INSURANCE REGULATORY & DEVELOPMENT AUTHORITY (IRDA) Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA, since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies. The other decisions taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA’s online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products, which are expected to be introduced by early next year. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. Duties, Powers and Functions of IRDA Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of IRDA. 1. Subject to the provisions of this Act and any other law for the time being in force, the Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business. 2. Without prejudice to the generality of the provisions contained in sub-section (1), the powers and functions of the Authority shall include, -     (a) issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration; (b) protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance; (c) specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents; (d) specifying the code of conduct for surveyors and loss assessors; (e) promoting efficiency in the conduct of insurance business; (f) promoting and regulating professional organisations connected with the insurance and re-insurance business; (g) levying fees and other charges for carrying out the purposes of this Act; (h) calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organisations connected with the insurance business; (i) control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938); (j) specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries; (k) regulating investment of funds by insurance companies; (l) regulating maintenance of margin of solvency; (m) adjudication of disputes between insurers and intermediaries or insurance intermediaries; (n) supervising the functioning of the Tariff Advisory Committee; (o) specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f); (p) specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; and (q) exercising such other powers as may be prescribed     *Source : www.irdaindia.org   Issue or renewal of licence.---(1) A person desiring to obtain or renew a licence (hereinafter referred to as “the applicant”) to act as an insurance agent or a composite insurance agent shall proceed as follows:- (a) the applicant shall make an application to a designated person--- (i) in Form IRDA-Agents-VA, if the applicant is an individual; (ii) in Form IRDA-Agents-VC, if the applicant is a firm or a company: Provided that the applicant, who desires to be a composite insurance agent, shall make two separate applications. (b) The fees payable by the applicant to the Authority shall be as specified in Regulation The designated person may, on receipt of the application along with the evidence of payment of fees to the Authority, and on being satisfied that the applicant, --- (i) possesses the qualifications as specified under Regulation 4; (ii) possesses the practical training as specified under Regulation 5; (iii) has passed the examination as specified under Regulation 6; (iv) has furnished the application complete in all respects; (v) has the requisite knowledge to solicit and procure insurance business; and (vi) is capable of providing the necessary service to the policyholders; grant or renew, as the case may be, a licence in Form IRDA-Agents-VB, along with identity card in Form IRDA-Agents-VZ: Provided that in the case of a corporate agent, the identity card shall be in Form IRDA-Agent-VY. Provided further that such identity card from one life insurer and such identity card from one general insurer shall be provided to the applicant seeking licence to act as a composite insurance agent. Provided further that in the case of a firm or a company, all of its partners or directors, as the case may be, shall fulfil the requirements of sub-clauses (i) to (iii). Provided further a licence issued in accordance with this regulation shall entitle the applicant to act as insurance agent for one life insurer or one general insurer or both, as the case may be. (3) If the designated person refuses to grant or renew a licence under this regulation, he shall give the reasons therefor to the applicant. Qualifications of the applicant.--- The applicant shall possess the minimum qualification of a pass in 12th Standard or equivalent examination conducted by any recognised Board/Institution, where the applicant resides in a place with a population of five thousand or more as per the last census, and a pass in 10th Standard or equivalent examination from a recognised Board/ Institution if the applicant resides in any other place. Practical Training . --- (1) The applicant shall have completed from an approved institution, at least, one hundred hours’ practical training in life or general insurance business, as the case may be, which may be spread over three to four weeks, where such applicant is seeking licence for the first time to act as insurance agent. Provided that the applicant shall have completed from an approved institution, at least, one hundred fifty hours’ practical training in life and general insurance business, which may be spread over six to eight weeks, where such applicant is seeking licence for the first time to act as a composite insurance agent. An applicant, who has been granted a licence after the commencement of these regulations, before seeking renewal of licence to act as an insurance agent, shall have completed, at least twenty-five hours’ practical training in life or general insurance business, as the case may be, from an approved institution. Provided that such applicant before seeking renewal of licence to act as a composite insurance agent shall have completed from an approved institution, at least, fifty hours’ practical training in life and general insurance business. Examination.—The Applicant shall have passed the pre-recruitment examination in life or general insurance business, or both, as the case may be, conducted by the Insurance Institute of India, Mumbai, or any other examination body. Fees payable.-- (1) The fees payable to the Authority for issue or renewal of licence to act as insurance agent or a composite insurance agent shall be rupees two hundred and fifty. (2) The additional fees payable to the Authority, under the circumstances mentioned in sub-section (3) of section 42 of the Act, shall be rupees one hundred. Issue of duplicate licence.---The Authority may issue a duplicate licence replace a licence lost, destroyed, or mutilated on payment a fee of rupees fifty. . SYLLABUS & DURATION OF COURSE Details of no. of hours, no of minimum days and maximum days for the different training program. Training no of hours min. no. of days max. no of days Life 50 hours 7 days 14 days General 50 hours 7 days 14 days Composite 75 hours 11 days 19 days To get the detailed syllabus for life insurance and general insurance click syllabus INSURANCE IN INDIA The insurance sector in India has come a full circle from being an open competitive market to nationalisation and back to a liberalised market again. Tracing the developments in the Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries. A brief history of the Insurance sector The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are: 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: 1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company. Insurance sector reforms In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R.N. Malhotra, was formed to evaluate the Indian insurance industry and recommend its future direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. The reforms were aimed at “creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognising that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms…” In 1994, the committee submitted the report and some of the key recommendations included: i) Structure · Government stake in the insurance Companies to be brought down to 50% · Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations · All the insurance companies should be given greater freedom to operate ii) Competition · Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the industry · No Company should deal in both Life and General Insurance through a single entity · Foreign companies may be allowed to enter the industry in collaboration with the domestic companies · Postal Life Insurance should be allowed to operate in the rural market · Only one State Level Life Insurance Company should be allowed to operate in each state iii) Regulatory Body · The Insurance Act should be changed · An Insurance Regulatory body should be set up · Controller of Insurance (Currently a part from the Finance Ministry) should be made independent iv) Investments · Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50% · GIC and its subsidiaries are not to hold more than 5% in any company (There current holdings to be brought down to this level over a period of time) v) Customer Service · LIC should pay interest on delays in payments beyond 30 days · Insurance companies must be encouraged to set up unit linked pension plans · Computerisation of operations and updating of technology to be carried out in the insurance industry The committee emphasised that in order to improve the customer services and increase the coverage of the insurance industry should be opened up to competition. But at the same time, the committee felt the need to exercise caution as any failure on the part of new players could ruin the public confidence in the industry. Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs.100 crores. The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body.