Insurance Regulatory and Development Authority

• Short Title and Commencement
• Definition
• History
• Constitution and composition of the Authority
• I.R.D.A. Functions Duties and Powers
• Announcement of rules
• Major Provisions of IRDA

Power of Insurance Regulatory and Development Tribunal (Licensing Insurance Agents) Rules, 2000 – Clauses (k), (l) of sub-section (6) of section 42 of the Insurance Act, 1938 and sub-section (2) of section 114A ) , ( m ) . (n) . Under the powers conferred under ( 0 ) and ( p ) this tribunal can make the following legislation and rules in consultation with the Insurance Advisory Committee –

here we are presenting information only about the parts related to life insurance –

• This The regulation shall be called the Insurance Regulatory and Development Tribunal (Licensing Insurance Agents) Regulations, 2000.
• It shall come into force with its publication in the Official Gazette.
• These regulations may be called the Insurance Regulatory and Development Authority (Protection of Policyholder Interest) Regulations, 2002.
• Except in regulation 4(1) which shall come into force on the 1st day of October, 2002, these regulations shall come into force on the date of publication in the Official Gazette, and shall apply to all insurance contracts entered into thereafter.
• These regulations shall be in addition to any other regulation made by the Authority which may, inter alia, be available to protect the interest of policyholders.
• These regulations apply to all insurers, insurance agents, insurance intermediaries and policyholders.

1. Act – means the Insurance Act, 1938.
2. Approved Institution – means the institution which is engaged in teaching / training in the field of sales service and marketing and this tribunal is approved and notified.
3. Tribunal – means the Insurance Regulatory and Development Authority established under the provisions of section 3 of the Insurance Regulatory and Development Tribunal Act, 1999.
4. Compound Insurance Agent – means an insurance agent who is licensed to act as an insurance agent for a life insurer and a general insurer.
5. Corporate agent – is a person other than an individual referred to in clause
6. Designated Person – ordinarily means an officer designated by the insurer and authorized by the Tribunal to grant or renew a license under these regulations for the marketing of insurance.
7. Examination Body – is an institution which conducts recruitment examination for the recruitment of insurance agents and for the purpose of which it is recognized by the Tribunal.
8. License – Certificate of license to act as an insurance agent
9. Person – means –
   • (i) individual,
   • (ii) firm, or
   • (iii) company established under the Companies Act, 1956 And as defined in clause (4A) of section 2 of the Act, the banking company,
10. Practical Training – means training in the field of insurance, sales, service and marketing by training methods approved by the Tribunal.
11. Proposal Form – means an application for the purchase of an insurance product based on an insurance contract.
12. Prospective – means a potential purchaser of an insurance product.
13. Recognized Board or Institution – means such Board or Institution which is recognized by any State Government or Central Government.
14. Act – means the Insurance Act, 1938 (4 of 1938).
15. Authority – means the Insurance Regulatory and Development Authority established under the provisions of the Insurance Regulatory and Development Authority Act, 1999 (Part 2 of section 41 of 1999).
16. Cover – means any contract of insurance in which a decision to give evidence of the existence of an insurance contract is in the form of a policy or in the form of a cover note or certificate of insurance or in any other form prevalent in the industry. .
17. Proposal Form – means a form filled by a proposer of insurance to furnish all material material required by the insurer in respect of any risk to enable the insurer to decide whether the risk should be accepted or rejected and should also be able to determine the rates, terms and conditions of the cover to be granted in case of accepting the risk.
    • Explanation: – For the purposes of these regulations, “material” shall mean all material, necessary and relevant information in relation to the assessment of the risk to be undertaken by the insurer and shall have all the preceding.
18. Prospectus – means any document issued by or on behalf of an insurer to a potential purchaser of insurance, which shall contain such particulars as are mentioned in rule 11 of the Insurance Rules, 1838 and shall contain any prospectus establishing the purpose. or form is also included. Any such document should also specify the type and nature of the main product rate riders, indicating the nature of benefits accruing thereon.
19. words and expressions used in these regulations but not defined in the Act, or the Life Insurance Corporation Act, 1956 (31 of 1956) or the General Insurance Business (Nationalization) Act, 1972 (57 of 1972) or  defined in the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999) or the Insurance Rules, 1949, shall have the meanings respectively assigned to them in those Acts or rules.

Background – Clause (zc) of sub-section (2) of section 114 A of the Insurance Act, 1938 (4 of 1938) along with sections 14 and 26 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999) In exercise of the powers conferred by it, in consultation with the Insurance Advisory Committee, makes regulations.

Constitution of Insurance Regulation and Development Authority – Under the powers obtained under Section 3 of the Insurance Regulation and Development Authority Act, 1999, the Central Government has constituted the Insurance Regulation and Development Authority by issuing a notification. This authority has a maximum of 9 members and a chairman. As the first chairman, N. Rangachari was appointed in June 2003. Its scope of work is as follows: –

• To divide the insurance industry into different parts.
• To issue a licence.
• To fix the terms and conditions for the entrepreneurs and intermediaries entering the insurance sector.

1. The main duties of this authority are as follows –
   • To regulate the insurance and reinsurance business.
   • To promote the insurance and reinsurance business, and
   • To ensure the systematic development of the insurance and reinsurance business.
2. The main powers / powers and functions of this authority are as follows –
   • Issuance, renewal, cancellation, modification, or suspension of registration certificate/license to applicants.
   • To protect the interests of the insured in matters of handing of insurance, nomination, insurable interest, settlement of insurance claims, surrender of insureds and determination of other terms of the insurance contract, etc.
   • To determine the qualifications, codes of conduct and training etc. of insurance intermediaries and agents.
   • To lay down a code of conduct for surveyors and loss assessors.
   • To increase efficiency in the conduct of insurance business.
   • To encourage professional associations engaged in insurance and reinsurance business.
   • To levy and collect fees for carrying out the purposes of this Act.
   • To solicit, inspect, investigate, investigate and audit information from insurers, intermediaries and other organizations connected with the insurance business.
   • To regulate and control the rates, benefits and conditions of the plans offered by the insurers of the insurance business which are not controlled by the Tariff Advisory Committee of the insurance business.
   • To determine the form and method of books to be maintained and statements of accounts to be submitted by insurers and reinsurers.
   • To regulate the appropriation of funds of insurance companies.
   • To regulate the maintenance of solvency margins.
   • Settlement of disputes between insurers and arbitrators.
   • To oversee the work of Tariff Advisory Committee.
   • To determine the percentage of premium income of the insurers to finance the implementation of the schemes of promotion of professional associations.
   • To determine the percentage limit for life insurance and general insurance by insurers in rural or social areas.
   • Exercising other prescribed rights.

The Insurance Regulation and Development Authority has announced that the rules being made for the regulation of the insurance industry will be implemented within 90 days of its formation. So far this authority has declared the rules related to the following.

1. Accounting Standards of Insurers and their related rules.
2. Underwriters rules.
3. Rules regarding insurance surveyors.
4. Brokers and brokerage payment rules.
5. Rules regarding insurance agents.
6. Rules regarding liability of the insurer in relation to rural or social sector.
7. Insurance advertisement and disclosure rules.
8. Actuarial rules.
9. Reinsurance rules.
10. Rules relating to assets, liabilities and solvency of insurers.

1. License issue Or Renwell –
   • You shall be 2011. A person who wants to work as an insurance agent or a mixed insurance agent should proceed in the following manner –
     • He should submit an application to the proper officer –
       • If the applicant is an individual, Form IRDA – Agents – VA
       • If the applicant is a firm or a company, then Form IRDA – Agents – VC
     • should be given separate application to the applicant who wants to become a mixed insurance agent.
       • The applicant shall have to pay the fee mentioned in Regulation-7 to the Tribunal.
   • When the application and the fee are received by the officer of the Tribunal, he shall be satisfied that the applicant—
     • possesses the qualifications specified in regulation 4;
     • has undergone practical training as described in regulation 5.
     • has passed the examination described in regulation 6.
     • the application is complete in all respects.
     • possesses requisite knowledge in relation to insurance business.
     • the insurance is capable of providing the necessary services to the cardholders.
       • Thereafter he will be issued or renewed license in the format of IRDA-VB if along with it identity card in the format of IRDA-Agents-VZ.
       • In case of a Corporate Agent, he will get an Identity Card in the format of IRDA – Agents – VY.
       • An applicant willing to work as a composite insurance agent will be provided with an identity card from a life insurer and an identity card from a general insurer.
       • In the case of a firm or a company, all its partners or directors shall satisfy all the qualifications mentioned in clauses (a) to (c) above.
   • If the authority refuses to issue or grant a license under regulation, he shall explain the reasons for the same to the applicant.
2. Qualification of the applicant – If the population where the applicant resides is five thousand or more, then the minimum qualification of the applicant is 12th pass or equivalent from any recognized board or institution. If the applicant resides at any place other than this, his minimum qualification will be 10th pass or equivalent.
3. Practical Training –
   • If the applicant wants to take a license to become an insurance agent for the first time, he/she will have to complete one hundred hours practical training in life insurance or general insurance business from an approved institution. Must complete practical training. This training can be of three to four weeks duration. The applicant who wants to take a license to become a composite insurance agent for the first time will have to take at least 150 hours of practical training in life insurance and general insurance business, which can be completed in six to eight weeks.
   • If the applicant referred to under sub-regulation (1) is—
     • a member of the Insurance Institute of India, Bombay;
     • a member of the Institute of Chartered Accountants of India, New Delhi;
     • a member of the Institute of Cost and Works Accountants of India, Kolkata;
     • a member of the Actuarial Society of India,
     • a Master’s degree in Business Administration from any Institute or University recognized by the State Government or the Central Government,
     • a recognized Institute or University having Professional Diploma in Marketing (Professional qualification) then he/she will have to complete minimum 50 hours of vocational training from any recognized institution.
       • On the other hand, if the applicant wants to take license for mixed insurance agent for the first time, then he will have to undergo practical training of 70 hours in life insurance and general insurance business.
   • An applicant who has got a license after the commencement of these regulations shall undergo practical training of 25 hours for the renewal of his/her licence. On the other hand, if such an applicant wants to renew his license for a composite insurance agent, he will have to undergo practical training of 50 hours in the general insurance business of life insurance.
4. Examination – The applicant must pass the pre recruitment examination in life or general insurance business conducted by the Insurance Institute of India Mumbai or any other examining body.
5. Fees payable –
   • The fee for obtaining license or renewal of license to become an insurance agent or compound insurance agent is Rs.250, payable to the Tribunal.
   • In case of the circumstances mentioned in sub-section (3) of section 42 of the Act, the additional fee payable by the Tribunal is rupees one hundred.
6. Code of conduct – Every licensed person shall observe the following code of conduct –
   • Every insurance agent shall –
     • identify himself and the insurance company of which he is an agent.
     • disclose his license on demand by the subscriber involved.
     • give the required information about the insurance products offered by his insurer and take into account the requirement of the potential customer while recommending a particular insurance plan.
     • To give commission information in respect of the sale of the proposed insurance product to the prospective customer when asked.
     • To state the premium to be charged on the proposed insurance product.
     • informing a potential customer about the information required by the insurer in the insurance proposal and materially important information to be given in relation to an insurance contract.
     • to inform the insurer in the confidential report of his insurance agent about the adverse habits or income discrepancies of the potential customer at the time of sending the offer of insurance, affecting the acceptance of the insurance contract.
       • Promptly informing the customer about the insurance proposal accepted or rejected by the insurer.
       • To obtain the required documents at the time of filling up the insurance proposal form.
       • render necessary assistance to the holder of the policy or the claimant for settlement of the claim.
       • to render necessary assistance to every policy holder in the matter of nomination or assignment or change of beneficiaries or addresses or selection of options.
   • No insurance agent shall –
     • carry on insurance business without obtaining a valid license;
     • The insurance offer letter should not encourage the prospect to hide important information from the customer.
     • Should not be induced to give false information in the insurance proposal letter.
     • Should not behave in a discourteous manner with a potential customer.
     • not to interfere in the matter of any proposal of any other insurance agent.
     • Insurer: Things other than the benefits, terms and conditions offered by the insurer should not be offered.
     • shall not compel the holder of the insurance policy to terminate the existing insurance policy and take a new insurance proposal by terminating it within the same manner.
       • not to compel the policyholder to terminate the existing policy of insurance and take a new policy within three years thereof.
       • In the case of a corporate agent, the insurance business portfolio should not exceed fifty per cent of gross premiums in a year.
       • Once the license is cancelled, one should not apply for a license before five years from the date of cancellation.
       • Should not become or remain a director of an insurance company.
       • Every insurer should make every effort to collect the premium within the stipulated period from the insurance policy holders created by him. For this, he should give written or oral information.
7. Cancellation of license – Any insurance agent who is affected by any of the disqualifications mentioned in sub-section (4) of section 42 of the Act, his license may be canceled and the license identity card issued before that shall be taken back.
8. Issue of Duplicate License – In the event of the license being lost, destroyed or mutilated, a duplicate license may be issued by the Tribunal for a fee of Rs.50.
9. Appointment of Actuary Compulsory –
   • The Insurance Authority has made it mandatory for all insurers to appoint an actuary in their top management. It is mandatory to get its appointment approved by the authority.
   • The insurer will give advice to the company related to insurance business, in which he will mainly give advice in matters related to preparation of product, determining its premium, fixing its terms, investment of insurance fund, reinsurance. This will help in maintaining the financial soundness of the insurer.
   • The actuary will inform the insurance authority about the irregularities/discrepancies in the activities of the insurance company. He will make reasonable efforts to meet the reasonable expectations of the insured. He will keep a watch on the insurance company’s accrued premiums, claims generated but not submitted, emergency reserves etc. and ask the company to make suitable arrangements for them.
10. Determining limits of rural and social insurance business – Insurance Authority is setting minimum limits of insurance business in rural areas and social areas for private insurers. With this, insurance facility will be available to the rich and poor, rural and urban people of the country.
11. Determination of the investment limit of the funds – The Insurance Authority has also fixed the investment limit of the funds of the insurers. Every insurer shall invest at least 50 percent of its funds in government and government approved securities; not more than 50 percent of the total funds shall be invested in shares of companies, mortgages or loans, bank deposits.
12. Determination of capital norms –
    • The Insurance Authority has set the capital norms for the license of private sector insurers as follows.
      • The minimum paid-up capital of an insurer shall be Rs.100 crores. Will be
      • The minimum paid-up capital of the reinsurer company shall be Rs.200 crores. Will be Maximum 26% capital can be invested by foreign institutions in these companies.
    • The capital criteria for the license of brokerage are as follows –
      • The minimum capital for brokerage of the insurer is Rs.10 lakh. Will be
      • The minimum capital for brokers of reinsurers shall be Rs.25 lakhs. Will be Maximum 76% capital can be invested by foreign investors in brokerage institutions.
13. Determination of capital ratio for domestic companies – The Authority has fixed the capital ratio for domestic companies. Domestic companies can invest 100 percent in insurance companies. But if there are foreign partners, their capital ratio cannot exceed 26%. But in all cases domestic companies will have to bring down their capital ratio to 26% within 10 years.
14. Exemption for banks / financial institutions to enter the insurance sector – The Reserve Bank has decided to give banks and financial institutions the freedom to enter the insurance sector. For this, the Banking (Regulation) Act is being amended. The Reserve Bank has also fixed the investment limit of banks in insurance companies and has also made other rules, which are as follows: –
    • Any bank can invest up to 50% of the paid-up capital of any insurance company. The Reserve Bank can also allow select banks to invest up to 74%, but such banks will also have to bring their capital limit again to 50 percent within the stipulated period.
    • The foreign partner shall not invest more than 50% of the capital in such insurance company.
    • If the bank is not allowed to invest 74% of the capital, then the remaining 24% of the capital will be invested by another Indian partner.
    • N of the investing bank. P . a . (Non-performing Assets or NPA) should also not exceed the “reasonable limit”.
    • The capital adequacy ratio of such bank should be at least 10 percent.
    • such bank should have earned profit during the last three years.
15. Approval of new products – Every insurance company shall get its new products (new insurance-certificates) approved by the authority before releasing them in the market. The Authority shall approve or refuse to approve such product within thirty days of its receipt. Private sector and All the public sector insurance companies should get their insurance products approved by the authority.
16. Determination of Code of Conduct – The Insurance Authority has prepared a code of conduct for insurance brokers. In this code, many things have been given in relation to brokers, such as their relationship with customers, sales practice, obligation to give information to customers, advertisement, appointment of sub-broker, remuneration, punishment etc.