regulatory Commission exercises vertically management of all the agent offices stationed in various localities.
6. China Insurance Regulatory Commission approves the setup of representative offices of overseas insurance institutions in China. It can also apply to India.
7. IRDA staff needs training and skills upgrading. Because the insurance industry has been Government monopoly in the past, most of the staff, despite their background in the insurance industry or Government agencies, lacks sufficient supervision and regulatory experience and skills
.
67
CHAPTER – 9
CONCLUSION
CONCLUSION
1. IRDA is important to keep a check on private insurance companies and growth of insurance sector.
By.Deepak ThapliyalBusiness manager, Aegon Religare
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2. It has been successful in monitoring, nurturing and grooming insurance sector in India.
Ajay Tyagi, Territory head Birla sun life
3. If we want the company to work in a proper manner without any problem then we have to obey the rules of IRDA.
Saurabh Andrews, Agency Development Manager, Bharti Axa
4. Without IRDA all companies are like a car without a driver who can make to run their Companies without any guidance. So a driver is there to control a car to show car the right direction and run without harming others. Like driver IRDA also shows all directions and rules to companies by which they have to run.
Mohit khanduri, sales manager, Aviva life insurance
B. IRDA is successful in opening the insurance market for private and foreign companies after liberalization, insuring the orderly growth of insurance sector and protecting the interest of policyholders.
C. The effectiveness of IRDA depends substantially on the ability of its human resources.
D. Till now IRDA is successful in keeping a check on fraud companies entering into the insurance market.
E. IRDA in these years is successful in earning the respect of a regulator in the hearts of managers of insurance companies.
F. After the formation of ombudsmen committee by IRDA is successful in reducing the grievances of the policyholders.
G. Indian insurance sector in spite being opened at the same time as of china is behind but it has big opportunity in future and IRDA is working positively towards that opportunity.
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CHAPTER – 10
REFERENCES
REFERENCES
1. www.relegare.com
2. www.Amazon.com
3. www.irdaindia.org
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4. IRDA journals
5. IRDA annual report 2006-07
6. Insurance report 2006-07
7. TATA AIG branch office, Dehradun
8. ICFAI publications
9. Report of the KPN committee
10. IRDA to inspect the life insurance (TATA McGraw)
11. http://www.sebi.gov.in
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CHAPTER – 11
ANNEXTURE
ANNEXTURE
QUESTIONANAIRE
Dear sir/madam
72
I am conducting a survey on effectiveness of IRDA as a regulator of Indian insurance sector. The information is purely for academic purpose only and will be kept confidential. I hope your kind co-operation.
NAME: -_____________________________________________________________________
DESIGNATION:-_______________________________________________________________
NAME AND ADDRESS OF ORGANISATION:- _______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
E-MAIL:-____________________________________________________________________
PHONE:-____________________________________________________________________
1. YOU’RE WORK EXPERIENCE IN INSURANCE SECTOR IN YEARS.A. 0 – 5 ( )B. 5 -10 ( )C. 10 – 15 ( )D. 15 – 20 ( )E. MORE:-________________________
2. DOES IRDA INTERFARE IN ADJUDICATION OF DISPUTES IN YOUR COMPANY?A. YES ( )B. NO ( )
3. IF YES ARE YOU SATISFIED WITH THE SOLUTION/SUGESTION PORVIDED BY IRDA?A. YES ( )B. NO ( )
4. ARE YOU SATISFIED WITH THE WORKING OF IRDA AS A REGULATOR OF INSURANCE SECTOR IN INDIA?A. YES ( )B. NO ( )C. CAN’T SAY ( )
5. ARE YOU SATISFIED WITH THE WORKING OF TARIFF ADVISORY COMMITTEE?A. YES ( )B. NO ( )C. CAN’T SAY ( )
6. IS IRDA PROVIDING PROPER TRAINING FOR INTERMEDIARIES AND AGENTS?A. YES ( )
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B. NO ( )
7. IS IRDA SUCCESSFUL IN INSURING ORDERLY GROWTH OF INSURANCE SECTOR IN INDIA?A. YES ( )B. NO ( )C. CAN’T SAY ( )
8. DO YOU THINK THAT IRDA IS SUCCESSFUL IN PUTTING A CHECK ON FRAUD COMPANIES ENTERING INTO THE MARKET?A. YES ( )B. NO ( )C. CAN’T SAY ( )
9. WHAT IS THE CODE OF CONDUCTS THAT ARE LAID BY IRDA FOR YOU AS A MANAGER AND FOR YOUR COMPANY?A. ___________________________________________________________________B. ___________________________________________________________________C. ___________________________________________________________________D. ___________________________________________________________________E. ___________________________________________________________________
10. PLEASE WRITE THE IMPORTANCE OF IRDA AS A REGULATOR OF INSURANCE SECTOR IN INDIA IN YOUR WORDS._____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
THANKYOU!!!
DATE: - SIGNATURE
