Insurance Regulation
What the domain tests
This domain tests the regulatory framework for insurers, intermediaries, products, solvency, market conduct, and policyholder protection, with emphasis on IRDAI’s role and the Insurance Act, 1938.
Core rules and concepts
- IRDAI is the insurance regulator. It registers insurers and intermediaries, approves or regulates products, sets solvency and governance requirements, and supervises market conduct.
- The Insurance Act, 1938 provides the statutory base; the IRDAI Act, 1999 establishes the regulator. Regulations and guidelines cover licensing, solvency, investments, claims, grievances, and distribution.
- Solvency margin is the excess of assets over liabilities, expressed as a ratio of required solvency. A control level below the prescribed minimum triggers regulatory action.
- Insurers must maintain grievance-redressal systems and comply with KYC and anti-money-laundering requirements.
- The Insurance Ombudsman provides a free dispute-resolution mechanism within specified pecuniary and territorial jurisdiction.
Worked example
An insurer’s available solvency is ₹180 crore and the required solvency is ₹120 crore. The ratio is 150%, which meets a 150% control level. If available solvency falls to ₹100 crore, the ratio is about 83%, below the required level, and the insurer must restore solvency or face regulatory directions. The reasoning uses available solvency divided by required solvency.
Traps that cost marks
Do not say IRDAI pays claims. Do not confuse the Ombudsman with a court. Do not ignore jurisdictional limits. Do not treat solvency as profitability. Do not assume product filing removes all policy conditions. Do not overlook intermediary licensing.