IRDAI Rule and Regulations For Insurance Companies

  • June 12, 2023
  • Dushyant Sharma
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After getting an IRDA Certificate  every insurance company has to follow the rules set by IRDA to start a company. These rules are made to ensure that the business will run as per the laws and doesn’t follow any wrong practices.

 

Similarly, every company must follow the regulations of several authorities as per the business requirement. These Rules and Regulation are set by IRDA for companies to operate in the insurance industry. To know the other Regulations, read the complete article.

 

The Importance of IRDA Regulation

 

The following are the reasons behind following the IRDA Regulation set by the authority:

 

  • The company must be registered as per the regulations of the authority.
  • Check all the activities of insurance companies.
  • Settle the claims and grievances of policyholders.
  • For foreign exchanges, the company should follow a tight procedure.

 

Insurance Companies Checklist of IRDAI Regulations

 

The Insurance Regulatory and Development Authority of India (IRDAI) has managed the compliances. These compliances are present in the Insurance Act of 1938 and the Insurance Regulatory and Development Authority Act of 1999.

 

The IRDA Regulations for insurance companies is under the following authorities:

  • To start a company, first, the company should be registered under the companies act 1956 or 2013. Secondly, the company has to deal with the Ministry of Corporate Affairs and Registrar of Companies.
  • Foreign Exchange Management Compliance - The insurance company should follow the rules of the Foreign Exchange Management Act 1999.
  • E-commerce Compliance regulates under E-commerce Business/ Internet Guidelines.

 

Process for Insurance Companies Under IRDA Regulations 

 

Below is the IRDA compliance for an insurance company which should be followed are:

 

Registering an Insurance Company

 

  • Register a Public Company under the companies act 1956 or 2013.
  • Must be an IRDA-registered insurance company.
  • Submit the annual filing to the Ministry of Corporate Affairs.
  • File the resolution to the Board regarding the appointment of directors, and auditors.

Learn more: Functions of IRDA 

 

Guidelines for E-Commerce Insurance Company

 

  • Take permission from the authority to set up an Insurance Self Network Platform.
  • Fill out the application Form-ISNP-1 to start an e-commerce platform.
  • Pay a non-refundable fee of Rs. 10 thousand.
  • Fill out the form with all the required details.
  • The authority will revert to the application within 15 days.
  • Once the application and documents get checked, the authority will issue a license.

 

 

IRDA Regulations

 

The following regulation must be fulfilled by the insurance companies to establish a business in India:

 

  • Businesses have to submit monthly, quarterly, and annual reports. 
  • Submit details of policy grievances, with the overall performance of business activities including risk and the process by which they deal with the risk.
  • A minimum solvency ratio must be maintained.
  • Submit an annual report with four copies, first within 6 months, and if the business is operating outside India, then file a report within 3 months. The principal officer, two directors, and the chairman must sign the annual report.

 

Reports of Business Outside India

 

The businesses which are established outside India must file the IRDA insurance company certified copies to the authority. These copies include a balance sheet, account statement, abstract, and report.

 

Along with this, a statement that an auditor or qualified person has stated must be submitted because it reflects the assets possessed by the insurer as per the dates stated in the balance sheet. They have to submit an abstract of a valuation report to the authority before the due date.

 

Compliances Requirement for FEMA

 

These IRDA insurance company compliances are designed for those companies that have foreign investments or foreign promoters. For insurance companies, it is mandatory to file an annual report by filing all the provisions within the specified period to RBI. 

 

The insurance companies have specific requirements related to foreign equity, that’s why foreign investors are allowed to invest in outward investment and inward investment in the insurance sector.

 

IRDA Commission Structures For Brokers

 

As per the circular, the IRDA brokerage percentage for insurance agents, brokers, and intermediaries will be based on insurer approved policy, the commission, remuneration, and reward will be decided. The commission of life insurance, health insurance, and general insurance is stated in the table below:

 

Life Insurance Commission

 

S.No

Life Insurance Policy Categories

Maximum Commission on Single Premium Payable to Insurance Broker

  1.  

All Single Premium Life Policies

2%

  1.  

Pure Risk Policies without return of Premium

10%

  1.  

Immediate/ Deferred Annuity

2%

  1.  

One-year renewable group policies

10%

  1.  

Group Pure Risk (incl Group credit)

2%

  1.  

Group Savings Variable Life

2%

  1.  

Group Fund based

0.5% of the premium paid during the year or Rs 5 lakhs whichever is less



Health Insurance (Life Insurance) Commission

 

S.No

Category of Life Insurance Products

Maximum Commission/ Remuneration on Single Premium Payable 

Maximum Commission/ Remuneration on Regular Premium Payable

First-year premium

Renewal Premium

  1.  

Retail

NA

10%

10%

  1.  

Group

2% of the premium for Rs. 2 Lakhs per scheme per policy year

NA

NA

  1.  

Government Schemes

0.5% of the premium for Rs. 50 thousand per scheme per policy year

NA

NA

 

General Insurance Commission

 

S. No

Line of Business

Maximum commission/remuneration

  1.  

Fire

15%

  1.  

Marine

10%

  1.  

Miscellaneous - Retail

15%

  1.  

Miscellaneous - Corporate/ Group

15%

 

Motor Insurance Commission

 

S.No

Line of Business

Maximum commission in 1st and 2nd year

Maximum commission in 3rd year

  1.  

Motor

10%

15%




Conclusion 

In last, it can conclude that IRDA Regulations are important for insurance companies to run a successful business in India. The companies can choose the compliances as per their requirements. Any company that doesn’t have a foreign holding can’t deal with the compliances of FEMA.

 

We at Registrationwala, help companies to get end-to-end support to apply for an IRDA Insurance broker license. Reach out to us to get complete assistance in applying for the final issuing of an insurance broker license.

 

FAQs

 

What is the compliance of IRDA?

 

IRDA compliance is the rules and regulations set by the Insurance Regulatory and Development Authority of India (IRDAI) for businesses run in the insurance industry.

 

What is the role of IRDA in an insurance company?

 

An IRDA is an autonomous body that protects the right of policyholders. It keeps an eye on the insurance sector in India, and if found any issue then it has a right to punish the insurance companies.

 

How many ombudsmen are there in India?

 

For grievances-related issues, there are a total of 22 regional offices of the Banking ombudsman in India.

 

What is the role of the compliance function in insurance?

 

IRDA compliances are essential to check the management and business activities of insurance companies as per the law. Also, it ensures that the company operations comply with internal standards too. 

 

 

People also read : What's the Difference Between an Insurance Broker and an Agent?

 


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Dushyant Sharma
Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.

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