In InsuranceSamadhan.com’s A-Z Blog series on Insurance topics, we try to provide all vital information related to the Insurance sector and demystify certain myths related to the sector. In today's blog, we are sharing detailed information regarding – Protection of Policy Holder interest by IRDA– and everything that one needs to know.

All Policy Holders, specially of Private Insurance companies, have worries about the future as given below:

  • What if Company runs away?
  • Is our money safe?
  • What if company closes down?
  • Will company pay the claim?

IRDA, the regulator of Insurance Industry has thought of all fears and incorporated Insurance Act to protect the interest of all Policy Holders.

All Policy Holders must be aware of provisions given below:

  1. Safety of Money: Section 27 A provide guidelines on investment by Life Insurance Companies i.e
    • 25% of investment should be in Government Securities with 100% sovereign guarantee.
    • Not less than 50% investment should be done with government approved securities including the 25% mentioned above this means that 50% investment has 100% sovereign guarantee of investor money.
    • Not less than 15% investment should be made with infrastructure or social sector. These sectors need to be approved by IRDA.

    So overall 65% investment are absolutely under the guidelines of IRDA.

    • Balance 35% investments can be done as specified in regulation 5. This investment can never exceed 35%.
  2. Can company close down or run away: Section 52 (H) of Insurance Act empowers Government to take over an Insurance Company in the interest of Policy Holder.
  3. Section 52 (A) also empowers IRDA to remove a Director and appoint another one as per choice of IRDA.
  4. As per section 54, no insurance company can voluntarily wind up its business. In case, they want to close down, IRDA would ensure merger or takeover by another Insurer. In last 20 years, there has been many cases where management has changed.
  5. Will company pay the claim: As per section 64 VA of Insurance Act, all companies must remain solvent at all times to pay the liabilities. IRDA do regular solvency audit.
  6. All plans and premiums need IRDA approval and IRDA ensures that plans are viable.
  7. Section 13 defines role of Appointed Actuary who is accountable to IRDA.
  8. Section 34A regulates appointment and termination of CEO.
  9. Section 35 and 36 controls transfer and amalgamation of business. This is done to safeguard the interest of Policy holder. Licensing to do business of Insurance need capital of Rs 100 crore.
  10. Section 45 ensures indisputability of Insurance policy if policy has received two annual premiums.
  11. Freelook cancellation. IRDA guarantees that insured can apply for free look cancellation within 15 days of receipt of policy.

These provisions ensures that interest of Policy holders are protected. Insurance Samadhan also represent grievance using all legal provisions and try for resolution.

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