General Overview
As stated in the report "Review of the Recommendations of the Advisory Groups Constituted by the Standing Committee on International Financial Standards And Codes: Report on the Progress and Agenda Ahead" published by the Reserve Bank of India (RBI) in 2004, the Indian approach to standards and codes has been guided by the Standing Committee on International Financial Standards and Codes that was set up by the RBI in consultation with the Government of India in December 1999. The Standing Committee subsequently constituted eleven Advisory/Technical Groups that broadly corresponded to the core areas identified by Financial Stability Forum (FSF). The Advisory Groups had members who were experts from outside the RBI or the Government. After evaluating the Indian insurance legislation on the basis of international standards and codes, the Advisory Group on Insurance Regulation, in the Part I of its Report, dealt with licensing of new companies in India in the light of standards and codes prescribed by the International Association of Insurance Supervisors (IAIS) and the twenty Insurance Guidelines issued by the OECD for its members. The Part II of the Report, deliberated on solvency and actuarial issues. (RBI 2004, pp. 3, 63; RBI 2002, p. 13)
According to the RBI's report, over the last few years, the Insurance Regulatory and Development Authority (IRDA) issued several regulations that have helped India's insurance sector to improve its compliance with IAIS guidelines. While there appeared to be broad compliance with the advocated principles, there were several aspects where progress would be necessary so that all the core principles are implemented in letter and spirit. As of 2004, the IRDA was preparing a self-assessment and a phased approach for implementing the core principles was contemplated. Drawing up a blueprint for improved corporate governance, covering both the state-owned insurance companies as well as the private insurers, could be the focus of immediate agenda. (RBI 2004, p. 156)
The primary legislation that deals with insurance business in India is Insurance Act of 1938 and Insurance Regulatory & Development Authority Act of 1999. Consequent upon the constitution of the IRDA on April 19, 2000, the IRDA has notified a set of regulations for the insurance sector . These regulations have established the ground rules and standards for the entire gamut of insurance activities including the role, responsibilities and functions of the insurance companies, the intermediaries, and the manner in which the interests of the policyholders are to be protected. These regulations have further undergone some modifications to reflect the requirements of the evolving operating and economic environment. As stated in the RBI report, the objective of IRDA is to move towards globally accepted standards pertaining to the insurance industry. The IRDA has been a member of the International Association of Insurance supervisors (IAIS) since 1996 and is on its Technical Committees, Emerging Markets Committee and the Executive Committee. The membership in IAIS has helped in the process of harmonization of the practices and procedures followed in the Indian market with the world standards. (RBI 2004, p. 125; IRDA 2003, p. 1; IRDA website)
The framework of functioning of the IRDA can be categorized into four broad areas: (1) licensing of insurers and insurance intermediaries; (2) financial and regulatory supervision; (3) control and regulate premium rates; and (4) protection of the interests of the policyholders. The regulatory framework provides for registration of insurance companies, maintenance of solvency margin, in respect of investments and financial periodic reporting position of the company. In addition, with a view to facilitating development of the insurance sector, the IRDA has issued regulations on protection of the interests of policyholders; obligations towards the rural and social sectors; and licensing of agents, corporate agents, brokers, and third party administrators. Overall the regulatory framework is enshrined in the Insurance Act, the IRDA Act, the various regulations notified by the IRDA, and circulars and directives issued. (IRDA 2006, p. 47)
The IRDA together with the Law Commission of India initiated a review of the Insurance Act of 1938. As of 2004, the Law Commission finalized its Report on revision of the Insurance Act of 1938 and the IRDA Act 1999, and it had been presented to the Parliament. The review was initiated for consolidating the insurance related legislations into a single codified Act of Parliament, with the legislative powers resting with the Government of India and the regulatory mechanism for the professional supervision and development of the insurance industry vested with the IRDA. (IRDA 2004)
The recommendations of the Law Commission are broadly focused on issues pertaining to merging of the provisions of the IRDA Act with the Insurance Act, 1938 to avoid multiplicity of legislations; amending and updating the provisions of the Act to meet the current needs of the insurance industry; bringing consistency among various provisions in different sections of the Act by putting them into a core provision relating to a particular subject/topic; recasting certain sections so as to remove ambiguity and to make them more specific and clear; and defining/re-defining certain terms which are required to be defined in the process of improving the existing legislation. The Commission has specifically focused on the need for a full fledged grievance redressal mechanism and on raising the limits on the fines and penalties to be levied under the Act, so as to ensure adequate in-built deterrence in the regulatory mechanism. (IRDA 2004)
The Insurance Regulatory and Development Authority (IRDA) is a member of the International Association of Insurance Supervisors (IAIS). (IAIS website)
The Principles
ICP 1 Conditions for effective insurance supervision |
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There is no information publicly available as to India's compliance with this principle.
ICP 2 Supervisory objectives |
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There is no information publicly available as to India's compliance with this principle.
As stated in the Insurance Regulatory and Development Authority (IRDA) Annual Report 2004, the mission of the IRDA is (1) to protect the interest of and secure fair treatment to policyholders; (2) to bring about speedy and orderly growth of the insurance industry (including annuity and superannuation payments), for the benefit of the common man, and to provide long term funds for accelerating growth of the economy; (3) to set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of those it regulates; (4) to ensure that insurance customers receive precise, clear and correct information about products and services and make them aware of their responsibilities and duties in this regard; (5) to ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices and put in place effective grievance redressal machinery; (6) to promote fairness, transparency and orderly conduct in financial markets dealing with insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players; (7) to take action where such standards are inadequate or ineffectively enforced; (8) to bring about optimum amount of self-regulation in day to day working of the industry consistent with the requirements of prudential regulation. (IRDA 2004, p. 155)
ICP 3 Supervisory authority |
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There is no information publicly available as to India's compliance with this principle.
The Insurance Regulatory and Development Authority (IRDA) was established on April 19, 2000. Section 14 of the IRDA Act of 1999 lays down the duties, powers and functions of IRDA. The framework of functioning of the IRDA can be categorized into four broad areas: (1) licensing of insurers and insurance intermediaries; (2) financial and regulatory supervision; (3) control and regulate premium rates; and (4) protection of the interests of the policyholders. The regulatory framework provides for registration of insurance companies, maintenance of solvency margin, in respect of investments and financial periodic reporting position of the company. In addition, with a view to facilitating development of the insurance sector, the IRDA has issued regulations on protection of the interests of policyholders; obligations towards the rural and social sectors; and licensing of agents, corporate agents, brokers, and third party administrators. Overall the regulatory framework is enshrined in the Insurance Act, 1938 the IRDA Act of 1999, the various regulations notified by the IRDA, and circulars and directives issued. (IRDA 2006, p. 47; IRDA website)
ICP 4 Supervisory process |
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There is no information publicly available as to India's compliance with this principle.
ICP 5 Supervisory cooperation and information sharing |
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There is no information publicly available as to India's compliance with this principle.
The Report of the Advisory Group on Insurance Regulation published in 2000-2001 recommended to strengthen co-ordination among the regulators for an efficient unit-linked insurance business. The 2004 RBI on the progress of implementation of the Advisory Group recommendations noted that establishment of a High Level Committee, in which the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA) are represented, provided for co-ordination on unit-linked business. (RBI 2004, p. 65; RBI 2000, p. 26)
The IRDA has taken steps to foster regional cooperation amongst the South Asian Association for Regional Cooperation (SAARC) countries with the setting up of the South Asian Insurance Regulators Forum comprising of insurance supervisors from Sri Lanka, Bhutan, Nepal, Maldives and Pakistan, besides India. The Forum offers a platform to regulatory bodies in the region to share their experiences in promoting growth and stability in the insurance markets in their respective countries. (IRDA 2004, p. 58)
There is no information publicly available as to India's compliance with this principle.
Section 6 of the Insurance Act of 1938 and the regulations framed there under lay down the minimum entry level pre-requisites for registration of Indian Insurance companies. Any company proposing to carry on life or general insurance business shall have a paid up capital of Rs.100 crore. In case of a re-insurer, the requirement has been placed at Rs.200 crore. The foreign joint venture partner, either by itself or through its subsidiary companies or its nominees, may participate to the extent of 26 per cent of the paid up equity in the insurance company. The guiding principle for laying down such stringent requirement has been as much to restrict entry to reputed groups with long term commitments and also to ensure that adequate capital is injected to fund various requirements evolving with operations and to fuel growth of the insurer. (IRDA 2004, p. 31)
ICP 7 Suitability of persons |
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There is no information publicly available as to India's compliance with this principle.
In the 2000 Report of the Advisory Group on Insurance Regulation it was recommended to introduce a system of detailed information about the Directors/ Senior Managers for registration of new insurance companies. The 2004 report on the progress of implementation of the Advisory Group recommendations published by the Reserve Bank of India (RBI) noted that under the present regulations, the company is required to take formal approval of the Authority at the time of appointment of new director/ chief executive officer or their change. It is also obtained at the time of renewal of certificate of registration. As such, no further action appears necessary. (RBI 2000, p. 3; RBI 2004, p. 67)
ICP 8 Changes in control and portfolio transfers |
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There is no information publicly available as to India's compliance with this principle.
According to the Reserve Bank of India (RBI), on the issue of corporate control, the provisions relating to percentage of shareholding, voting rights and power to remove directors on the Board and other committees have been laid down in the Insurance Act. The Insurance Regulatory and Development Authority (IRDA) has powers vested with it to undertake onsite investigations and inspections of the insurance companies. The Act also gives powers to the Authority to appoint staff, issue directions, appoint of additional directors, and conduct search and seizure in exercise of its functions as laid down in the Insurance Act. (RBI 2004, p. 125)
ICP 9 Corporate governance |
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According to a report prepared by the Reserve Bank of India (RBI) in 2004, as of 2004, the Insurance Regulatory and Development Authority (IRDA) was in the process of constituting a Corporate Governance Committee to lay down the guidelines for ensuring good corporate governance by the insurance companies as they act as custodians of public money which they hold in trust. Though formation of compensation committee, audit committee and risk management committee is not mandated under the Act, the insurance companies have been encouraged to constitute such committees. The Insurance Act of 1938 requires every appointment, reappointment, termination and remuneration of whole time directors, managing director and the principal officer to be done only with the prior approval of the IRDA. In addition, the IRDA was in the process of evolving guidelines for remuneration to be paid to the managing directors of the companies. (RBI 2004, p. 125)
On the issue of corporate control, the provisions relating to percentage of shareholding, voting rights and power to remove directors on the Board and other committees have been laid down in the Insurance Act already. The IRDA has powers vested with it to undertake onsite investigations and inspections of the insurance companies. The Act also gives powers to the Authority to appoint staff, issue directions, appoint of additional directors, and conduct search and seizure in exercise of its functions as laid down in the Insurance Act. (RBI 2004, p. 125)
All insurers are required to ensure compliance on corporate governance as per the provisions of the Companies Act of 1956. In addition, the insurers have to comply with the requirements of the Insurance Act and the regulations framed thereunder. The various requirements stipulated by the IRDA to ensure good governance in the management of affairs of the insurers and transparency in their operations, cover such aspects as internal controls and processes; constitution of Investment Committee, its duties and responsibilities; appointment of managerial personnel to meet the "fit and proper" criteria subject to prior approval of the IRDA; disclosure on payments made to individuals, firm, companies and organizations in which directors are interested; stipulation on appointment of joint auditors, their qualifications and rotation of auditors, Format of the Audit Report; defined role of Appointed Actuary; representation of the policyholders on the Board; provisions against commonality of interest through presence of similar directors in two insurance companies; amongst others. (IRDA 2004, p. 47)
There is no information publicly available as to India's compliance with this principle.
There is no information publicly available as to India's compliance with this principle.
ICP 12 Reporting to supervisors and off-site monitoring |
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There is no information publicly available as to India's compliance with this principle.
As stated in the 2005-2006 Annual Report of the Insurance Regulatory and Development Authority (IRDA), the scope of off-site supervision has been focused on the following four segments: (1) financial reporting; (2) investment functions; (3) actuarial and solvency aspects; and (4) re-insurance. Derived from the regulations notified in this regard, insurance companies are required to file reports and statements as prescribed on a periodic basis. Additional formats of reporting have also been prescribed to obtain information which have not been specifically spelt out in the regulations, but is necessary to monitor the operations of the insurance companies. These statements form the basis for off-site supervision. (IRDA 2006, p. 47)
The IRDA regulates the financial reporting practices of insurance companies under the IRDA Act. The power to regulate the financial reporting of insurance companies was given to IRDA in the financial year 2000-01 when new private insurers entered the Indian insurance market. While the private insurance companies have set up systems to meet the various requirements under the IRDA Act and the related rules, the public sector insurance companies have been facing practical problems in meeting the requirements under the new regulatory regime. Insurance companies and their auditors are required to comply with the requirements of the IRDA Regulations (Preparation of Financial Statements and Auditor's Report of the Insurance Companies) in preparing and presenting their financial statements and the format and content of the audit report. The IRDA requires compliance with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI). The IRDA has the authority to impose sanctions for noncompliance. However, in practice, this power has rarely been exercised. (WB 2004, pp. 6, 7, 14)
According to the IRDA 2004 Annual Report, the IRDA regulations broadly conform to the ASs issued by the ICAI. Modifications have been made in respect of the accounting standards pertaining to preparation of Cash Flow Statement (AS 3) which is required to be furnished to the IRDA only under the direct method. The requirements under Segment Reporting (AS 17) have been made more stringent for the insurers. The regulations further require that the financial statements shall be accompanied by the Management Report, in a prescribed format, duly certified by the management. (IRDA 2004, p. 12)
ICP 13 On-site inspection |
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There is no information publicly available as to India's compliance with this principle.
The IRDA has been empowered by provisions of Insurance Act, Section 14 of the IRDA Act and the regulations notified by it to undertake inspections, conduct enquiries and investigations including audit of insurers/ intermediaries. The IRDA initiated the process of on site inspection of the insurers during the financial year 2002-03. The inspection process can broadly be categorized into two, overall inspection of the insurance companies, and targeted inspection, as to satisfy the specific concerns/objectives of concern to the IRDA. The officers of the IRDA carried out inspection of select insurers with a view to reviewing their operations. These audits were aimed at getting an overview of the operations of the insurers. In addition, special purpose audits were also carried out by a select group of statutory auditors empanelled with the IRDA. Investment audit of insurers was carried out to review the investment operations of the insurers. The IRDA has been utilizing the services of chartered accountants to conduct inspections in this area. (IRDA 2003, p. 15)
The IRDA has also been undertaking inspection of selected intermediaries, agents training institutes and third party administrators, at regular intervals. The objectives of these inspections is not fault finding but to reassure the regulator that the operations of various registered entities are being carried out on prudent lines of management. (IRDA 2003, p. 17)
ICP 14 Preventive and corrective measures |
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There is no information publicly available as to India's compliance with this principle.
ICP 15 Enforcement or sanctions |
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There is no information publicly available as to India's compliance with this principle.
ICP 16 Winding-up & exit from the market |
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There is no information publicly available as to India's compliance with this principle.
ICP 17 Group-wide supervision |
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There is no information publicly available as to India's compliance with this principle.
ICP 18 Risk assessment and management |
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There is no information publicly available as to India's compliance with this principle.
According to the Insurance Regulatory and Development Authority's (IRDA) report, as a step forward in the process of regulating, seeking information and on-site inspection, is the process of risk based supervision. The first intent of supervision is to ensure compliance with the legislative intent and the basic framework of reporting is established to ensure review of compliance. While the IRDA is not in favor of managing the affairs of the registered entities, it would continue to draw their attention to the key risk factors in the industry in particular and the financial sector in general is exposed to. Simultaneously, insurers are required to identify the various risks faced by them and lay down the strategies to mitigate them. These are required to be enumerated in the Management Report to be furnished by the insurers as part of the annual financial statements. (IRDA 2003, p. 15)
ICP 19 Insurance activity |
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There is no information publicly available as to India's compliance with this principle.
As stated in the 2005-2006 Annual Report of the Insurance Regulatory and Development Authority (IRDA), the mandate to the IRDA in respect of re-insurance lies in the provisions of Section 14(1) and 14(2) Sub Section (f) of the IRDA Act, 1999 as well as Sections 34F, 101A, 101B and 101C of the Insurance Act, 1938. In addition, the IRDA has framed regulations pertaining to re-insurance by general insurers which lays down the ground rules in placing re-insurance with the re-insurers. Under the provisions of the Insurance Act of 1938, the General Insurance Corporation of India has been designated as the "Indian insurer" which entitles it to receive obligatory cessions of 20% from all the direct general insurers. The limits have been laid down in consultation with the Re-insurance Advisory Committee. (IRDA 2006, p. 36)
There is no information publicly available as to India's compliance with this principle.
There is no information publicly available as to India's compliance with this principle.
As stated in the 2005-2006 Annual Report of the Insurance Regulatory and Development Authority (IRDA), IRDA Investment Regulations have prescribed investment pattern for life and non-life (including re-insurer) insurers. Prescriptions have been laid down in respect of life fund, annuity and pension business, which are monitored in the case of Life Insurance Business on the basis of 'Controlled Fund' and in the case of general Insurance Business, on the basis of 'Total Assets' of the Insurer. The Insurance Act of 1938 and the Regulations prescribe the specified percentages of investments to be made in Government securities, approved securities (where principal and servicing of interest are guaranteed) and other approved investments to the extent of 85 per cent for life and 75 per cent for general insurance companies. The Regulations also lay down prudential safeguards in regard to the levels of exposure to a single company/a group of companies/a single industrial sector to mitigate concentration risk and to provide a semblance of safety. The regulations have also prescribed the specified per cent of investments to be made in infrastructure and social sectors, to ensure that the long-term savings of the sector are appropriately channelized. (IRDA 2006, p. 40)
The Act and Regulations have restricted investment in equity market. In the life and non-life business, for an investment to be categorized as Approved Investment, the prudential norms specified in Section 27A and 27B of Insurance Act of 1938 are required to be complied with. The norms laid down under the Act provide for track record of payment of dividend of not less than three years for non life insurance companies and seven years in the case of life companies in respect of companies whose equity/preference shares are being acquired. Further, the Authority has also laid down norms to be complied with, in case of an insurance company subscribing to Initial Public Offer (IPO). (IRDA 2006, p. 40)
The IRDA has initiated steps towards investment audit on a periodic basis with a view to monitoring the investment decisions of the insurers, compliance with the regulations, prudent investment of the funds and adequate provisioning on a regular basis. The audits are carried out by chartered accountants drawn from a panel maintained by the IRDA. The inspection audits enable the Authority to make on-site assessment of the compliance with the regulations and to initiate corrective action. (IRDA 2004, p. 36)
ICP 22 Derivatives and similar commitments |
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There is no information publicly available as to India's compliance with this principle.
ICP 23 Capital adequacy and solvency |
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There is no information publicly available as to India's compliance with this principle.
The Insurance Regulatory and Development Authority (IRDA) Act and the regulations provide a framework for the calculation of solvency margin which the insurance company must maintain at all times. The solvency margin is kept at a minimum level of Rs. 50 crore. The solvency ratio has been kept at the level of 1.5 before any regulatory intervention is taken by the regulator. This allows sufficient time to the regulator to take early corrective action to prevent worsening of the situation that may arise. Powers to give directions to the insurance company to strengthen its solvency position exist. Measures can be taken to directly address the problem by capital or asset injections or punitive measures to protect the policyholders as powers for the same are vested with the Authority under the Insurance Act of 1938. The insurers are required to file the solvency statement annually indicating the solvency ratio. This is monitored to ensure that the company is backed by sufficient assets to meet its liabilities. (RBI 2004, p. 129)
As stated in the 2005-2006 of the IRDA, every insurer is required to maintain a required Solvency Margin as per the Section 64 VA of the Insurance Act 1938. Every insurer shall maintain an excess of the value of assets over the liabilities. This excess prescribed by the IRDA, is referred to as Required Solvency Margin. The IRDA (Assets, Liabilities and Solvency Margin of Insurers) Regulations, 2000 describe in detail the method of computation of the Required Solvency Margin. (IRDA 2006, p. 81)
There is no information publicly available as to India's compliance with this principle.
The Insurance Regulatory and Development Authority (IRDA) is charged with the responsibility of promoting and regulating professional organizations connected with the insurance and re-insurance business. A code of conduct for agents and the insurance intermediaries has been laid down to ensure that the affairs of insurance intermediaries are conducted in such a manner as to safeguard the interests of various stakeholders. Instances of misconduct would be dealt with. In addition, given that the insurance industry forms a part of the financial system, the IRDA along with the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) has set up a mechanism for real time monitoring of the financial intermediaries. This mechanism would need to be further strengthened in the times to come. IRDA has been undertaking inspection of selected intermediaries, agents training institutes and third party administrators, at regular intervals. The objectives of these inspections is not fault finding but to reassure the regulator that the operations of various registered entities are being carried out on prudent lines of management. (IRDA 2003, pp. 9, 17)
ICP 25 Consumer protection |
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There is no information publicly available as to India's compliance with this principle.
As stated in the 2005-2006 Annual Report of the Insurance Regulatory and Development Authority (IRDA), the IRDA notified regulations for Protection of Policyholders' Interests in 2002. The regulations require all insurers to set up grievance redressal mechanisms to address complaints and grievances of the policyholders efficiently and with speed. The insurers are also required to send details of the Ombudsmen to the policyholders. The IRDA has been monitoring the systems in the companies to ensure that they are effective. In 2003, the IRDA set up a grievance cell to facilitate resolution of policyholders' complaints. The IRDA receives and takes up the complaints with the insurance companies. The nature of complaints reflects on the happenings in the market. (IRDA 2006, p. 35)
With a view to further protecting the interests of the policyholders, the IRDA has constituted the in-house Consumer Grievance Cell (CGC) in December 2002 as a mechanism parallel to the regulations framed for protecting the interests of the policyholders. While the regulations lay down the benchmarks for processing the claims and mandate every insurer to have in place proper procedures and effective mechanism to address complaints and grievances of policyholders efficiently, the CGC has been established to bring to the fore the deficiencies noticed in the functioning of the registered insurers in providing services under the insurance contracts sold by them. The insurers are expected to not only come up to the standards of servicing established but also make the requisite disclosures in both the proposal form and in the policy document. (IRDA 2003, p. 11)
In another initiative, the office of the Appellate Authority has been constituted under Section 110H of the Insurance Act of 1938. The Appellate Authority has been set up to review, on appeal, the directives given by the IRDA. During 2004, a two member Bench heard appeals of public sector non-life insurers in respect of the Authority's directives on settlement of claims, which are at various stages of consideration. (IRDA 2004, p. 30)
ICP 26 Information, disclosure & transparency towards the market |
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There is no information publicly available as to India's compliance with this principle.
There is no information publicly available as to India's compliance with this principle.
ICP 28 Anti-money laundering/ Combating the Financing of Terrorism |
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There is no information publicly available as to India's compliance with this principle.
As stated in the 2005-2006 Annual Report of the Insurance Regulatory and Development Authority (IRDA), the IRDA was given powers to issue guidelines to the insurance industry on anti-money laundering (AML) issues. The Guidelines were issued on March 31, 2006 after considering views from the Industry. They require the AML program to be implemented from August 1, 2006. A statutory duty is imposed on insurance companies, which knows or suspects that any property in whole or in part directly or indirectly represents the proceeds of drug trafficking or of an indictable offence, or was or is intended to be used in that connection, to make a disclosure to the Director of the Indian Financial Intelligence Unit (FIU-IND). The obligation to establish an AML program applies to an insurance company, and not to its agents, and other intermediaries. Each company should have an AML policy and file a copy with IRDA. They should appoint a Principal Compliance Officer who is entrusted with the responsibility of implementation of the Company's policy. An AML program at a minimum, include: (1) internal policies, procedures, and controls; (2) appointment of a Principal compliance officer; (3) recruitment and training of employees/agents; (4) internal Control/Audit; (5) Know Your Customer (KYC) norms. (IRDA 2006, p. 67)
According to the Guidelines, insurance company should make reasonable efforts to determine and document the true identity of all customers requesting for its services. It should be an on-going process. It also covers the existing customers who entered into contract from the cut-off date of 01/01/2006. The norms requires customers' source of funds, his estimated net worth etc., to be documented to establish his need for insurance cover. Further, insurers should not enter into a contract with a customer whose identity matches with any person with known criminal background or with banned entities and those reported to have links with terrorists or terrorist organizations. The companies are advised to classify the customer into high risk and low risk, based on the individual's profile. A threshold of Rs. 1 lakh per annum is fixed to decide upon the extent of due diligence. (IRDA 2006, p. 67)
The AML norms pertaining to KYC, should be applied by general insurance companies in respect of all policies at the settlement stage and where claims payout/premium refund cross a threshold of Rs. 1 lakh per claim/premium refund. They are required to establish procedures, at the stage of customer acceptance to avoid unwitting involvement in insuring assets bought out of illegal funds to mitigate possible reputational and other operational risks. Guidelines with these relaxations would be implemented by general insurance companies prospectively from January 1, 2007. (IRDA 2006, p. 68)
India