IRDAI POSP General key terms

The statutory body that licenses insurers, intermediaries and insurance agents, sets solvency and conduct rules, and supervises the Indian insurance market under the Insurance Act, 1938 and IRDA Act, 1999.

The formal licence issued by IRDAI that permits an insurer, broker, corporate agent or individual agent to carry on the specific class of insurance business applied for, subject to stated conditions.

The excess of an insurer's admitted assets over its liabilities, required by regulation to stay above a prescribed ratio so that the company can meet policyholder claims even in adverse conditions.

An individual appointed and trained by an insurer or intermediary to sell only specified simple products such as motor, travel, personal accident and micro-insurance, within the limits and syllabus approved by IRDAI.

An independent quasi-judicial authority set up under the Insurance Ombudsman Rules to hear complaints of individual policyholders against insurers, with power to award compensation within a defined monetary limit.

A designated officer in every insurer and intermediary who receives, records and resolves customer complaints within prescribed timelines, and who a policyholder must normally approach before escalating elsewhere.

IRDAI's central online platform where policyholders can register complaints against any regulated entity, and where insurers must log and report the status and disposal of each complaint.

A window, generally fifteen days from receipt of the policy document, in which a policyholder may cancel a new policy and receive a refund of premium less proportionate risk charges and expenses.

The mandatory identity and address verification process applied before issuing a policy or accepting renewal premium, aimed at preventing money laundering and fraud in insurance transactions.

The set of legal duties requiring insurers and sellers to identify customers, monitor unusual transactions and report suspicious activity to the Financial Intelligence Unit so that insurance is not used to launder funds.

Both proposer and insurer must disclose all material facts honestly and completely, because the contract depends on information one party alone can know; concealment can make the contract voidable.

Any information that would influence a prudent insurer's decision to accept a risk, fix the premium or impose terms, such as health history, occupation, prior claims or the nature of the property insured.

Failure by the proposer to reveal a material fact, whether deliberate or accidental; the insurer may cancel the policy or repudiate a claim if the omitted fact would have changed the underwriting decision.

A false or misleading statement of fact made by the proposer during negotiation of the contract, which may entitle the insurer to avoid the policy if the statement was material to acceptance.

A person may insure only something in which they stand to gain from its safety or lose financially from its loss; the interest must exist at the time of the loss for non-life cover.

The insured is restored to the same financial position as immediately before the loss, no better and no worse, so that insurance cannot become a source of profit on property and liability claims.

After paying a loss, the insurer steps into the insured's shoes and acquires the right to recover the amount from the third party responsible for the damage, preventing double recovery.

When the same risk is insured under two or more policies, each insurer shares the loss proportionately so that the insured recovers only the actual loss and never more than it.

The situation where more than one policy covers the same subject matter, interest and peril; total recovery is capped at the loss, and the insurers contribute among themselves.

The dominant and effective cause that sets off a chain of events leading to a loss, used to decide whether the peril is covered when several causes operate together.

The specific event or happening that causes loss, such as fire, flood, theft or accident; hazards increase the likelihood or severity of a peril but are not the peril itself.

A condition that raises the chance of a loss or makes it worse, such as a poorly maintained electrical installation, or a moral hazard like indifference created by having insurance.

A behaviour-related risk that the existence of insurance may make an insured careless, dishonest or more willing to claim, which underwriters counter through deductibles, co-payment and claim scrutiny.

The maximum amount an insurer will pay under a policy for a covered loss, chosen at proposal to reflect the value of the asset or the limit of liability purchased.

Arises when the sum insured is less than the actual value of the property, so that average clauses or proportionate settlement reduce claim payouts and the owner bears the shortfall.

The amount of each loss that the insured must bear before the insurer pays, applied either as a fixed sum or a percentage, which reduces premium and discourages small claims.

A clause obliging the insured to bear a stated amount or percentage of a claim; compulsory excesses are imposed by the insurer, while voluntary excesses are chosen for a premium discount.

The reduction in the value of an insured asset because of age, wear and tear or use; policies may settle claims on a depreciated basis or on a reinstatement basis depending on the wording.

The residual value of damaged property that remains after a loss; the insurer may take it over or deduct its value from the claim so the insured does not profit from the damaged remains.

The legal responsibility of an insured towards other persons for bodily injury, death or damage to their property, which motor and public liability policies are required to cover.

Compulsory cover under the Motor Vehicles Act for bodily injury, death or property damage caused to third parties by an insured vehicle, required before a vehicle may be used on a public road.

The optional section of a motor policy that pays for loss or damage to the insured's own vehicle from perils such as accident, fire, theft or natural calamity, subject to the sum insured.

Low-premium, low-sum-insured cover designed for low-income households, offered for life, health, personal accident and asset risks, with simplified documentation and prompt claim settlement obligations.

A policy paying a fixed benefit for accidental death or permanent disability and, in some variants, temporary total disability, calculated as a percentage of the sum insured as per the policy table.

A listed event, circumstance or property that the policy expressly does not cover, such as war, nuclear risk, intentional self-injury or normal wear and tear, and which must be explained to the buyer.

The written contract of insurance containing the schedule, coverage clauses, exclusions, conditions and warranties; the insured must read it and is bound by its terms once accepted.

The interval after policy issuance during which the policyholder may reconsider the purchase without penalty, commonly applied to distance selling and long-term products.

Selling a policy by misrepresenting benefits, hiding exclusions, forcing an unsuitable product or replacing cover without need, which breaches conduct rules and can attract regulatory penalties.

The duty to recommend a product that matches the customer's stated needs, affordability and circumstances, gathered through a documented needs analysis rather than the seller's commission.