REGULATION OF INSURANCE BUSINESS

UNIT 1

History of life and non-life insurance legislation

The term ‘Yogakshemam Bahamayam’ in our ancient texts. This suggests that a
form of “community insurance” was prevalent around 1000 BC and practised by
the Aryans. In modern times, Triton Insurance Co. Ltd. was the first general
insurance company to be established in India in 1850. The Bombay Mutual Life
Insurance Society started its business in 1870. It was the first company to charge
same premium for both Indian and non-Indian lives. The Oriental Assurance
Company was established in 1880. Thereafter, many players emerged. By 1956,
there were around 240 private life insurers and more than 100 general insurers.
The Government of India, concerned by the unethical standards adopted by some
players against the consumers, nationalised the industry in two phases in 1956
(life) and in 1972 (non-life). The government brought together life insurers under
one nationalised monopoly corporation and LIC was born. The general insurance
business remained in the private sector till 1972. Then, nearly 107 insurers were
merged and grouped into four companies- National Insurance Company, New
India Assurance Company, Oriental Insurance Company and United India
Insurance Company. They were subsidiaries of the General Insurance Company
(GIC).

The modern form of Life Insurance came to India from England in the year 1818.
Oriental Life Insurance Company started by Europeans in Calcutta was the first life
insurance company on Indian Soil.

The insurance companies established during that period were brought up with
the purpose of looking after the needs of European community and Indian natives
were not being insured by these companies. However, later with the efforts of
eminent people like Babu Muttylal Seal, the foreign life insurance companies
started insuring Indian lives. But Indian lives were being treated as sub-standard
lives and heavy extra premiums were being charged on them.

Bombay Mutual Life Assurance Society heralded the birth of first Indian life
insurance company in the year 1870, and covered Indian lives at normal rates.
Bharat Insurance Company (1896) was also one of such companies inspired by
nationalism. The Swadeshi movement of 1905-1907 gave rise to more insurance
companies such as The United India in Madras, National Indian and National
Insurance in Calcutta and the Co-operative Assurance at Lahore.

Life Insurance Companies Act, 1912

In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act
were passed. The Life Insurance Companies Act, 1912 made it necessary that the
premium rate tables and periodical valuations of companies should be certified by
an actuary. But the Act discriminated between foreign and Indian companies on
many accounts, putting the Indian companies at a disadvantage.

Insurance Act 1938

From 44 companies with total business-in-force as Rs.22.44 Crores, it rose to 176

companies with total business-in-force as Rs.298 Crores in 1938. With a view to
protect the interests of the Indian Insurance companies, the earlier legislation
was amended with the enactment of the Insurance Act 1938, which consists
comprehensive provisions for effective control over the activities of insurers or
insurance organizations.

The Insurance Act 1938 was the first legislation governing the life insurance and
non-life insurance and to provide strict state control over insurance business.

Birth of Life Insurance Corporation of India

On 19th of January, 1956, that life insurance in India was nationalized. About 154
Indian insurance companies, 16 non-Indian companies and 75 provident were
operating in India at the time of nationalization. Nationalization was
accomplished in two stages; initially the management of the companies was taken
over by means of an Law, and later, the ownership too by means of a
comprehensive bill.

The Parliament of India passed the Life Insurance Corporation Act on June 1956,
and the Life Insurance Corporation of India was created on September 1956, with
the objective of spreading life insurance much more widely and in particular to
the rural areas with a view to reach all insurable persons in the country, providing
them adequate financial cover at a reasonable cost.
The LIC had monopoly till the late 90s when the Insurance sector was reopened to
the private sector.

History of General (non-life) Insurance

The history of general insurance dates back to the Industrial Revolution in the
west during the 17th century. General Insurance in India has its roots in the
establishment of Triton Insurance Company Ltd. at Kolkata in the year 1850 by the
Britishers. In 1907, the Indian Mercantile Insurance Ltd. was established and was
the first company to transact all classes of general insurance business.

In 1957, General Insurance Council (GIC), a wing of the Insurance Associaton of

India was established The General Insurance Council framed a code of conduct for
ensuring fair conduct and sound business practices across Non-Life or General
insurance sector.

In 1968, the Insurance Act was amended to regulate investments and set
minimum solvency margins. The Tariff Advisory Committee was also established in
the same year.

With the passing of the General Insurance Business (Nationalization) Act in 1972,
general insurance business was nationalized. A total of 107 insurers were
amalgamated and grouped into four companies namely National Insurance
Company Ltd. at Kolkata, the New India Assurance Company Ltd. at Mumbai, the
Oriental Insurance Company Ltd at New Delhi and the United India Insurance
Company Ltd at Chennai.

Malhotra Committee

The Government set up a committee in 1993 under the chairmanship of R.N.

Malhotra, former Governor of RBI (Reserve Bank of India), to propose
recommendations for initiation and implementation of reforms in the Indian
insurance sector. The objective of setting up this committee was to complement
the pace of reforms initiated in the financial sector.

The aforesaid committee submitted its report in 1994 wherein it was

recommended that the private sector be permitted to enter the Indian insurance
sector. It also recommended the participation of foreign companies by allowing
them to enter into an MOU (Memorandum of Understanding) by floating Indian
companies, preferably a joint venture with Indian partners.

Birth of IRDA

Following the recommendations of the Malhotra Committee report, the Insurance

Regulatory and Development Authority (IRDA) Act, in 1999 was passed by the
Indian Parliament.

The IRDA opened up the Indian insurance market in August 2000 by inviting
application for registration proposals. Foreign companies were allowed entry into
Indian insurance sector with an upper ceiling on ownership of up to 26%
participation. The IRDA has been granted the powers to frame regulations under
Section 114A of the Insurance Act, 1938.

From 2000 onwards, IRDA has framed various regulations for carrying on
insurance business to protection of Indian policyholders’ interests including the
registration of Life & Non-Life (General) Insurance companies.

Insurance: A blooming sector

At present there are 28 general insurance companies including the ECGC(Export

credit Guarantee corporation of India) and Agriculture Insurance Corporation of
India and 24 life insurance companies operating in the country.

The insurance sector is a massive one and is thriving at a speedy rate of 15-20%.
Together with banking services, insurance services add about 7% to the country’s
GDP. A well-developed and evolved insurance sector is a boon for economic
development as it provides long- term funds for infrastructure development at
the same time strengthening the risk taking ability of the country.
Insurance Nationalization

The Government of India issued an Order on 19 January 1956 nationalising the

Life Insurance sector and Life Insurance Corporation came into existence in the
same year. The Life Insurance Corporation (LIC) absorbed 154 Indian, 16 non-
Indian insurers and also 75 provident societies 245 Indian and foreign insurers in
all. In 1972 with the General Insurance Business (Nationalisation) Act was passed
by the Indian Parliament, and consequently, General Insurance business was
nationalized with effect from 1 January 1973. 107 insurers were amalgamated
and grouped into four companies, namely National Insurance Company Ltd., the
New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the
United India Insurance Company Ltd. The General Insurance Corporation of India
was incorporated as a company in 1971 and it commenced business on 1 January
1973.

The LIC had monopoly till the late 90s when the Insurance sector was reopened to
the private sector. But now there are 23 private life insurance companies in India.
Before that, the industry consisted of only two state insurers: Life Insurers (Life
Insurance Corporation of India, LIC) and General Insurers (General Insurance
Corporation of India, GIC). GIC had four subsidiary companies. With effect from
December 2000, these subsidiaries have been de-linked from the parent company
and were set up as independent insurance companies: Oriental Insurance
Company Limited, New India Assurance Company Limited, National Insurance
Company Limited and United India Insurance Company.

The nationalisation of life insurance is an important step in our march towards a

socialist society. Its objective will be to serve the individual as well as the state.
We require life insurance to spread rapidly all over the country and to bring a
measure of security to our people.: Jawaharlal Nehru

The first step towards nationalisation of life insurance was taken on 19 January
1956 by the promulgation of the Life Insurance (Emergency Provisions)
Ordinance, 1956. In terms of this Ordinance, the management of the ‘controlled
businesses of insurers were vested in the central government. The period
between 19 January 1956 and 31 August 1956 was utilised as a period of
preparation to facilitate the subsequent integration of the various insurers into a
single State-owned  Corporation.

Before nationalisation, the insurance industry was organised into 243

autonomous units, each with its own separate administrative structure of office
and field staff, its own separate set of agents and of medical examiners. Their
offices concentrated in the large cities and their field of operation was confined to
the major urban areas. Out of 145 Indian insurance companies, as many as 103
had their head offices in the four cities of Bombay, Calcutta, Delhi and Madras.

When the Corporation was constituted on 1 September 1956, it integrated into

one organisation, the controlled business of 243 different units, Indian and
foreign, which were engaged in the transaction of life insurance business in India.

The total assets of the above 243 units as on 31 August 1956 were about Rs 4,110
million and the total number of policies in force was over five million assuring a
total sum of more than Rs 12,500 million. The total number of salaried employees
was nearly 27,000. These figures give a broad idea of the magnitude of the
problem involved in setting up an integrated structure.

When parliament set up LIC as a monopolistic public undertaking, it was argued

and believed that elimination of competition and the malpractice that
competition has given rise to, would lead to:

a) Better and more economical management of the Business of life insurance.

b) Reduction in administrative expenses.

c) Improvement in the quality of service.

d) Increase in volume of business.

e) Maximisation of social advantages that insurance can provide through higher

returns on investments of life fund, consistent with safety and liquidity of the
invested funds.

The Corporation had an Executive Committee consisting of the Chairman, two

Managing Directors and two other Members of the Corporation. There was also
an Investment Committee consisting of the Chairman, a Functional Director, and
five other persons, to advise the corporation in matters referred to it relating to
the investment of its funds.

By the end of 1955, life insurance touched only a frontier of the urban population.
The immense benefits of modern concepts of life insurance remained largely
unknown to the large sections of the people and thus the country did not derive
full benefit from the system. The shortcomings noticed in the insurance business
were due to the immoral business practices of some insurance business
entrepreneurs. Also, a large number of foreign insurers charged a much higher
premium compared to the Indian insurers, thus catering to only the higher
income groups. It is believed that insurance is a type of business that must never
to fail if it is properly run. But it was found that during the decade 1945-1955, as
many as 25 life insurance companies went into liquidation and another 25 had so
gamble away their resources that their business had to be transferred to other
companies at a loss to the policyholders’ savings. Hence, effective mobilisation of
people’s savings was given as one of the major reasons for nationalisation as a
nation’s savings are the prime mover of its economic development.

General Insurance business Act, 1972

The business of general insurance was nationalised through The General

Insurance (Emergency) Provisions Law circulated on 13 May 1971 and thereby the
business being carried on by 107 entities was consolidated and restructured into
four companies namely The New India Assurance Company Limited, Bombay,
United India Fire & General Insurance Company Limited, Madras, Oriental Fire &
General Insurance Company Limited, Bombay and National Insurance Company
Limited, Calcutta (New India Assurance Co. Ltd., United India Insurance Co. Ltd.,
The Oriental Insurance Co. Ltd., and National Insurance Company Co. Ltd.
respectively).

The General Insurance Business (Nationalisation) Act, 1972 (GIBNA) that followed
smooth the way for the Government to take over ownership of these businesses.
Accordingly, GIC was incorporated on 22 November 1972 as a private company
under Companies Act, 1956[4] in Bombay and received its Certificate for
Commencement of Business on 1 January 1973.
GIC’s stated role was to function as the holding company of the four companies,
and superintend, control and carry on the business of General insurance on behalf
of the Government of India.

The first Chairman of GIC was A Rajagopalan, an Actuary and an officer of the
Indian Administrative Service (IAS). M K Venkateshan and S K Desai were
appointed the two Managing Directors of GIC.

On 1 January 1973, GIC was notified as the reinsurer under Section 101 A of
Insurance Act, 1938,[5] making it the Indian reinsurer for receiving obligatory
cessions, a role hitherto played by two companies called India Reinsurance
Corporation Limited (India Re) and Indian Guarantee and General Insurance
Company Limited (Indian Guarantee).

GIC was reborn as a pure reinsurance company in November, 2000. It was re-
notified as ‘Indian reinsurer’ under Insurance Act, 1938 and continued to receive
obligatory cessions from direct insurers. It continued writing foreign inward
reinsurance business purely on its own account from 1 April 2002.

With effect from 21 March 2003, the four subsidiaries were delinked from GIC by
an administrative order from the Ministry of Finance and became directly owned
by the Government.

An Act to provide for the acquisition and transfer of shares of Indian insurance
companies and undertakings of other existing insurers in order to serve better the
needs of the economy by securing the development of general insurance business
in the best interests of the community and to ensure that the operation of the
economic system does not result in the concentration of wealth to the common
detriment, for the regulation and control of such business and for matters
connected therewith or incidental thereto.

Effect of transfer of undertakings.

(1) The undertaking of every such existing insurer as is referred to in section 5

shall be deemed to include all assets, rights, powers, authorities and privileges
and all property, movable and immovable, cash balances, reserve funds,
investments and all other rights and interests in, or arising out of, such property
as were immediately before the appointed day in the ownership, possession,
power or control of such existing insurer in relation to the undertaking, whether
within or without India, and all books of accounts, registers, records and all other
documents of whatever nature relating thereto, and shall also be deemed to
include all borrowings, liabilities and obligations of whatever kind then subsisting
of the existing insurer in relation to the undertaking.

(2) Unless otherwise expressly provided by this Act, all deeds, bonds, agreements,
powers of attorney, grants of legal representation and other instruments of
whatever nature subsisting or having effect immediately before the appointed
day and to which any such insurer as is referred to in section 5 is a party or which
are in favour of such existing insurer shall be of as full force and effect against or
in favour of the Indian insurance company in which the undertaking or the part to
which the instrument relates has vested and may be enforced or acted upon as
fully and effectually as if, in the place of the existing insurer referred to in section
5, the Indian insurance company in which the undertaking or any part thereof has
vested had been a party thereto, or as if they had been issued in its favour.

(3) If, on the appointed day, any suit, appeal or other proceeding of whatever
nature in relation to any business of the undertaking which has been transferred
under section 5 is pending by or against any such existing insurer as is referred to
in that section, the same shall not abate, be discontinued or be in any way
prejudicially affected.

The objectives of this Code will be pursued having regard to the law, and
acknowledging that a contract of insurance is a contract based on the utmost
good faith.

Assignment

A policy of insurance is a contract of a personal nature and hence cannot be

transferred by the insured without the consent of the insurer. In the case of life
and personal accident insurances, the subject matter of the insurance is a life and
is not agreeable to transfer. An assignment of the policy in such cases is just an
assignment of the right to receive the proceeds of the policy.

The Insurance Act lays down the mode of assignment and transfer of a life
insurance policy. An assignment or transfer may be made only on satisfaction of
the following conditions:
(i) An endorsement (authorization) upon the policy itself or by a separate
instrument;

(ii) The endorsement or instrument should be signed by the transferor or his

agent and should be attested by at least one witness;

(iii) It should specifically set forth the fact of transfer or assignment.

Nomination

A policy holder of a life insurance policy on his own life has the right, either while
effecting the policy or before it matures, to nominate a person to whom the
money secured by the policy should be paid in the event of the death of the policy
holder. An insurer is not bound by such nomination unless it is brought to his
notice, endorsed on the policy and registered in the records of the policy. It is
pertinent to note that a transfer of assignment of a policy automatically leads to
cancellation of a nomination. Additionally, these provisions relating to nomination
under the Insurance Act 16 do not apply to any policies under the Married
Women’s Property Act, 1874.

Tax implications

Insurance companies and insurance agents, in India, are subject to tax for the
premiums and the commissions received by them respectively, under the Indian
Income Tax Act, 1963 (“Income Tax Act”).

The Income Tax Act deals with the computation of the income of the following
insurance companies:

 Companies carrying on life insurance business which are resident in India;

 Companies carrying on any other kind of insurance business, which are
resident in India; and
 Non-resident persons carrying on the business of insurance in India through
a branch.

Taxation on Insurance Business

The Income Tax Act provides that the income tax payable on the profits and gains
arising from the life insurance business will be calculated at the rate of 12.5% of
such profits and gains. An insurance company is required to deposit an amount
equal to one-third of the tax, in a Social Security Fund as notified by the Central
Government. Further, the insurance company is required to deposit an amount of
not less than 2.5% of the profits and gains of the insurance business in such a
Security Fund. Where the insurance company has deposited such an amount, the
income tax payable by the insurance company will be reduced by that amount
and the amount to be deposited in the Security Fund would also be calculated on
the income tax so reduced.

Insurance Regulatory and Development Authority of India

The Insurance Regulatory and Development Authority of India (IRDAI) is an

autonomous, statutory body tasked with regulating and promoting the insurance
and re-insurance industries in India. It was constituted by the Insurance
Regulatory and Development Authority Act, 1999, an Act of Parliament passed by
the Government of India. The agency’s headquarters are in Hyderabad,
Telangana, where it moved from Delhi in 2001.

IRDAI is a 10-member body including the chairman, five full-time and four part-
time members appointed by the government of India.

In India insurance was mentioned in the writings of Manu (Manusmrithi),

Yagnavalkya (Dharmasastra) and Kautilya (Arthashastra), which examined the
pooling of resources for redistribution after fire, floods, epidemics and famine.
The life-insurance business began in 1818 with the establishment of the Oriental
Life Insurance Company in Calcutta; the company failed in 1834. In 1829, Madras
Equitable began conducting life-insurance business in the Madras Presidency. The
British Insurance Act was enacted in 1870, and Bombay Mutual (1871), Oriental
(1874) and Empire of India (1897) were founded in the Bombay Presidency. The
era was dominated by British companies.

In 1914, the government of India began publishing insurance-company returns.

The Indian Life Assurance Companies Act, 1912 was the first statute regulating life
insurance. In 1928 the Indian Insurance Companies Act was enacted to enable the
government to collect statistical information about life- and non-life-insurance
business conducted in India by Indian and foreign insurers, including provident
insurance societies. In 1938 the legislation was consolidated and amended by the
Insurance Act, 1938, with comprehensive provisions to control the activities of
insurers.

The Insurance Amendment Act of 1950 abolished principal agencies, but the level
of competition was high and there were allegations of unfair trade practices. The
Government of India decided to nationalise the insurance industry.

An ordinance was issued on 19 January 1956, nationalising the life-insurance

sector, and the Life Insurance Corporation was established that year. The LIC
absorbed 154 Indian and 16 non-Indian insurers and 75 provident societies. The
LIC had a monopoly until the late 1990s, when the insurance industry was
reopened to the private sector.

General insurance in India began during the Industrial Revolution in the West and
the growth of sea-faring commerce during the 17th century. It arrived as a legacy
of British occupation, with its roots in the 1850 establishment of the Triton
Insurance Company in Calcutta. In 1907 the Indian Mercantile Insurance was
established, the first company to underwrite all classes of general insurance. In
1957 the General Insurance Council (a wing of the Insurance Association of India)
was formed, framing a code of conduct for fairness and sound business practice.

Eleven years later, the Insurance Act was amended to regulate investments and
set minimum solvency margins and the Tariff Advisory Committee was
established. In 1972, with the passage of the General Insurance Business
(Nationalisation) Act, the insurance industry was nationalized on 1 January 1973.
One hundred seven insurers were amalgamated and grouped into four
companies: National Insurance Company, New India Assurance Company, Oriental
Insurance Company and United India Insurance Company. The General Insurance
Corporation of India was incorporated in 1971, effective on 1 January 1973.

The re-opening of the insurance sector began during the early 1990s. In 1993, the
government set up a committee chaired by former Reserve Bank of India
governor R. N. Malhotra to propose recommendations for insurance reform
complementing those initiated in the financial sector. The committee submitted
its report in 1994, recommending that the private sector be permitted to enter
the insurance industry. Foreign companies should enter by floating Indian
companies, preferably as joint ventures with Indian partners.

Following the recommendations of the Malhotra Committee, in 1999 the

Insurance Regulatory and Development Authority (IRDA) was constituted to
regulate and develop the insurance industry and was incorporated in April 2000.
Objectives of the IRDA include promoting competition to enhance customer
satisfaction with increased consumer choice and lower premiums while ensuring
the financial security of the insurance market.

The IRDA opened up the market in August 2000 with an invitation for registration
applications; foreign companies were allowed ownership up to 26 percent. The
authority, with the power to frame regulations under Section 114A of the
Insurance Act, 1938, has framed regulations ranging from company registrations
to the protection of policyholder interests since 2000.

In December 2000, the subsidiaries of the General Insurance Corporation of India

were restructured as independent companies and the GIC was converted into a
national re-insurer. Parliament passed a bill de-linking the four subsidiaries from
the GIC in July 2002. There are 28 general insurance companies, including the
Export Credit Guarantee Corporation of India and the Agriculture Insurance
Corporation of India, and 24 life-insurance companies operating in the country.
With banking services, insurance services add about seven percent to India’s GDP.

In 2013 the IRDAI attempted to raise the foreign direct investment (FDI) limit in
the insurance sector to 49 percent from its current 26 percent. The FDI limit in the
insurance sector was raised to 100 percent according to the budget 2019.

Objectives of IRDA

 To promote the interest and rights of policy holders.

 To promote and ensure the growth of Insurance Industry.
 To ensure speedy settlement of genuine claims and to prevent frauds and
malpractices
 To bring transparency and orderly conduct of in financial markets dealing
with insurance.

Functions and Duties of IRDA

The functions of the IRDAI are defined in Section 14 of the IRDAI Act, 1999, and
include:

 Issuing, renewing, modifying, withdrawing, suspending or cancelling

registrations
 Protecting policyholder interests
 Specifying qualifications, the code of conduct and training for
intermediaries and agents
 Specifying the code of conduct for surveyors and loss assessors
 Promoting efficiency in the conduct of insurance businesses
 Promoting and regulating professional organizations connected with the
insurance and re-insurance industry
 Levying fees and other charges
 Inspecting and investigating insurers, intermediaries and other relevant
organizations
 Regulating rates, advantages, terms and conditions which may be offered
by insurers not covered by the Tariff Advisory Committee under section
64U of the Insurance Act, 1938 (4 of 1938)
 Specifying how records should be kept
 Regulating company investment of funds
 Regulating a margin of solvency
 Resolving disputes between insurers and intermediaries or insurance
intermediaries
 Supervising the Tariff Advisory Committee
 Specifying the percentage of premium income to finance schemes for
promoting and regulating professional organizations
 Specifying the percentage of life- and general-insurance business
undertaken in the rural or social sector
 Specifying the form and the manner in which books of accounts shall be
maintained, and statement of accounts shall be rendered by insurers and
other insurer intermediaries.
Insurance Web Aggregators

Definitions:

 “Act” means the Insurance Act, 1938 (4 of 1938), as amended from time to
time.
 “Agreement” for the purpose of these regulations means an agreement
entered into between a web aggregator and an Insurer;
 “Authority” means the Insurance Regulatory and Development Authority
established under the provisions of Section 3 of the Insurance Regulatory
and Development Authority Act, 1999 (41 of 1999);
 “Distance Marketing” for the purpose of these regulations refers to the
process of solicitation or sale of insurance products or services where the
consumer is physically not present at the point of solicitation or sale or the
conclusion of the sale, and the process is accomplished through telephone
or Short Messaging Service (SMS) or e-mail or Internet or web services;
 “Lead” for the purpose of these regulations means information pertaining
to a person who has accessed the website of a web aggregator and has
submitted contact information of any kind, for obtaining information on
prices or features/benefits of insurance products;
 “Lead Generation” for the purpose of these Regulations, is the process of
collecting the details of the prospects to ascertain their intention to
purchase insurance, before proceeding with solicitation of insurance
products;
 “Lead Management System” (LMS) for the purpose of these Regulations
refers to the Software implemented by the Web Aggregator for recording,
filtering, validating, grading, distribution, follow up and closure of leads
from the enquiries received on the website of the Web Aggregator;
 “Outsourcing”: for the purpose of these Regulations means activities which
can be carried out by the Web Aggregators to the extent as specified by the
Authority.
 “Person” means
 A company formed under the Companies Act, 1956 (1 of 1956); or
 A limited liability partnership formed under the Limited Liability Partnership
Act, 2008 (6 of 2009) with no partner being a non-resident entity/person
resident outside India as defined in clause (w) of section 2 of the Foreign
 Exchange Management Act, 1999 (42 of 1999) FEMA, and not being a
foreign limited liability partnership registered there under; or
 Any other person recognized by the Authority to act as a Web Aggregator;

j. “Principal Officer” means

 A director / partner, who is responsible for the activities of the Web

Aggregator in the case of a body corporate; or
 The chief executive officer appointed exclusively to carry out the functions
of a Web Aggregator;
 “Solicitation” for the purpose of these Regulations is defined as the
approach of a Prospect by an insurer or an intermediary with a view to
convince the Prospect to purchase an insurance policy;
 “Tele caller” for the purpose of these Regulations is a person engaged by a
Telemarketer for carrying out the Telemarketing and Distance Marketing
related work;
 “Telemarketer” for the purpose of these Regulations, is an entity registered
with Telecom Regulatory Authority of India under Chapter III of The
Telecom Commercial Communications Customer Preference Regulations,
2010 (as amended from time to time);
 “Web Aggregator” for the purpose of these regulations is a person licensed
by the Authority under these Regulations;
 “Website” is a set of related web pages served from a single web domain. A
website is hosted on at least one web server, accessible via a network such
as the Internet or a private local area network through an Internet address
known as a Uniform resource locator. The word ―website‖ includes a web
portal and/or a mobile site for the purpose of these regulations;
 “Designated Website” for the purpose of these regulations is a website(s)
with domain name(s) registered, owned by and used exclusively for the
functions of the Web Aggregator;
 Words and expressions used and not defined in these Regulations but
defined in the Insurance Act, 1938 (4 of 1938), the Insurance Regulatory
and Development Authority Act, 1999 or in any of the Regulations made
there under shall have the meanings respectively assigned to them in those
Acts or Regulations.

Eligibility criteria for License of the Web Aggregator:

 1. For the grant of License / Renewal of license of the web aggregator, the
applicant shall ensure the fulfilment of the conditions including but not
limited to the following:
2. The applicant is a person as defined under regulation 1 (i).
3. The Memorandum of Association of the company or such other documents
of applicants shall have the business of web aggregation of Insurance
Products only as its main object.
4. The applicant is not engaged in any other business other than the main
object (Web Aggregation of Insurance Products) of the applicant;
5. The applicant shall not be licensed / registered as an insurance agent,
corporate agent, micro-insurance agent, TPA, surveyor, Loss assessor or any
other Insurance Intermediary under the relevant Regulations framed by the
Authority.
6. The applicant shall not have a referral arrangement with an Insurer.

The applicant shall not be a related party of an insurer, insurance broker,

corporate agent, micro-insurance agent, TPA, Surveyor or a loss assessor or other
insurance intermediary at any time.

1. The Principal Officer shall possess the required qualification as specified by

the regulator
2. The Principal Officer of the Web Aggregator should have undergone 50
hours of training initially and 25 hours of renewal training at the end of
every three years thereafter.
3. The Principal Officer / Directors / Promoter(s) / Shareholders / Partners /
Key Management Personnel should fulfil the conditions in the FIT and
PROPER criteria notified by the authority from time to time.
4. The web aggregator should not have violated the obligations and the code
of conduct as specified by the regulator.
5. The Authority is of the opinion that the grant of license will be in the
interest of policyholders.

Application seeking Grant of License.

1. An applicant, seeking grant of License as Web Aggregator shall make an

application to the Authority in the specified application Form.
 2. The application shall be accompanied by a non-refundable fee of rupees
ten thousand paid by way of a bank draft drawn in favour of ‗Insurance
Regulatory and Development Authority‘ payable at Hyderabad.
3. Applicants seeking permission for Outsourcing and Telemarketing
functions/facility shall mention the same specifically in the application
Form.
4. The applicant seeking grant of license as Web Aggregator shall fulfil all the
eligibility conditions as specified under the relevant sections of these
regulations and fulfil the conditions mentioned in these Regulations.
5. The application for grant of license as Web Aggregator shall be dealt by the
authority as per the applicable provisions and under these Regulations.
6. On the applicant fulfilling all the eligibility criteria and requirements
mentioned in these Regulations; the authority shall grant License to the
applicant to function as a Web aggregator
7. A license once issued shall be valid for a period of three years from the date
of its issue, unless the same is suspended or cancelled pursuant to these
Regulations.
8. An application, which is not complete in all respects, shall be liable to be
rejected.
9. Application seeking Renewal of License:
10.Web Aggregators interested in continuing in the business shall apply with
the Authority for renewal of the License at least THIRTY DAYS before expiry
of the previous License. The application for renewal of license should be
accompanied by a fee of rupees ten thousand Applicants seeking
permission for Outsourcing and Telemarketing functions / facility shall
mention the same specifically in the application Form.
11.No Web Aggregator shall be allowed to carry out the functions of the Web
Aggregator, after expiry of the license.

The application for renewal of license as Web Aggregator shall be dealt with by
the authority as per the applicable provisions and under these Regulations.

1. A Web Aggregator, before seeking a renewal of license, shall ensure that

their Principal Officer has received at least twenty-five hours of theoretical
and practical training from an institution recognized by the Authority from
time to time.
 2. The Authority, on being satisfied that the applicant fulfils all the conditions
specified for renewal of a license, shall renew the license for a period of
three years and send intimation to that effect to the applicant.
3. Wherever it is found that the Web Aggregator is not doing any amount of
business during the entire/part of the previous licensed period, the
Authority may refuse to renew the license.
4. Employees of the Web Aggregator:
5. The employees of the Web Aggregator involved in insurance solicitation
and verification should have completed the fifty hours of theoretical and
practical training on insurance from an institution recognized by the
Authority from time to time and passed an examination, at the end of the
period of training mentioned above, conducted by the National Insurance
Academy, Pune or any other examining body recognized by the Authority.
6. Tele-callers deployed by Web Aggregators to solicit business should be
employees on the rolls of the Web aggregator and should have undergone
training as prescribed by Authority.
7. Web Aggregators shall be responsible for all acts of commission and
omission of the employees deployed on their behalf.

Capital requirements

1956. The capital of the web aggregator shall be issued and subscribed in
the form of Equity Shares where the web aggregator is a company
registered under Companies Act, 1956.
1957. The web aggregator shall have a net worth not less than Rupees ten
lakh at all times.
1958. The Web Aggregator shall submit to the Authority a net worth
certificate duly certified by a Chartered Accountant every year after
finalisation of books of accounts.

Duties and Functions of web Aggregators.

1. a) The Web Aggregator shall

2. Display Information pertaining to the Insurers who have signed agreement
with the Web Aggregators.
3. Carryout the activities for the purpose of Lead Generation for insurers.
4.  Ensure that the information systems, (both hardware and software)
including the aggregation website(s) / portals, Lead Management System
 and the Data Centers hosting the website(s) / Portal(s) / Lead Management
System are in compliance with the generally accepted information security
standards and procedures in force in India from time to time.
5. Ensure that the leads and other data is transmitted to the insurers and
others using secured layer data encryption technologies like 128 bit
encryption.
6. Use only RBI licensed payment gateways for collection and transfer of
premium to insurers when the web aggregator is authorized by the insurer
to collect the premium on behalf of the insurer.
7. Ensure to get the information systems (both hardware and software)
including the aggregation website(s) / portals, Lead Management System
and the Data Centers hosting the website(s) / Portal(s) / Lead Management
System Audited by CERT-In empanelled Information Security Auditing
organisations once in a financial year and submit a copy of the Audit
Certificate/Report to IRDA and the insurers with whom the web aggregator
has entered into an agreement, within 15 days from the date of receipt of
the same.

b) The Web Aggregators shall not:

1. Display any information pertaining to products or services of other financial

institutions / FMCG or any product or service on the website
2. Display advertising of any sort, either pertaining to any product or service
including insurance product or service, other financial products or service /
or any other product or service in the Web Aggregators Website.
3. Operate multiple websites or tie up with other
approved/unapproved/unlicensed entities/websites for lead generation /
comparison of product etc. subject to few exceptions.
4. Operate the websites of other Financial / Commercial / marketing or sales
or service entities or use other Social Media sites etc. for comparison of
products etc.
5. Operate in any other manner for the purpose of transmitting leads to any
entity engaged in insurance business except these following regulations.

Nomenclature of Web Aggregators

i) All Web Aggregators shall have the word `Insurance Web Aggregator‘ or
Insurance Web Aggregators` in the name of the Insurance Broking Company to
reflect its line of activity and to enable the public to differentiate IRDA licensed
insurance Web Aggregator from other non-licensed insurance related entities.
The application of the new applicant companies making an application to seek the
license to act as web aggregator shall not be considered in the absence of the
compliance of the nomenclature requirement.

ii) Every licensed insurance Web Aggregator shall display in all its
correspondences with all stakeholders its name registered with the Authority,
address of the Registered and Corporate Office, IRDA license number and validity
period of the license.

iii) Insurance web aggregators are not permitted to use any other name in their
correspondence/literature/letter heads without the prior approval of the
Authority.

 Agreement of Insurer with a Web Aggregator:

 An Insurer desirous of obtaining leads from web aggregator shall enter into
an “agreement” with the web aggregator approved by the Authority which
shall necessarily include details relating to, though not limited to, the
following:

i) Time-frame and mode of transmission of leads to be shared

ii) Onus of complying with regulatory and other legal requirements on both the
parties to the agreement.

iii) Identifying the different data elements to be shared (viz., name of prospect /
client (visitor of the web site), contact details etc)

iv) The timeframe for providing the premium and feature tables of the agreed
products to the Web Aggregator after concluding the agreement and keeping
them up to date.

 The agreement between an insurer and web aggregator shall be valid for a
period of three years from its date, subject to the validity of license of web
aggregator.
 The web aggregator shall file the agreement with the Authority within
fifteen days from the date of entering the agreement.