III IC-14 cheat sheet

Insurance is a Union List subject under Entry 47 of the Seventh Schedule; Parliament enacts central insurance laws and IRDAI regulates the sector.

The Insurance Act, 1938 provides the core framework for insurer registration, capital, investments, agents and policyholder protection.

The IRDA Act, 1999 created IRDAI as the statutory apex regulator; IRDAI was constituted in 2000.

IRDAI's mandate includes protecting policyholders' interests, promoting fairness and ensuring orderly growth of the insurance industry.

The Insurance Laws (Amendment) Act, 2015 amended the Insurance Act, IRDA Act, LIC Act and GIC Act, including penalties and foreign investment provisions.

The Insurance (Amendment) Act, 2021 raised the foreign direct investment limit in Indian insurance companies from 49% to 74%, subject to ownership and control conditions.

Public sector insurers are governed by their own statutes: the LIC Act, 1956 for life insurance and the GIC Act, 1972 for general insurance.

Other key statutes affecting insurance include the Marine Insurance Act, 1963, Motor Vehicles Act, 1988 and Consumer Protection Act, 2019.

The framework is layered: statutes, IRDAI regulations, master circulars, guidelines and product-specific circulars.

Section 3 requires every insurer to obtain a certificate of registration from IRDAI before carrying on insurance business in India.

Minimum paid-up capital is ₹100 crore for life and general insurers and ₹200 crore for reinsurers, unless IRDAI prescribes a higher amount.

Section 64VB prohibits an insurer from assuming risk unless premium is received in advance or is guaranteed; premium payment is a condition precedent to cover.

Section 38 governs assignment of life insurance policies, while Section 39 governs nomination by the policyholder.

Section 45 protects life policies after three years: the policy cannot be called in question on grounds of misstatement or suppression, except for fraud.

Section 41 prohibits rebating of premium or commission by insurers, agents and intermediaries as an inducement to take or renew a policy.

Section 27 regulates investment of insurers' assets in approved securities, and IRDAI prescribes detailed investment norms.

Section 42 regulates licensing, qualifications and conduct of insurance agents and provides for disqualifications.

Insurers must maintain prescribed records, submit statutory returns and get their accounts audited as required by the Act and IRDAI.

The IRDA Act, 1999 established IRDAI with a Chairperson and members appointed by the Central Government.

Section 14 of the IRDA Act lists IRDAI's functions, including registering insurers, regulating investments, specifying conduct standards and protecting policyholders.

IRDAI makes regulations under Section 114A of the Insurance Act, 1938 and Section 25 of the IRDA Act, 1999.

The IRDAI (Protection of Policyholders' Interests) Regulations, 2017 set standards for proposal disclosure, policy documents, claim settlement and grievance redressal.

The IRDAI (Insurance Products) Regulations, 2024 govern product design, approval and file-and-use procedures for insurance products.

The IRDAI (Expenses of Management, including Commission of Insurers) Regulations, 2024 cap expenses and commission payable by insurers.

The IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) Regulations, 2015 govern ownership changes and amalgamation.

IRDAI issues master circulars for life, general and health insurance that consolidate operational requirements for insurers and intermediaries.

IRDAI regulations are subordinate legislation and must be consistent with the Insurance Act, 1938 and the IRDA Act, 1999.

The Life Insurance Corporation Act, 1956 nationalised life insurance business in India and created LIC as a statutory corporation.

LIC is owned by the Government of India; its capital is ₹5 crore, fully subscribed by the Central Government under the LIC Act.

The LIC Act provides for transfer of the life insurance business of existing insurers to LIC and vesting of related assets and liabilities.

The General Insurance Corporation Act, 1972 nationalised general insurance and established GIC with four subsidiaries.

The four original GIC subsidiaries were National Insurance, New India Assurance, Oriental Insurance and United India Insurance.

GIC Re, the national reinsurer, is registered with IRDAI and operates under the GIC Act, 1972 and IRDAI regulations.

LIC and GIC are public sector insurers and remain subject to IRDAI regulation for products, conduct and policyholder protection.

The LIC Act, 1956 and GIC Act, 1972 were amended by the Insurance Laws (Amendment) Act, 2015.

The Central Government appoints directors and exercises powers over LIC and GIC under their respective statutes.

The Marine Insurance Act, 1963 codifies Indian marine insurance law, including insurable interest, utmost good faith, warranties, losses and abandonment.

A marine insurance policy is assignable unless the policy contains terms prohibiting assignment.

A sue and labour clause in marine insurance obliges the insured to mitigate loss, and mitigation expenses are recoverable from the insurer.

Section 146 of the Motor Vehicles Act, 1988 requires every motor vehicle used in a public place to have third-party insurance; driving without it attracts penalties.

Section 147 prescribes compulsory third-party risks to be covered, and Section 149 makes the insurer liable to satisfy third-party judgments.

The Motor Vehicles (Amendment) Act, 2019 introduced no-fault compensation of ₹5 lakh for death and ₹2.5 lakh for grievous hurt under Section 164.

The Consumer Protection Act, 2019 treats insurance as a service, so deficiency in service can be challenged before consumer commissions.

Consumer Protection Act, 2019 pecuniary jurisdiction is up to ₹1 crore at District, ₹1 crore to ₹10 crore at State and above ₹10 crore at National level.

A consumer complaint under the Consumer Protection Act, 2019 must be filed within two years from the date of cause of action.

Insurance intermediaries include agents, corporate agents, brokers, surveyors, third-party administrators, web aggregators and insurance marketing firms.

Section 42 of the Insurance Act, 1938 requires agents to hold a licence and satisfy qualifications; the IRDAI (Appointment of Insurance Agents) Regulations, 2016 govern appointment.

Insurance brokers are regulated by the IRDAI (Insurance Brokers) Regulations, 2018; categories include direct, reinsurance and composite brokers.

Corporate agents may distribute products of one or more insurers subject to IRDAI conditions, disclosure and customer consent requirements.

Web aggregators must be registered with IRDAI, display insurer-wise product comparisons and avoid misleading customers.

All intermediaries must comply with IRDAI code of conduct, KYC and AML requirements, and commission disclosure rules.

Section 41 of the Insurance Act prohibits rebating; intermediaries cannot offer inducements beyond approved commission or remuneration.

The IRDAI (Expenses of Management, including Commission of Insurers) Regulations, 2024 govern commission and remuneration payable across distribution channels.

Banks acting as corporate agents must comply with IRDAI and RBI requirements, including open architecture and customer consent.

Insurers must maintain a board-approved corporate governance framework with independent directors, audit committee, risk management committee and nomination and remuneration committee.

Fit-and-proper criteria apply to directors, key management persons and statutory auditors under IRDAI governance norms.

Insurers must have a board-approved risk management policy, asset-liability management framework and internal control systems.

Under the Prevention of Money Laundering Act, 2002, insurers are reporting entities required to conduct KYC, customer due diligence and report suspicious transactions to FIU-IND.

An AML programme includes a principal officer, designated director, employee training, record retention and enhanced due diligence for high-risk customers.

Cash transaction reports and suspicious transaction reports must be filed with FIU-IND within prescribed timelines.

IRDAI's Fraud Monitoring Framework requires insurers to have a fraud monitoring committee, fraud risk assessment and reporting of detected frauds to IRDAI.

A whistleblower policy and fraud register help detect, escalate and monitor governance and fraud risks.

Insurers must file fraud returns and monitor distribution, policy and claims fraud through red-flag indicators.

The IRDAI (Protection of Policyholders' Interests) Regulations, 2017 require insurers to maintain grievance redressal machinery and appoint a Grievance Redressal Officer.

An insurer must resolve a policyholder complaint within 14 days of receipt; if unresolved, the policyholder can approach IRDAI or the Insurance Ombudsman.

The Insurance Ombudsman deals with grievances against insurers relating to claims, premiums, policy servicing and mis-selling.

The Insurance Ombudsman Rules, 2017 provide free, speedy and impartial redressal; the Ombudsman may conciliate or pass an award.

An Ombudsman award is binding on the insurer; the complainant may reject the award and approach a court.

The pecuniary limit for an Ombudsman award is ₹30 lakh per complaint, and a complaint must generally be filed within one year of rejection.

A free look period of 30 days allows a policyholder to return a newly issued policy and seek refund after deducting proportionate risk premium and expenses.

Insurers must settle claims within 30 days of receipt of the last necessary document; investigation cases may extend to 45 days under IRDAI norms.

A policyholder may also approach consumer commissions under the Consumer Protection Act, 2019 for deficiency in service.