How to Start a Insurance Company IRDA Compliance

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What is the Insurance Companies IRDA Compliance?

Every incorporated business in India has to execute a particular set of compliance, returns, and filings given under the provisions of various tax and corporate laws. In easy words, compliance means abiding by the rules and regulations that is applicable to the entity. Hence, every entity is governed by the law that the entity is bound to follow. The annual compliance mentions a specific set of compliance that a company must fulfill after its incorporation to initiate and continue its functions. The non-compliance by the companies may result into disqualification of directors and striking off of such a Company.

The annual compliance includes the several returns that have to be filed with the IRDA, FEMA Compliances, Company compliance, etc of any insurance company. Therefore, Insurance Companies IRDA Compliance is a process which has to be mandatorily followed by all the insurance companies. Different insurance companies with specialization in general insurance or life insurance will have different compliances on the basis of their own regulatory norms with respect to the insurance. Therefore, insurance companies IRDA compliance is requisite for a company to function in the field of insurance.

The given below are the Acts under which the Insurance Companies IRDA Compliance is done:

Insurance Companies IRDA Compliance

Why is there a requirement for Insurance Companies IRDA Compliance?

Insurance companies IRDA compliance is required with the objective that the Company compulsorily follow the rules and orders which are prescribed by the authority. Besides this, the Insurance companies IRDA compliance is requisite for the following reasons:

  • To guarantee that the insurance companies fulfill the best interests of policyholders
  • Registration of insurance company is in accordance with the guidelines of the authority.
  • To settle and resolve the grievances and the claims with respect to the policyholders.
  • To ensure a proper system of monitoring the insurance companies.
  • Foreign exchange is permitted in insurance. Thus, the compliance with the rules in reference to FEMA shall make certain that the Company is abiding with the procedure.

Which authority regulates the Insurance Companies IRDA Compliance?

The main regulatory authority for the Insurance Companies IRDA Compliance in India is the Insurance Regulatory and Development Authority of India (IRDAI). The laws regarding insurance are given under the Insurance Act, 1938 and under the Insurance Regulatory and Development Authority Act, 1999.

Besides, there are various other regulatory authorities, regulations and laws that the insurance companies have to comply with. Insurance companies IRDA Compliance comes under the following given below authorities:

For setting up a Company: It is necessary that there must be compliance with the Companies Act 2013 and the preceding company law. The insurance company will have to deal and manage with the MCA (ministry of corporate affairs) and the ROC (Registrar of Companies) for setting up a company.

Foreign Exchange Management Compliance- The insurance company will have to comply with the laws with respect to the Foreign Exchange Management Act 1999 (FEMA). Reserve Bank of India (RBI) develops the Foreign exchange management regulations.

For the e-commerce compliance- E-commerce for insurance companies are regulated under the Insurance E-Commerce Business or the Internet Guidelines (IRDA/ INT/ GDL/ ECM/ 055/03/ 2017). It will follow the guidelines according to section 34 of the Insurance Act, 1938 and consider Section 14 of the IRDA Act,1999.

What is the Role of IRDA?

IRDA has a major role in promoting, regulating and in the orderly growth of the insurance sector. IRDA provides :

  • Registration to an insurance company
  • Modification, renewal, cancellation, and suspension of registration certificate
  • Adjudicate dispute between intermediaries and insurers
  • Protect rights of the policyholder
  • Settlement of claims
  • Curb fraudulent activity
  • Promote insurance sector
  • Draft rule and regulation

Eligibility criteria- Insurance Companies IRDA Compliance

The Company which is interested in conducting the insurance business should be incorporated as the Company under the Companies act.

  • The insurance company must to be registered as a public company under the Companies Act 2013.
  • It is obligatory for the Company to comply with the Insurance Laws and the Insurance Act for getting registered with the IRDAI and should have the minimum capital requirements as: a)The minimum Capital Requirement for the Insurance Company must be - 100 Crores.

    b) The Minimum Capital Requirement for the Reinsurance Company- 200 Crores.

  • Insurance Laws Compliance :

    a) File Annual Reports.

  • FEMA Compliance:

    a) The reporting amount of outward flow and inward inflow that happens in an Insurance company with a particular amount of foreign investment.

  • E-Commerce Compliance by the Insurance Company:

    a. The insurance business should mandatorily register as an e-Commerce company while dealing with the internet insurance.

    b. The Company should make sure that the website is made in accordance with the guidelines as issued by the IRDAI.

    c. The Company should ensure that the products price should comply with the IRDAI.

    d. The Company should ensure that all the policyholders are given with the information available on the website.

Process / Procedure for Insurance Companies IRDA Compliance

There are various IRDA compliance for all the insurance companies. The following should be considered by the insurance company.

Starting of an Insurance Company and Corporate Governance Norms

  • The Insurance Company should mandatorily get itself registered under the Companies Act or Previous company law as a public company.
  • The Company must incorporate itself as a public company under the Companies Act 2013 or under the previous company law.
  • The requirements like filing of resolutions to the Ministry of Corporate Affairs, the director’s declaration, appointment of auditors and directors, annual filings are to be compulsorily followed by companies.
  • It is mandatory for all the Insurance companies registered under this Act to file several board resolutions with reference to the topics like appointment or resignation of directors, appointment of the auditors, problems linked with shares, and others with the ROC.
  • It is exempted from the insurance company to file the balance sheet in XBRL. Furthermore, the annual return filed in MGT-7 and AOC-4 needs to be filed within the time period of 60 days from the Annual General Meeting.
  • Corporate Governance Guidelines is an additional provision that the IRDAI issues for the insurance companies. It is requisite for the Company to strictly abide with all the regulations and strictly follow the rules specified in the guidelines while forming the committees. 

E-Commerce – Internet Compliance for Insurance Company

  • It is necessary for the applicant to set up an independent ISNP (Insurance Self Network Platform).
  • Application should be made in the Form-ISNP-1 to create an internet e-commerce platform to perform e-Commerce activities in India.
  • The authority’s prior permission is necessary to set up such platform.
  • The applicant shall pay a non-refundable fee of Rs 10,000.
  • The application form must be filled with details in accordance with the requirements, and the authority shall return within the time period of 15 days.
  • It is the authority who gives the authorization for securing license.

Conditions the authority consider before granting permission

  • The policyholder’s interests shall be considered.
  • The authority will look into the scenario of insurance activities based on internet before giving any such permission.
  • The Company should not breach the guidelines that are issued by the authority.
  • The applicant must not violate any provision of the Insurance Act, 1938, insurance Rules, IRDA Act, 1999, Regulations, Orders, Guidelines, notices, circulars, etc. as issued by the authority.

Compliance under the Insurance Regulatory and Development Authority / Audit

It is mandatory for all the insurance companies to file the following given reports:

  • Quarterly Reports;
  • Monthly reports;
  • Annual Reports;
  • The Monthly informational reports regarding policy grievances and business information. The same would also be applicable to the quarterly reports; and
  • The insurance company will have to put forward their overall performance, which comprises the risk-related topics and how they manage with particular risks and the details on the policyholder and the management particulars.

The important requirement of the Company is that it should file the annual return in four copies to the authorities from the end of the financial year but within six months. This time period can be extended by three months if the business is carried outside. It is mandatory to have the signatures of the Chairman, principal officer, two directors in the annual report.

Compliance Requirements under FEMA

The provision under FEMA is specifically designed and obligatory for those insurance companies with foreign investments or foreign promoters. They should follow the guidelines as specified by the FEMA.

It is compulsory for the insurance companies under FEMA to create an annual report filed by abiding with the provisions as has been prescribed and within the particular time period to the RBI. Thus, these companies must follow the provisions of these regulations for smooth operation of the organization. Foreign Direct Investment is permitted in the insurance sectors.

Documents for Insurance Companies IRDA Compliance

Documentation of Company Law - Insurance Companies IRDA Compliance

  • Identity Proof like Aadhaar card, Voter Id, PAN card, Driving License of all the selected shareholders and directors.
  • The Address Proof of the directors and shareholders who are proposed for the Company.
  • The details of the PAN card for all the directors and shareholders.
  • Utility bills like the telephone, electricity, gas, water bill of the office that is registered serves as the evidence of residential proof of the place of business. It should not be old than two months.
  • A No Objection Certificate from the owner or landlord of the business place.
  • Directors Identification Number of all the selected directors.
  • Digital Signature Certificate of the selected directors.
  • Memorandum of Association (MOA) and
  • Article of Association (AOA).

IRDAI Documentation- IRDA Compliance for Insurance Companies

  • Evidence of equity capital of 100 crores for an Insurance Business.
  • Evidence of equity capital of 200 crores for a Reinsurance Business.
  • Name and full address of the directors.
  • Qualifications of the nominated directors.
  • The Certified Copy of the Prospectus.
  • A statement representing the distinct numbers of the shares that are issued to every shareholder and promoter with reference to the share capital of applicant.
  • Any other supplementary information.

Internet/E-commerce Insurance Business- IRDA Compliance for Insurance Companies

  • Form - ISNP – 1.
  • Application form.
  • KYC documents.
  • Fee

How can Swarit help in Insurance Companies IRDA Compliance?

Swarit has team of experts to assist your insurance company and will make sure that the Company complies with all the rules related to IRDAI.

Frequently Asked Questions

The administrator is responsible to conduct the management of the insurer’s business according to the provision of insurance Act, 1938. The administrator will manage the affairs of insurer.

Yes, the insurance company must necessarily follow the above given compliances. Moreover, the compliance varies according to the business requirement of the particular insurance company. If the insurance company does not have any form of foreign holding or there is no foreign investment then it does not have to comply under FEMA.

Yes, there are particular compliances that are compulsorily followed by all insurance companies, including intermediaries, agents, corporate agencies, brokers, and marketers.

17 ombudsmen is appointed to solve the grievances related to insurance all over India.

The kinds of insurance companies are:

  • Life Insurance or Personal Insurance.
  • Property Insurance.
  • Liability Insurance.
  • Social Insurance.
  • Marine Insurance.
  • Guarantee Insurance.
  • Fire Insurance.

The functions of IRDAI are as given below:

  • Issue certificate of registration.
  • Protecting the policyholders interests.
  • Issuing license to the agents.
  • Specifying the code of conduct.
  • Promoting effectiveness in the insurance business.
  • Performing examination and inspection, conduct inquiries on the insurance companies.

The penalties and consequences for non-compliance with insurance regulations vary differently.

For non-compliance with the authority- The authority shall impose penalty on the Company and the directors shall be faced with the civil consequences for any non compliance.

Non-Compliance with Companies 2013 will give punishments to the Company and the directors.

Non-Compliance with FEMA Regulations would attract harsh penalties, which the RBI and the authorized dealer shall enforce

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