IRDAI

IRDAI (Insurance Regulatory & Development Authority of India) Act, 1999 and Insurance
act, 1938.
Organizational Structure of IRDAI:

Composition of IRDAI:
As per Sec. 4 of IRDAI Act, 1999, the composition of the Authority is:
a) Chairman;
b) Five whole-time members;
c) Four part-time members,
(appointed by the Government of India)

Office Duties: (FSIIAGL)

1. Ensuring financial stability of insurers
2. Providing required support for inspection of Insurance companies and other regulated entities
3. Focuses on spreading consumer awareness
4. Handling of Insurance grievances
5. Responsible for licensing of Surveyors and Loss Assessors.

Insurance Regulatory Framework:

1. Insurance Regulatory and Development Authority of India (IRDAI), is a statutory body formed under
an Act of Parliament, i.e., Insurance Regulatory and Development Authority Act, 1999 (IRDAI Act
1999) for overall supervision and development of the Insurance sector in India.
2. The powers and functions of the Authority are laid down in the IRDAI Act, 1999 and Insurance Act,
1938. The key objectives of the IRDAI include promotion of competition so as to enhance customer
satisfaction through (CCFPFS)
a. increased consumer choice
b. fair premiums
c. ensuring the financial security of the Insurance market
3. IRDAI adopted a Mission for itself which is as follows: (FGEISFAS)

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

2. To bring about speedy and orderly growth of the Insurance industry (including annuity

and superannuation payments), for the benefit of the common man)

3. to provide long term funds for accelerating growth of the economy;

4. To set, promote, monitor and enforce high standards of integrity, financial soundness,

fair dealing and competence of those it regulates;

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

malpractices and put in place effective grievance redressal machinery;

 6. To promote fairness, transparency and orderly conduct in financial markets dealing

with Insurance and build a reliable management information system to enforce high

standards of financial soundness amongst market players;

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

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

industry consistent with the requirements of prudential regulation.

4. Entities regulated by IRDAI: (LGRAI)

a. Life Insurance Companies - Both public and private sector Companies

b. General Insurance Companies - Both public and private sector Companies. Among them, there are
some standalone Health Insurance Companies which offer health Insurance policies.
c. Re-Insurance Companies
d. Agency Channel
e. Intermediaries which include the following:

 Corporate Agents

 Brokers

 Third Party Administrators

 Surveyors and Loss Assessors.

Supervisory Role:

Section 14 of the IRDAI Act,1999 specifies the Duties, Powers and functions of the Authority. These
include the following:

1. To grant licenses to (re) Insurance companies and Insurance intermediaries

2. To protect interests of policyholders,

3. To regulate investment of funds by Insurance companies, professional organisations

connected with the (re)Insurance business; maintenance of margin of solvency;

4. To call for information from, undertaking inspection of, conducting enquiries and

investigations of the entities connected with the Insurance business;

5. To specify requisite qualifications, code of conduct and practical training for

intermediary or Insurance intermediaries, agents and surveyors and loss assessors

 6. To prescribe form and manner in which books of account shall be maintained and

statement of accounts shall be rendered by insurers and other Insurance intermediaries;

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What are the various types of Insurance. Give examples in support of your answers.

What are the Different Types of Insurance Available?

While there is a wide range of Insurance types available in the market, all of them can be broadly classified
into two main categories:
1. General Insurance
2. Life Insurance
While Life Insurance provides you with financial coverage against your life, a General Insurance policy
indemnifies you against any losses for your non-life assets.
Below is the further classification of the above two types of Insurance:
1. General Insurance
The major kind of General Insurance Policies in India are:

 Health Insurance

 Motor Insurance

 Travel Insurance

 Property Insurance

 Commercial Insurance

 Asset Insurance

 Pet Insurance

 Bite-Sized Insurance
2. Life Insurance
The major kind of Life Insurance Policies in India are:

 Term Insurance

 Whole Life Insurance

 Endowment Policy

 Money Back Policy

 Pension Plan

 Unit Linked Insurance Plans

 Child Plans
Let's have an extensive look at all the above types of Insurance:
What are the Different Types of General Insurance?

Basically, an insurance that does not lie in the ambit of Life Insurance is General Insurance.
General Insurance provides coverage against any financial loss incurred due to any loss or destruction of the
insured asset. It safeguards your assets like a Bike, Car, Home, Travel, Health, or even your beloved electronic
gadgets from any loss.
1. Health Insurance
A Health Insurance is your savior against the expenses incurred due to any illness or medical emergency.
There are various types of health insurance available based on their coverage:
 Individual Health Insurance: Covers one policyholder.
 Family Floater Health Insurance: Covers the complete family under a single policy.
 Group Health Insurance: Covers the employees of an organization.
These have different products under them based on their usage and many other factors. Here is a list of major
types of health insurance products available in India:
  Senior Citizen Health Insurance

 Maternity Health Insurance

 Aarogya Sanjeevani

 Super Top-Up Insurance

 OPD Insurance

 Personal Accident Cover

2. Motor Insurance
You must have a Motor insurance policy not just because it is mandatory in India but also because the policy
ensures that the vehicle has complete protection against physical damage from natural or artificial calamities
and third-party liabilities arising from the insured vehicle.
Based on the type of vehicle they cover, Motor Insurance is broadly categorized into:
 Car Insurance
 Two-wheeler Insurance
 Commercial Vehicle Insurance
The different types of Motor Insurance Policies available in the market under the ones mentioned above are as
follows:
 Third-party insurance Policy: Pays the financial liability to the third party affected in
the mishap, ensuring you do not face legal hassle due to the accident.
 Comprehensive Insurance Policy: Apart from covering third-party liabilities, these
plans also cover the expenses incurred for repairing the damages to the policyholder’s
vehicle due to an accident, fire, artificial and natural calamities, riots and other such
instances.
 Own Damage Policy: With Own Damage Cover, you receive the same benefits as a
comprehensive policy without the third-party liability portion of the policy.
Additionally, you can purchase some add-ons like Zero depreciation cover, Loss of personal belongings cover,
Pay-as-you-drive cover, Daily conveyance cover, etc. to ensure that you are covered against any eventuality.
3. Travel Insurance
Travel Insurance is your financial safeguard when you are travelling. It covers loss of baggage, loss of passport,
hijacking, medical emergencies, delayed flights, accidental deaths, adventure sports etc.
The major types of travel insurance are:
 Domestic Travel Insurance: For travel within the country
 International Travel Insurance: For travel outside the country
 Student Travel Insurance: If you are moving abroad for higher studies.
Under the above types, there are different products like Individual Travel Insurance, Family Travel Insurance,
Senior Citizen Travel Insurance, Corporate Travel Insurance, Multi Trip Travel Insurance, Single Trip Travel
Insurance and Schengen Travel Insurance.
4. Property Insurance
A Property Insurance Policy provides financial reimbursement to the owner/renter of a building and its
contents.
Some products available in the market under property insurance include:
 Home Insurance
 Shop Insurance
 Burglary Insurance
 Office Insurance
 Fire Insurance:
5. Commercial Insurance
A Commercial Lines Insurance policy ensures that the business does not face any financial burden because of
any financial and business risks. It provides coverage to business, its employees and ownership.
Furthermore, Commercial Insurance has several Insurance types based on the type of asset covered, viz:
 Liability Insurance: Provides coverage against damage to any third party and offers the
following types of Policies:

o Directors and Office Liability Insurance

o General Liability Insurance
o Public Liability Insurance
o Cyber Insurance
 Marine Cargo Insurance: This Insurance indemnifies the goods/cargo carried through
inland transit.
 Engineering Insurance: A comprehensive insurance that provides complete protection
against all risks associated with engineering and machinery, like the risk faced by the
ongoing construction project, installation project and machines and equipment in
project operation. It includes the following insurance products:
o Contractor’s All-Risk Insurance
o Erection All Risk Insurance
o Plant and Machinery Insurance
 Workmen Compensation Insurance: Workmen Compensation provides financial
coverage to employees who get injured or die in any mishap during work.
 Crop Insurance: Crop Insurance covers the financial losses that a bad crop season,
crop failure or any other related menace might bring in for the agriculturists.
Apart from the above major categories of General Insurance, there are a few more types as below:
6. Asset Insurance
Asset Insurance provides financial coverage to your assets like Mobile, TV, and other appliances or electronics
so that their expensive repair doesn’t hit your pocket.
7. Pet Insurance
Pet Insurance covers your furry baby’s health and well-being requirements, such as any medical condition,
such as pregnancy complications, dental treatments, and insect-borne diseases. It also covers a lot of other
conditions like pet theft, loss or damages to a third party because of the pet, accidents, overseas coverage and
many more, depending on your insurance provider.
8. Bite-Size Insurance
Bite-size Insurance, or small-ticket insurance/sachet insurance is available at very low premiums and focuses
on specific needs. More than being a type, it is a category of insurance that is unrestricted across all categories
like health, travel, property etc.
A few common Bite-Sized insurance products available in the market are:

 Online Fraud Protection

 Cab Ride Insurance

 Backpack Insurance

 Marathon Insurance, and many more.

Life Insurance

Life Insurance provides financial coverage for the most uncertain part of human life: Life itself! Thus, it offers
financial protection to the Life Assured's family in case of unfortunate events like the death or disability of the
policyholder. In addition to the life coverage, some policies also provide a savings component and can be used
as a prudent investment option.
Below are the major types of Life Insurance policies in India:
1. Term Insurance
Term Insurance is the most basic type of Life Insurance that provides Life Cover for a predetermined period
called the 'term' of the policy.
Since they do not offer any cash value, they are generally available at a much lower premium than other
products for the same amount of coverage. If the Life Assured dies during the policy term, the nominee
receives the Sum Assured, and there is no maturity value if the Life Assured survives the policy term. However,
certain Term Plans offer the option of Return of Premium which is paid to the policyholder if Life Assured
survives the policy term.
2. Whole Life Insurance
Also known as Traditional Life Insurance, Whole Life Insurance provides coverage for the policyholder's entire
life. Besides this life cover, they also have a savings component and accrue periodic bonuses.
Generally, the Whole Life Insurance Plans have a maturity period of 100 years, and if a policyholder survives
this term; they are paid a maturity amount.
3. Endowment Policy
A perfect mix of Investment and Insurance, Endowment Plans provide Life Coverage and help build a corpus
for major life goals.
A portion of the premium goes towards Sum Assured while the other portion is invested in certain low-risk
investments. In case of the policyholder's demise during the policy term, the Sum Assured is paid to the
nominee. However, if the policyholder survives the term, they receive a maturity amount along with the
accrued bonuses.
Thus, Endowment Plans serve the dual purpose of Insurance and Investment.
4 . Money Back Policy
Money Back Policies are essentially the Endowment Plans only with the additional feature of payments at
certain pre-defined intervals during the policy term. Additionally, on maturity, the maturity benefits are paid
along with accrued bonuses.
In case of the policyholder’s demise during the term, Sum Assured is paid to the nominee regardless of the
survival benefits already paid.
5. Unit Linked Insurance Plans
ULIPs provide Life Coverage and capital-building opportunities by investing in various market-related
instruments and funds of varying risks.
ULIPs have some underlying funds related to different asset classes like Equity, Hybrid and Debt funds where a
certain portion of the premium is invested as per the policyholder's risk appetite. While this portion of the
premium helps generate returns, the other portion goes to the Life Coverage part.
ULIPs are flexible to a certain extent. They allow partial withdrawal after a lock-in period of 5 years and the
switching of funds that can help you customize your investment as per your financial goal and life stage.
6. Pension Plan
Also known as Retirement Plan, Pension Plan helps to accumulate wealth for the golden years of one's life and
helps you deal with the financial uncertainties of the post-retirement phase.
Thus, a pension plan allows you to contribute a specific portion of your income as a premium during your
earning years. Subsequently, in your retirement phase, this accumulated amount is paid back to you in the
form of an annuity or pension at regular intervals.
7. Child Plans
These are specially designed endowment plans meant to financially secure a child's future in case any mishap
occurs with their parents or, more importantly, the sole earning parent.
In the event of the policyholder's death, the child receives a certain sum assured. However, the policy does not
end there. Future premiums are waived off/paid by the insurer, and the child also keeps receiving some
amount at regular intervals. This plan ensures the demise of the earning parent does not impact the child's
education.
What Are the Benefits of Insurance?

Benefits of General Insurance

Any individual needs to have a general insurance policy owing to the risks posed by accidents, medical
emergencies, natural calamities, and other unforeseen circumstances. The policy provides financial protection
in case such situations arise in our lives. We cannot predict an accident or calamity; however, we can be better
prepared to handle them.
Here are a few benefits that General Insurance provides:

 For most categories, having insurance coverage is compulsory by law. One example is
the Motor Vehicles Act 1988, which made motor insurance compulsory. Thus, while
following the mandatory regulation, you also ensure your beloved vehicle is financially
protected.

 General Insurance Plans provide compensation against losses. Thus, across all
categories, they serve one primary purpose: to provide financial protection and
safeguard your savings in case any unfortunate situation arises.

 Many General Insurance Plans provide tax benefits. For example, the premium paid
towards medical insurance offers tax benefits under Section 80D of the Income Tax
Act.

Benefits of Life Insurance

Life Insurance is basically the Kavach that protects your dependent family if, God forbid, anything happens to
you. Here are the most crucial benefits that Life Insurance provides:

 The primary and foremost benefit that Life Insurance provides is financial security. It's
the cushion that ensures your family's finances remain unaffected even in the case of
the breadwinner's demise.
 With a Life Insurance Policy, you can also avail of tax benefits. The premium paid
towards a Life Insurance Policy is tax-free under section 80C of the IT Act. Also, the
returns, be it sum assured, maturity benefit or bonus, are tax-free under Section
10(10)D of the IT Act.

 With Life Insurance in place, you can be stress-free about a loan repayment even in
case of death. Your insurance will take care of the loan repayment and ensure that
your dependent family does not deal with this financial struggle.

 Life Insurance is an excellent method to secure your child's future financially. While
building a corpus for higher studies, Child Education Plans also ensure that your child's
education goals remain unaffected even in case of any unfortunate incident like the
death of the earning parent.

 Retirement Plans are annuity based and provide you with the option of periodic
payments after retirement. Not just that, they also serve the primary purpose of
providing life cover and financially securing your dependents.

What is the Insurance Regulatory and Development Authority

(IRDA)?
The Insurance Regulatory and Development Authority is the main organization or
supervisory body that regulates the insurance sector in the country. It sets rules and
regulations for the functioning of the insurance industry. Its sole purpose is to protect the
interest of policyholders and to develop the industry on the whole.

Objective of IRDA:
The main objective of the Insurance Regulatory and Development Authority of India is to
enforce the provisions under the Insurance Act. The mission statement of the IRDA is:

 To protect the interest and fair treatment of the policyholder.

 To regulate the insurance industry in fairness and ensure the financial soundness of
the industry.

 To regularly frame regulations to ensure the industry operates without any

ambiguity.

Important Role of IRDA in the Insurance Sector in India:

 To protect the policyholder’s interests.

 To help speed up the growth of the insurance industry in an orderly fashion, for the
benefit of the common man.

 To provide long-term funds to speed up the nation’s economy.

 To promote, set, enforce and monitor high standards of integrity, fair dealing,
financial soundness and competence of the insurance providers.

 To ensure genuine claims are settled faster and efficiently.

 To prevent malpractices and fraud, the IRDA has set up a grievance redress forum to
ensure the policyholder is protected.

 To promote transparency, fairness and systematic conduct of insurance in the

financial markets.

 To build a dependable management system to make sure high standards of financial

stability are followed by insurers.

 To take adequate action where such high standards are not maintained.

 To ensure the optimum amount of self-regulation of the industry.

Functions of IRDA:
 Grant, renew, modify, suspend, cancel or withdraw registration certificates of the
insurance company.

 Protecting the interests of the policyholder in matters concerning the grant of

policies, settlement of claims, nomination by policyholders, insurable interest,
surrender value of the policy and other terms and conditions of the policy.

 Specify code of conduct, qualifications and training for intermediary or insurance

agents.
 Specify code of conduct for loss assessors and surveyors.

 Levying fees and charges for carrying out the provisions of the Act.

 Undertaking inspection, calling for information, and investigations including an audit

of insurance companies, intermediaries, and other organizations associated with the
insurance business.

 Regulate and control insurance rates, terms and conditions, advantages that may be
offered by the insurance providers.