Regulatory Compliances of IRDA for Insurance Companies

Priyanka Bajpayee

13 Sep, 2022

IRDA is playing a vital role in governing the Insurance sector. The main motive of the Insurance companies is upholding the resources and to invest the same. Companies dealing in Insurance sector are looked upon a lot of expectations for meeting the complex economic patterns. However, Reporting is the basic requirement expected from the Insurance companies by the authorities. IRDA Compliances for Insurance companies are necessary to maintain transparency and accountability. So, they must share the information to ensure better governance of the organization.

For better working of the insurance company, it is covered by the various Acts, mainly-

• Insurance Act 1938^[1]
• Companies Act, 2013
• FEMA ACT 1999 (Foreign Exchange Management Act )1999

Additionally, to ensure its smooth working and for ensuring transparency and accountability numerous other policies are also imposed on the insurance companies while dealing with complicated business.

Why IRDA is important for Insurance Companies in India?

IRDA – (Insurance Regulatory and Development Act) is an apex statutory body which controls and standardize the working of Insurance Companies in India. To protect the interest of the policyholder, IRDA is playing a major role in regulating, promoting and for orderly growth of the Insurance Sector. Further, IRDA provides-

• Registration Certificate to the Insurance Companies,
• Renewal, Modification, Cancellation, and suspension of Registration Certificate.
• Protects the right of the policyholder and Adjudication of disputes between insurers and intermediaries.
• Speedy settlement of claims and to prevent fraudulent practices.
• Ensuring the growth of the Insurance sector.
• Promotes and controls the organization which relates to the insurance business.
• Specifies how the Insurance companies and its intermediaries will provide the financial reports

IRDA Compliances required to be done by the Insurance Companies

• The Insurance company is regulated by the statutory body-The Insurance Regulatory and Development Authority of India .The Insurance Company are required to comply with the IDRA i.e. the company needs to file Annual, Monthly and Quarterly Report .The reporting can also be an event based reporting which should be within in a prescribed time limit.
• The reporting of the compliance shall be filed in both Offline and Online manner within time as recommended by the Authority under the respected rules, regulation or circular.
• The Insurance companies are required to report on monthly basis which includes the information related to Business, Injustice to policyholders and Petitions report, etc. shall be filed by the Insurance Companie in the prescribed time. Likewise, the reporting shall also be done on quarterly and annual basis.
• The Insurance Company shall inform the Board about the working of the Company. Further, the Board shall also be indicated about-
  • Risk settlement if risk arises,
  • Particulars of policyholders,
  • Particulars of claims and management report etc.
• The Company shall prepare the accounts in such a manner as suggested by the authority. The Insurance Company shall also prepare the solvency Margin ration at all times.
• The company shall file the return annually to the Authority in 4 copies within a period 6 months from the end of the financial year.

Additionally, The Return shall be signed by

• The chairman
• Directors and
• Principal officer

However, If Insurer carries business outside India then said 6 months as mentioned above will be extended by 3 months.

Insurer have to provide to the Authority 4 copies (duly certified) in the English language of every document (i.e. Balance sheet, Account, Report and statement) furnished to the public authority attached with the statement examined by an auditor which reflects the assets held by insurer in India as on the time of  the balance-sheet so furnished within the prescribed time.

Compliances under the Companies Act 2013 and FEMA

In India, all the Companies dealing in Insurance business shall be incorporated under the Companies Act, 2013 as a Public Company. Being a Public Company, the insurance company is required to comply with the provisions of Companies Act 2013. Various provisions are required to comply with as per the provisions of the Companies Act i.e.

• Declaration from directors,
• Reporting the resolution passed by the Company to the MCA or any other provisions as and when applicable are duly complied.
• Provisions of Director’s and Auditor’s Appointment,
• Provision of annual filing and Disclosure of issue of shares etc. shall also be complied.
• Filing of Annual return (MGT-7 and AOC-4) within the 60 days of the Annual General Meeting.

Compliance with the Corporate Governance Guidelines issued by the IRDA is mandatory for Insurance Company and shall constitute the committees as prescribed under the guidelines.

Compliance under FEMA

The provisions of FEMA are designed and imposed for those insurance companies that possess foreign investments or have foreign promoters. For the insurance companie, it is mandatory to comply with the FEMA Compliances and to produce an annual report by following the provisions prescribed by the RBI and within the specified time period. For smoother working of the organization, these companies must abide by the directions of the guidelines.

How IRDA works for Insurance Company?

IRDA clearly explains the code of conduct for all insurance companies.

• IRDA prevents the misdeed. It also conducts both annual and need-based audit, investigation. If required, it calls for explanation from either the insurance companies or intermediaries. 
• To bring equality for the customers, it regulates the rates and conditions offered by the insurance companies.
• In case of dispute, Resolves a dispute between the insurer and the policyholder.
• IRDA bounds the insurers with a minimum percentage to carry both life and non -life business by taking into consideration the development of both the urban and the rural sector,

Conclusion

For the smooth working and for maintaining the transparency in the business compliance with provisions of IRDA is necessary. To maintain the equity among the customers, IRDA regulates the rates and terms and conditions offered by the insurance companies to the consumer. IRDA compliances are of utmost importance for Insurance companies. IRDA has set standards and proper vigilance mechanism to check the fraudulent practices.

Read our article: A Review on Insurance Broker Compliance under IRDAI