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IRDAI POSP General practice questions

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Question 1Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which body was established by the Insurance Regulatory and Development Authority Act, 1999, to regulate and develop the insurance industry in India?

  1. The Insurance Regulatory and Development Authority Correct answer.
  2. The Reserve Bank of India
  3. The Life Insurance Corporation of India
  4. The Securities and Exchange Board of India

Explanation

The IRDA Act, 1999 created the Insurance Regulatory and Development Authority as a statutory regulator for the insurance sector. SEBI regulates securities markets, RBI handles banking and monetary policy, and LIC is a public sector insurer rather than a regulator.

Question 2Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Under the IRDAI Act, 1999, the Authority is constituted as a body that performs which combination of functions?

  1. Regulating, promoting and ensuring orderly growth of the insurance and reinsurance business Correct answer.
  2. Only settling policyholder claims above one crore rupees
  3. Only collecting premium taxes for the central government
  4. Only issuing licences to insurance agents

Explanation

The statute entrusts IRDAI with regulating, promoting and ensuring orderly growth of the insurance and reinsurance industry while protecting policyholders. Its mandate is broad and developmental, not limited to licensing or claim settlement.

Question 3Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

What is the maximum number of members of the IRDAI Authority, including the Chairperson, as specified in the IRDA Act, 1999?

  1. Five
  2. Fifteen
  3. Ten Correct answer.
  4. Seven

Explanation

The IRDA Act, 1999 provides that the Authority shall consist of a Chairperson and not more than ten other members. This cap is stated in the statute itself and is a frequently tested structural fact.

Question 4Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

A person appointed as Chairperson or member of IRDAI holds office for a term specified in the Act. What is that term?

  1. Six years, extendable by two more years
  2. Five years or until attaining the age of sixty-five years, whichever is earlier Correct answer.
  3. Until the age of seventy years, with no fixed term
  4. Three years, with no age limit

Explanation

The Act fixes the tenure of the Chairperson and members at five years or until the age of sixty-five, whichever comes first. This ensures periodic leadership renewal in the regulator.

Question 5Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

An insurer wants to begin operations in India. Which regulator grants it a certificate of registration to carry on insurance business?

  1. The Ministry of Corporate Affairs
  2. IRDAI Correct answer.
  3. The National Payments Corporation of India
  4. The Competition Commission of India

Explanation

Section 3 of the Insurance Act, 1938 requires a certificate of registration from IRDAI before any person carries on insurance business in India. Other bodies handle company incorporation or competition matters, not insurance licensing.

Question 6Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which of the following is a stated objective of IRDAI in discharging its regulatory role?

  1. Setting benchmark interest rates for bank loans
  2. Protecting the interests of policyholders Correct answer.
  3. Fixing the price of gold in domestic markets
  4. Regulating commodity futures trading

Explanation

Policyholder protection is a core objective of IRDAI under the IRDA Act, 1999, along with orderly growth of the industry. Interest rates, gold pricing and commodity futures fall outside the insurance regulator's remit.

Question 7Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

A foreign insurer wishes to hold a stake in an Indian insurance company. What does the foreign investment limit for Indian insurance companies currently permit, subject to applicable rules?

  1. Up to 49 per cent
  2. Up to 26 per cent
  3. Up to 100 per cent
  4. Up to 74 per cent Correct answer.

Explanation

The permissible foreign investment in Indian insurance companies was raised to 74 per cent, subject to the conditions laid down in the insurance foreign investment rules. Earlier limits of 26 and 49 per cent have been superseded.

Question 8Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Under the insurance regulatory framework, the insurance penetration of a country is measured as which ratio?

  1. Number of policies as a percentage of total population
  2. Total insurance premium as a percentage of gross domestic product Correct answer.
  3. Total assets of insurers as a percentage of stock market capitalisation
  4. Total claims paid as a percentage of total premium collected

Explanation

Insurance penetration expresses premium volume as a percentage of GDP, showing the relative size of the insurance sector in the economy. Density, by contrast, is premium per capita.

Question 9Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which measure expresses insurance premium per capita and is reported alongside penetration in IRDAI's market data?

  1. Solvency ratio
  2. Incurred claims ratio
  3. Insurance density Correct answer.
  4. Expense ratio

Explanation

Insurance density is premium per head of population, usually expressed in US dollars for cross-country comparison. Solvency, expense and claims ratios measure financial health or efficiency rather than per-capita premium.

Question 10Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

IRDAI requires insurers to maintain a minimum solvency margin. Which statement describes the required control level?

  1. The solvency ratio must be exactly 100 per cent at all times
  2. The solvency ratio must be maintained at not less than 50 per cent of the required solvency margin
  3. The solvency ratio must be maintained at not less than 150 per cent of the required solvency margin Correct answer.
  4. No minimum solvency ratio is prescribed for insurers

Explanation

The IRDAI (Assets, Liabilities and Solvency Margin of Insurers) Regulations prescribe a control level of solvency of 150 per cent of the required solvency margin. Falling below this triggers corrective action by the regulator.

Question 11Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

An insurer's solvency ratio falls below the prescribed control level. What is IRDAI's most likely regulatory response?

  1. Directing the insurer to submit a corrective action plan and restore solvency within a specified period Correct answer.
  2. Transferring the insurer's portfolio to a foreign reinsurer automatically
  3. Immediately cancelling all existing policies of the insurer without notice
  4. Waiving the solvency requirement for the remainder of the financial year

Explanation

When solvency falls below the control level, IRDAI can require a corrective action plan, restrict new business and monitor restoration within a timeline. Automatic mass cancellation or permanent waiver is not the regulatory approach.

Question 12Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which function relating to insurance agents and intermediaries is performed by IRDAI?

  1. Adjudicating commission disputes between agents and insurers as a court
  2. Paying commission to agents directly from its own funds
  3. Prescribing the qualifications, training and licensing framework for agents and intermediaries Correct answer.
  4. Appointing agents for every insurer operating in India

Explanation

IRDAI lays down the regulatory framework for licensing, training and conduct of agents and intermediaries. It does not pay commissions, appoint agents for insurers, or function as a civil court for disputes.

Question 13Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

What is the role of the Insurance Ombudsman in the Indian insurance grievance redressal system?

  1. To audit the solvency of reinsurers
  2. To set premium rates for all insurers
  3. To resolve eligible policyholder complaints against insurers through a quasi-judicial mechanism Correct answer.
  4. To license new insurance companies

Explanation

The Insurance Ombudsman provides a cost-free, quasi-judicial forum for resolving eligible policyholder grievances against insurers. Licensing, rate-setting and solvency auditing lie elsewhere in the regulatory framework.

Question 14Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

IRDAI's consumer education and protection function is primarily aimed at which outcome?

  1. Setting the salaries of insurance company executives
  2. Reducing the number of insurance products available
  3. Improving policyholder awareness of rights, duties and grievance channels Correct answer.
  4. Increasing the number of insurers operating in India

Explanation

Consumer education initiatives seek to make policyholders aware of their rights and the channels available for redressal. They are not directed at market entry, product reduction or executive pay.

Question 15Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which of the following best describes the 'file and use' approach in insurance product regulation?

  1. The insurer files product terms with IRDAI and may use them subject to the prescribed process and norms Correct answer.
  2. The insurer must obtain prior approval of every product before any marketing activity
  3. The insurer must file products only after one year of sales
  4. The insurer may launch products without any filing or record with the regulator

Explanation

Under file and use, products are filed with the regulator and can be used in accordance with the prescribed procedure and norms. It differs from a strict prior-approval regime and from no-filing regimes.

Question 16Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

An insurer plans to launch a new health insurance product. Which IRDAI framework governs the filing and use of such products?

  1. The corporate governance guidelines
  2. The product filing guidelines under the file-and-use procedure Correct answer.
  3. The foreign investment rules
  4. The solvency margin regulations

Explanation

New products are governed by product filing guidelines, which set out the file-and-use procedure and documentation requirements. Solvency, governance and investment rules address different regulatory concerns.

Question 17Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which type of entity is regulated by IRDAI as an intermediary that arranges insurance for clients but does not itself underwrite risk?

  1. A mutual insurer
  2. A third-party administrator
  3. A reinsurance company
  4. An insurance broker Correct answer.

Explanation

Insurance brokers are licensed intermediaries who place business with insurers on behalf of clients without underwriting risk themselves. Reinsurers and mutual insurers carry risk, while TPAs administer claims rather than arrange cover.

Question 18Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Under the regulatory framework, what are 'Appointed Actuaries' required to certify to IRDAI?

  1. The salary structure of the insurer's sales force
  2. The number of new agents recruited during the year
  3. The adequacy of reserves and the solvency position of the insurer Correct answer.
  4. The market share of the insurer in each line of business

Explanation

Appointed Actuaries certify reserve adequacy and the insurer's solvency position, which are core prudential requirements. Market share, salaries and agent counts are commercial or operational matters.

Question 19Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which committee or mechanism within IRDAI's framework reviews the financial condition of insurers on an ongoing basis?

  1. The supervisory review process covering solvency, financial reporting and compliance Correct answer.
  2. The Policyholders' Education Committee
  3. The Insurance Ombudsman
  4. The Tariff Advisory Committee

Explanation

IRDAI conducts supervisory review of insurers' solvency, financial reporting and compliance on a continuing basis. The Ombudsman handles grievances, and the other bodies serve different functions.

Question 20Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which of the following reflects IRDAI's power to issue directions to insurers?

  1. IRDAI has no power to issue directions to insurers
  2. IRDAI may issue directions in writing to an insurer to ensure compliance with the Act and regulations Correct answer.
  3. IRDAI may issue directions only with the prior consent of the insurer
  4. IRDAI may issue directions only to public sector insurers

Explanation

The IRDA Act, 1999 empowers the Authority to issue written directions to insurers and other regulated entities to secure compliance. The power is not confined to public sector insurers and does not need the entity's consent.

Question 21Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

What is the principal purpose of the Insurance Act, 1938 in the current regulatory landscape?

  1. To provide the core statutory framework for the conduct of insurance business and its regulation Correct answer.
  2. To govern commodity derivatives
  3. To regulate banking licences
  4. To establish the Securities Appellate Tribunal

Explanation

The Insurance Act, 1938 remains the foundational statute governing registration, conduct and regulation of insurance business, as amended over time. It does not deal with banking or commodity derivatives.

Question 22Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

A life insurer wishes to declare a bonus to policyholders. Which regulatory consideration applies?

  1. The bonus must be declared in accordance with the actuarial valuation and IRDAI's prescribed norms Correct answer.
  2. The bonus can be declared without any actuarial valuation
  3. The bonus is fixed by the Insurance Ombudsman
  4. The bonus must equal the insurer's entire surplus for the year

Explanation

Bonus declarations must follow the actuarial valuation of surplus and the norms prescribed by IRDAI. The entire surplus cannot simply be distributed, and the Ombudsman has no role in bonus setting.

Question 23Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which of the following activities is outside the regulatory scope of IRDAI?

  1. Setting the repo rate for the banking system Correct answer.
  2. Licensing insurance intermediaries
  3. Monitoring insurer solvency
  4. Framing policyholder protection norms

Explanation

The repo rate is a monetary policy tool set by the Reserve Bank of India, not IRDAI. Licensing intermediaries, monitoring solvency and framing protection norms are all within IRDAI's remit.

Question 24Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which principle underlies IRDAI's approach to corporate governance of insurers?

  1. Insurers should avoid having independent directors
  2. Insurers should report only to shareholders and not to the regulator
  3. Insurers should combine the roles of chairperson and chief executive without oversight
  4. Insurers should maintain fit and proper boards and adequate risk management structures Correct answer.

Explanation

IRDAI's corporate governance framework emphasises fit and proper boards, independent oversight and robust risk management. It does not encourage concentration of unchecked authority or exemption from regulatory reporting.

Question 25Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

An insurer wants to outsource a core function such as policy administration. Which regulatory expectation applies?

  1. Outsourcing is prohibited for all core functions
  2. The insurer remains responsible for compliance and must ensure the outsourcing arrangement meets IRDAI norms Correct answer.
  3. Outsourcing requires no documentation or oversight
  4. Outsourcing transfers all regulatory responsibility to the service provider

Explanation

IRDAI's outsourcing norms make clear that the insurer retains responsibility for compliance and must manage the arrangement with proper documentation and oversight. Responsibility is not shifted to the vendor.

Question 26Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Under the IRDAI (Insurance Products) Regulations, what does the 'use and file' procedure require an insurer to do?

  1. File the product with IRDAI before launch and wait for explicit approval
  2. File the product only if IRDAI requests it after launch
  3. File the product with IRDAI after launch within the specified period Correct answer.
  4. File the product with the IRDAI only at the time of annual renewal

Explanation

In the use and file procedure, the insurer may use (launch) the product first and then file the details with IRDAI within the timeframe specified in the regulations. This differs from the file and use procedure, where filing precedes use and IRDAI may object within a defined period. The procedure applicable to a product line is specified by IRDAI.

Question 27Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which legislation is the primary statute under which IRDAI exercises its regulatory powers over insurance business in India?

  1. The IRDA Act, 1999 alone, without the Insurance Act, 1938
  2. The Insurance Act, 1938, as amended, read with the IRDA Act, 1999 Correct answer.
  3. The Companies Act, 2013 alone
  4. The Indian Contract Act, 1872

Explanation

The Insurance Act, 1938 provides the substantive regulatory framework for insurance business, while the IRDA Act, 1999 established the Authority and confers its powers and functions. The two are read together, along with regulations framed under them. The Companies Act and Contract Act apply generally but are not the primary insurance regulatory statutes.

Question 28Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

What is the maximum foreign investment permitted in an Indian insurance company under the current foreign investment limits?

  1. 49%
  2. 26%
  3. 74% Correct answer.
  4. 100%

Explanation

The foreign investment limit for Indian insurance companies is 74%, subject to the conditions prescribed under the foreign investment rules and IRDAI guidelines. This includes both direct and indirect foreign investment as computed under the applicable rules. The limit is not 100%, and the lower figures of 26% and 49% reflect earlier policy positions.

Question 29Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

An insurer has a solvency ratio of 1.30. How does this compare with the minimum control level prescribed by IRDAI?

  1. It is below the control level and requires immediate corrective action
  2. It is above the control level and within the prescribed minimum Correct answer.
  3. It is exactly at the control level
  4. It is above the control level but below the prescribed minimum

Explanation

The prescribed control level of solvency for insurers is 1.50, meaning available solvency margin must be at least 150% of the required solvency margin. A ratio of 1.30 is below that control level, so it does not meet the requirement. The insurer would need to restore solvency to at least the control level.

Question 30Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which body has the statutory power to make regulations consistent with the Insurance Act, 1938 and the IRDA Act, 1999 for carrying out the purposes of those Acts?

  1. The Central Government in consultation with the Authority
  2. The Reserve Bank of India
  3. The Authority (IRDAI) Correct answer.
  4. The Securities and Exchange Board of India

Explanation

Section 114A of the Insurance Act, 1938 empowers the Authority to make regulations, and the IRDA Act, 1999 also confers regulation-making power on the Authority. The Central Government makes rules, while IRDAI makes regulations. SEBI and RBI regulate securities markets and banking respectively, not insurance.

Question 31Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

An insurance company wishes to commence business in India. Which of the following is a prerequisite under the Insurance Act, 1938?

  1. A licence from the Reserve Bank of India
  2. Registration with the Registrar of Companies only
  3. Registration with the Registrar of Companies and a certificate of commencement of business from IRDAI Correct answer.
  4. Approval from the Securities and Exchange Board of India

Explanation

An insurer must be registered under the Companies Act and must obtain a certificate of registration from IRDAI under Section 3 of the Insurance Act, 1938 before carrying on insurance business. The certificate of registration is the key regulatory authorisation. RBI and SEBI approvals are not the relevant authorisations for insurance business.

Question 32Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which of the following best describes the 'Appointed Actuary' requirement for insurers?

  1. Every insurer must appoint a chartered accountant to certify the actuarial valuation of liabilities
  2. Every insurer must appoint an actuary only for life insurance business
  3. Every insurer must appoint an actuary who is a fellow member of the Institute of Actuaries of India and who certifies the actuarial valuation of liabilities Correct answer.
  4. Every insurer must appoint an actuary who reports solely to the board and not to IRDAI

Explanation

The Insurance Act, 1938 and IRDAI regulations require every insurer to appoint an Appointed Actuary who is a fellow member of the Institute of Actuaries of India. The Appointed Actuary certifies the actuarial valuation of liabilities, including the mathematical reserves. The role applies to both life and general insurers, with the scope appropriate to the business.

Question 33Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Under IRDAI's corporate governance requirements, what is the minimum number of independent directors required on the board of an insurance company?

  1. At least one independent director irrespective of board size
  2. At least one-third of the total number of directors or two, whichever is higher Correct answer.
  3. At least one-half of the total number of directors
  4. At least two independent directors irrespective of board size

Explanation

IRDAI's corporate governance guidelines require that at least one-third of the board, subject to a minimum of two, be independent directors. This ensures independent oversight of management. The requirement is not one-half and is not a flat number irrespective of board size.

Question 34Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

An insurer intends to outsource the administration of its policy servicing function to a third-party service provider. What is IRDAI's primary regulatory expectation?

  1. The insurer must retain ultimate responsibility for the outsourced function and ensure effective oversight and risk management Correct answer.
  2. The insurer may transfer regulatory responsibility for the function to the service provider
  3. The insurer need not inform IRDAI or maintain any records of the arrangement
  4. The insurer must obtain prior approval from the policyholders for the outsourcing

Explanation

IRDAI's outsourcing guidelines require that the insurer remains fully responsible for the outsourced activity and its regulatory compliance. The insurer must conduct due diligence, maintain oversight, and manage the risks of the arrangement. Regulatory responsibility cannot be transferred to the service provider.

Question 35Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

What is the primary role of the Insurance Ombudsman under the IRDAI grievance redressal framework?

  1. To approve new insurance products
  2. To adjudicate insurance disputes between policyholders and insurers within the prescribed pecuniary limits Correct answer.
  3. To license insurance agents and intermediaries
  4. To regulate the solvency of insurance companies

Explanation

The Insurance Ombudsman provides a cost-effective and expeditious forum for resolving grievances of policyholders against insurers, within the pecuniary limits prescribed under the rules. The Ombudsman's role is dispute resolution, not solvency regulation, product approval, or licensing. The scheme is established under the Insurance Ombudsman Rules.

Question 36Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which of the following is a function of IRDAI in relation to insurance intermediaries?

  1. Granting certificates of registration to insurance brokers and regulating their conduct Correct answer.
  2. Regulating the issuance of securities by listed companies
  3. Setting interest rates for bank deposits
  4. Conducting monetary policy for the country

Explanation

IRDAI registers and regulates insurance intermediaries, including brokers, corporate agents, and web aggregators, under the applicable regulations. It sets conduct and eligibility requirements for them. Interest rates, securities issuance, and monetary policy are outside IRDAI's mandate.

Question 37Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Under IRDAI's product regulations, what is the purpose of the 'file and use' procedure?

  1. To require insurers to obtain prior approval for every product from the Central Government
  2. To allow insurers to launch products without any filing with IRDAI
  3. To allow insurers to launch products after filing with IRDAI, subject to IRDAI's power to object within a specified period Correct answer.
  4. To require insurers to file products only after they have been sold for one year

Explanation

In the file and use procedure, the insurer files the product with IRDAI before use, and IRDAI may examine it and object within the specified period. If no objection is raised, the product may be used. It is not a prior approval from the Central Government, nor is filing optional.

Question 38Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

An insurer is required to maintain a minimum solvency margin. Which of the following best describes the 'control level of solvency'?

  1. A solvency ratio of 0.50, being the ratio of available solvency margin to required solvency margin
  2. A solvency ratio of 1.50, being the ratio of available solvency margin to required solvency margin Correct answer.
  3. A solvency ratio of 2.00, being the ratio of available solvency margin to required solvency margin
  4. A solvency ratio of 1.00, being the ratio of available solvency margin to required solvency margin

Explanation

The control level of solvency is prescribed as 1.50, meaning the available solvency margin must be at least 150% of the required solvency margin. This is the level that insurers must maintain at all times. The other figures do not correspond to the prescribed control level.

Question 39Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

What is the role of the Insurance Advisory Committee under the IRDA Act, 1999?

  1. To conduct inspections of insurers on behalf of IRDAI
  2. To advise IRDAI on matters relating to the regulation of insurance business Correct answer.
  3. To adjudicate disputes between insurers and policyholders
  4. To grant registrations to insurance companies

Explanation

The IRDA Act, 1999 establishes the Insurance Advisory Committee to advise the Authority on matters relating to the regulation of insurance. It is an advisory body and does not adjudicate disputes, grant registrations, or conduct inspections. Those functions are carried out by IRDAI and other designated bodies.

Question 40Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

An insurer wishes to declare a bonus to participating policyholders. Which regulatory consideration applies?

  1. The bonus may be declared at the sole discretion of the board without any actuarial input
  2. The bonus must be declared in accordance with the actuarial valuation and the policy terms, subject to IRDAI regulations Correct answer.
  3. The bonus must be approved by the Insurance Ombudsman
  4. The bonus must be declared only after obtaining prior approval from the RBI

Explanation

Bonus declaration for participating policies must follow the actuarial valuation and the terms of the policy, within the framework of IRDAI regulations. The Appointed Actuary plays a key role in certifying the surplus and bonus. It is not a matter for the Ombudsman or the RBI.

Question 41Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Under IRDAI's corporate governance framework, what is the role of the Audit Committee of an insurer's board?

  1. To oversee financial reporting, internal controls, and the audit process Correct answer.
  2. To declare bonuses to policyholders
  3. To appoint the Appointed Actuary
  4. To approve new insurance products

Explanation

The Audit Committee oversees the integrity of financial reporting, the effectiveness of internal controls, and the audit function. Product approval, bonus declaration, and appointment of the Appointed Actuary are not functions of the Audit Committee. Those matters fall to other board committees or the board as a whole within the regulatory framework.

Question 42Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which of the following best describes IRDAI's power to issue directions to insurers?

  1. IRDAI may issue directions only to life insurers
  2. IRDAI may issue directions only after a court order
  3. IRDAI may issue directions only with the prior approval of the Central Government in every case
  4. IRDAI may issue directions to insurers to ensure compliance with the insurance laws and to protect policyholders' interests Correct answer.

Explanation

IRDAI has statutory power to issue directions to insurers to secure compliance with the insurance laws and to protect policyholders. This power is not confined to life insurers and does not require a court order. It is a core supervisory tool.

Question 43Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Under the IRDAI (Insurance Products) Regulations, what is the significance of the 'use and file' procedure for product launches?

  1. It allows the insurer to launch the product immediately and file the details with IRDAI within the specified period Correct answer.
  2. It requires the insurer to file the product only after one year of launch
  3. It exempts the insurer from filing the product with IRDAI
  4. It requires the insurer to obtain prior approval from IRDAI before launching the product

Explanation

Use and file allows the insurer to use the product first and file the details with IRDAI within the period specified in the regulations. This is distinct from file and use, where filing precedes use. Filing is still mandatory and must be done within the prescribed time.

Question 44Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which of the following statements about the Insurance Ombudsman's pecuniary jurisdiction is correct?

  1. The Ombudsman's jurisdiction is limited to life insurance claims
  2. The Ombudsman can consider only complaints above a prescribed minimum amount
  3. The Ombudsman has unlimited pecuniary jurisdiction
  4. The Ombudsman can consider complaints up to the limit prescribed under the Insurance Ombudsman Rules Correct answer.

Explanation

The Insurance Ombudsman Rules prescribe a pecuniary limit for complaints that the Ombudsman can consider. The jurisdiction is not unlimited and is not restricted to life insurance. Complaints within the limit can be brought without cost to the policyholder.

Question 45Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

What is the role of the Insurance Regulatory and Development Authority of India (IRDAI) in relation to the Insurance Ombudsman scheme?

  1. IRDAI has no role in the Ombudsman scheme
  2. IRDAI acts as the appellate authority against every Ombudsman decision
  3. IRDAI appoints the Ombudsman without any role in the scheme's procedures
  4. IRDAI oversees the functioning of the Ombudsman mechanism and frames the relevant rules and procedures Correct answer.

Explanation

IRDAI oversees the Ombudsman mechanism and frames the rules and procedures governing its functioning under the statutory framework. The Ombudsman scheme is an important part of the grievance redressal architecture supervised by IRDAI. IRDAI is not the appellate authority for every Ombudsman decision, and it does not lack a role in the scheme.

Question 46Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Which of the following is a key function of IRDAI in promoting the development of the insurance market?

  1. To guarantee the solvency of every insurer
  2. To fix the premiums charged by all insurers
  3. To regulate and promote the orderly growth of the insurance industry while protecting policyholders Correct answer.
  4. To provide insurance directly to policyholders

Explanation

IRDAI's mandate includes regulating and promoting the orderly growth of the insurance industry while protecting the interests of policyholders. It does not fix premiums for all insurers, guarantee solvency, or sell insurance directly. Those functions are not part of its regulatory role.

Question 47Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

Under the IRDA Act, 1999, IRDAI's powers and functions are exercised by which body, and how is that body constituted?

  1. A committee of the Ministry of Finance chaired by the Revenue Secretary
  2. A multi-member Authority appointed by the Central Government, headed by a Chairperson Correct answer.
  3. A single Insurance Commissioner appointed by the Reserve Bank of India
  4. A part-time advisory council of state insurance officials

Explanation

The IRDA Act, 1999 constitutes IRDAI as a body corporate whose powers are exercised by a multi-member Authority appointed by the Central Government, comprising a Chairperson and whole-time and part-time members. The Authority is the decision-making organ, while the Insurance Advisory Committee is only advisory. Day-to-day regulation is therefore vested in this appointed Authority rather than in a ministry committee or a single commissioner.

Question 48Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

An insurer proposes to issue a new unit-linked product. Which statement correctly describes the regulatory route it must follow before selling the product?

  1. It must obtain prior written approval from the Insurance Advisory Committee
  2. It must file the product with the Ministry of Finance for clearance before any marketing
  3. It may launch immediately and file the product with IRDAI within 30 days of launch
  4. It must file the product with IRDAI and may market it only after receiving approval from IRDAI Correct answer.

Explanation

Unit-linked products are subject to the prior-approval route, under which the insurer files the product with IRDAI and may market it only after the Authority accords approval. This differs from non-linked products that may follow file-and-use or use-and-file routes. The Insurance Advisory Committee and the Ministry of Finance have no product clearance role.

Question 49Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

An insurer's solvency ratio falls below the prescribed control level but remains above the required minimum. Which regulatory consequence best describes IRDAI's expected action?

  1. IRDAI may require the insurer to submit a corrective action plan to restore the solvency margin within a specified period Correct answer.
  2. IRDAI automatically transfers the insurer's portfolio to another insurer
  3. IRDAI takes no action because any ratio above the minimum is fully compliant
  4. IRDAI must immediately cancel the insurer's certificate of registration without any opportunity to respond

Explanation

The control level sits above the minimum solvency requirement and acts as an early-warning trigger. When an insurer breaches the control level, IRDAI can call for a corrective action plan and monitor restoration of the margin. Falling below the absolute minimum triggers far more severe consequences, such as restrictions or cancellation of registration.

Question 50Insurance Regulatory and Development Authority of India (IRDAI) - role, mandate and regulation of insurance business

An insurer intends to transfer a block of its life insurance business to another insurer. Which regulatory position applies under the Insurance Act, 1938 read with IRDAI's framework?

  1. The transfer requires only the approval of the Appointed Actuary of the transferring insurer
  2. The transfer takes effect once both boards pass resolutions and the policyholders are informed by newspaper advertisement
  3. The transfer can be completed without any regulatory involvement because it is a commercial arrangement between two insurers
  4. The transfer requires the sanction of the Authority, which may be granted after a scheme is prepared and objections considered Correct answer.

Explanation

A transfer of insurance business is not a purely commercial transaction; it requires the sanction of IRDAI, which examines the scheme, the interests of policyholders and any objections raised. Board resolutions and advertisements are procedural steps in the process but do not by themselves effect the transfer. The Appointed Actuary may certify matters but cannot authorise the transfer.