Life Insurance Regulation and Compliance
Life Insurance Regulation and Compliance
The Life Insurance Regulation and Compliance domain tests the rules that govern life insurers: licensing, capital and solvency, product approval, market conduct, anti-money laundering and grievance redress.
Core rules and concepts
- Entry and capital: insurers must be licensed and maintain minimum paid-up capital and solvency margins.
- Product regulation: products are filed or approved with benefit illustrations, actuarial reports and policy terms; file-and-use regimes require compliance within a waiting period.
- Market conduct: commission caps, disclosure, free-look, grievance redress and ombudsman access.
- AML/KYC: customer due diligence, beneficial ownership, suspicious transaction reporting and record retention.
- Data protection: consent, purpose limitation and security of customer data.
Worked example
An insurer files a new participating product under a file-and-use regime. The filing includes the benefit illustration and actuarial note, but the sales brochure promises a minimum 12% return. The regulator can require withdrawal or re-filing because the promise is unsupported and misleading. The reasoning: product approval covers terms and illustrations, while market-conduct rules prohibit misleading projections. The actuary must also confirm that illustrated returns use the prescribed rates and that charges are disclosed.
Traps
- Confusing minimum capital with the solvency margin.
- Treating file-and-use as no compliance obligation.
- Ignoring commission caps for different product types.
- Missing AML red flags such as unusual premium payments or third-party payers.
- Retaining records for less than the prescribed period.
Key points
- Licensing, capital and solvency are separate regulatory requirements.
- Product filings must include compliant illustrations and disclosures.
- Market-conduct rules govern commission, free-look and grievances.
- AML/KYC requires customer due diligence and suspicious transaction reporting.
- Data protection and record retention are continuing obligations.