logging in or signing up Insurance (1) samidha Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINT lite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 607 Category: Business & Fin.. License: All Rights Reserved Like it (0) Dislike it (0) Added: August 01, 2010 This Presentation is Public Favorites: 0 Presentation Description No description available. Comments Posting comment... By: cooldude1987 (7 month(s) ago) can u send this ppt urgently. Need tp present in my college pls. ishaancooldude@gmail.com Saving..... Post Reply Close Saving..... Edit Comment Close By: VIJAY24886 (8 month(s) ago) excellent Saving..... Post Reply Close Saving..... Edit Comment Close By: AMITAG86 (20 month(s) ago) hello ,, Friend can u please send this ppt to me by mail. As i want to use it with ur credit mentioned in the group ppt .Hope u dont mind My id is amitag86@gmail.com Saving..... Post Reply Close Saving..... Edit Comment Close By: RahulApte (20 month(s) ago) Sir, Your ppt is ecellent. I shall be happy to get the same on ryapte@shriramlife.in Thanks & regards. Rahul Apte Pune Saving..... Post Reply Close Saving..... Edit Comment Close Premium member Presentation Transcript REGULATIONS OF FINANCIAL SERVICES WITH SPECIAL EMPHASIS ON INSURANCE AND IRDA : Presented to – Prof. Godbole 1 REGULATIONS OF FINANCIAL SERVICES WITH SPECIAL EMPHASIS ON INSURANCE AND IRDA GROUP MEMBERS : GROUP MEMBERS Vaishnavi Amkar 02 Aditi Kadam 36 Avinash Mugle 57 Aditya Pimple 74 Pratik Thaker 106 2 Introduction – Financial Services : Introduction – Financial Services Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are banks, credit card companies, insurance companies, consumer finance companies, stock brokerages, investment funds and some government sponsored enterprises. Financial services includes asset management companies and liability management companies. 3 Regulators of Financial services in India : Regulators of Financial services in India Reserve Bank of India (RBI) Securities and Exchange Board of India (SEBI) Forward Markets Commission (India) (FMC) 4 Reserve Bank of India (RBI) : Reserve Bank of India (RBI) Duvvuri Subbarao was appointed the twenty-second Governor of Reserve Bank of India (RBI); his term will end in September 2011. 5 Regulations of RBI : Regulations of RBI Monetary Authority - Objectives are maintaining price stability and ensuring adequate flow of credit to productive sectors. Manager of exchange control - To facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India. Issuer of currency - The basic objectives of RBI are to issue bank notes, to maintain the currency and credit system of the country and to maintain the reserves Related functions - The RBI is also a banker to the Government and performs merchant banking function for the central and the state governments. It also acts as their banker. 6 2. Securities & Exchange Board of India (SEBI) : 2. Securities & Exchange Board of India (SEBI) SEBI is the regulator for the securities market in India. It was formed officially by the Govt of India in 1992 with SEBI Act 1992. Chaired by C B Bhave. 7 Regulations of SEBI : Regulations of SEBI SEBI has to be responsive to the needs of three groups, which constitute the market: Issuers of securities Investors market intermediaries. 8 3. Forward Market Commission (FMC) : 3. Forward Market Commission (FMC) The Forward Markets Commission (FMC) is the chief regulator of forwards and futures markets in India. As of March 2009, it regulates ` 52 Trillion worth of commodity trade in India under the chairmanship of Mr. B.C. Khatua 9 Regulations of FMC : Regulations of FMC To advise the Central Government in respect of the recognition or the withdrawal of recognition from any association or in respect of any other matter arising out of the administration of the Forward Contracts (Regulation) Act 1952. To keep forward markets under observation and to take such action in relation to them, as it may consider necessary, in exercise of the powers assigned to it by or under the Act. To make recommendations generally with a view to improving the organization and working of forward markets 10 INSURANCE : INSURANCE A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured. 11 Types of Insurance : Types of Insurance 1.LIFE INSURANCE A protection against the loss of income that would result if the insured passed away. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured. e.g. LIC Jeevan Anand, LIC Money Bank Policy e.t.c. 12 Types of Insurance : Types of Insurance 2.NON LIFE INSURANCE General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance that is not determined to be life insurance e.g. Fire Insurance, Motor Car Insurance, Health Insurance e.t.c. 13 Types of Insurance : Types of Insurance 3.REINSURANCE Reinsurance is insurance that is purchased by an insurance company (insurer) from a reinsurer as a means of risk management, to transfer risk from the insurer to the reinsurer. The reinsurer and the insurer enter into a reinsurance agreement which details the conditions upon which the reinsurer would pay the insurer's losses (in terms of excess of loss or proportional to loss). The reinsurer is paid a reinsurance premium by the insurer, and the insurer issues thousands of policies. 14 INSURANCE REGULATORY & DEVELOPMENT AUTHORITY : INSURANCE REGULATORY & DEVELOPMENT AUTHORITY Chairman: Mr. J Hari Narayan To protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto 15 Duties, Powers & Functions of IRDA : Duties, Powers & Functions of IRDA Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration; Protection of the interests of the policy holders Specifying requisite qualifications, specifying the code of conduct for surveyors and loss assessors; promoting efficiency in the conduct of insurance business and regulating professional organisations connected with the insurance and re-insurance business 16 Contd…. : Contd…. undertaking inspection, conducting enquiries and investigations including audit of the insurers, intermediaries. specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries regulating investment of funds by insurance companies regulating maintenance of margin of solvency 17 Contd…. : Contd…. Adjudication of disputes between insurers and intermediaries or insurance intermediaries Supervising the functioning of the Tariff Advisory Committee Specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f). Specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector. 18 Regulatory Framework : Regulatory Framework The main regulations that regulate the insurance business are : The Insurance Act, 1938, the Life Insurance Corporation Act, 1956 The General Insurance Business Act, 1982 The Marine Insurance Act, 1963 and the Motor Vehicles Act, 1988. The Indian Contract Act, 1872, governs most of the aspects of the insurance contract. Additionally, the Foreign Exchange Management Act, 2000, Income Tax Act, 1961, Indian Stamp Act and the Hindu and Indian Succession Act govern some aspects involved in insurance. 19 1. Deposits : 1. Deposits Every insurer should, in respect of the insurance business carried on by him in India, deposit with the Reserve Bank of India (“RBI”) for and on behalf of the Central Government of India the specified amounts, either in cash or in approved securities estimated at the market value of the securities on the day of deposit, or partly in cash and partly in approved securities In case of Life Insurance co. `100 crores In case of General Insurance co. ` 100 crores In case of reinsurance ` 200 crores 20 2. Investment : 2. Investment Every insurer is required to invest and keep invested certain amount of assets as determined under the Insurance Act. The funds of the policyholders cannot be invested (directly or indirectly) outside India. 21 Slide 22: 22 3. Valuation of assets liabilities and solvency margins : 3. Valuation of assets liabilities and solvency margins An insurer should maintain, at all times, an excess of the value of his assets over the amount of his liabilities of not less than the relevant amount specified by the regulatory authority in order to maintain the required solvency margin 23 4. Submission of Returns : 4. Submission of Returns Every insurer should submit to the Authority the returns, showing that as of 31 day of December of the preceding year - The assets held and invested Investments made out of the controlled fund All other particulars necessary to establish that the requirements of the Insurance Act have been complied with. 24 5. Actuary : 5. Actuary An insurer carrying on the business of insurance or reinsurance in India is required, under the IRDA (Appointed Actuary) Regulations, 2000, to appoint a person fulfilling the eligibility requirements, to act as an appointed actuary, after seeking the approval of the Authority in this regard. It is mandatory for an insurer carrying on the business of life insurance in India to appoint any actuary. 25 6. Insurance Advertisement : 6. Insurance Advertisement Any insurer who is coming up with new advertisement of his product needs to take prior approval of IRDA (IRDA regulation act, 2000) Advertisement should not be unfair and misleading. 26 7. Obligation to Rural and Social sector : 7. Obligation to Rural and Social sector Every insurer has to design policy taking into consideration the Rural population of India It should also give importance to factors like Income, Agriculture etc. 27 8. Assignment & Nomination : 8. Assignment & Nomination 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. 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. 28 9. Forex laws : 9. Forex laws Insurance companies that are registered with the IRDA, are permitted to issue general insurance policies denominated in foreign currency and are also permitted to receive premiums in foreign currency without the prior approval of the RBI. However, this is permitted only for certain kinds of cases such as marine insurance for vessels owned by foreign shipping companies and chartered by Indian companies, aviation insurance for aircrafts imported from outside India on lease/hire basis for the purpose of air taxi operations etc. 29 10. Tax aspects in Insurance : 10. Tax aspects in Insurance 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. 30 11. Stamp Duty : 11. Stamp Duty An insurance policy needs to be duly stamped in accordance with the stamp duty prescribed for each kind of policy under the Indian Stamp Act, 1899 (“Stamp Act”). The rates of stamp duty on insurance policies are the same throughout the territories of India. Generally, the stamp duty on a 20 life insurance policy or group insurance is borne by the person effecting the insurance. 31 RECENT REGULATORY INITIATIVES : RECENT REGULATORY INITIATIVES Distribution channel related changes: 1. IRDA has amended: to remove any scope for the involvement of unlicensed personnel/entities in the sale of insurance products. 2. IRDA has amended: to further tighten the Code of Conduct of corporate agents to ensure that the prospect does not deal with any unlicensed person. 3. The Regulations have also been amended to ensure that there is no scope for any kind of remuneration other than commission where sale has been effected. This measure will reduce the expenses of the insurer, thereby lowering premiums to be paid by the policyholder. 32 Contd… : Contd… 3. Regulations for referrals: Companies which wish to share their database of customers with insurers would need to get approval from IRDA after having conformed to the requirements as laid down in the Regulations. For instance, the referral company shall not be in any business of extending loans and advances or accepting deposits etc though there are exceptions such as for Regional Rural Banks, Co-operative banks etc. The Regulations cast obligations on the referral company as well as the insurer including submission of data as and when called for by the Authority. 33 ULIP STRUCTURE RELATED CHANGES: : ULIP STRUCTURE RELATED CHANGES: (1) Lock in period increased to five years: IRDA has increased the lock-in period for all Unit Linked Products from three years to five years, including top-up premiums, thereby making them long term financial instruments which basically provide risk protection. (2) Level Paying Premiums: Further, all regular premium /limited premium ULIPs shall have uniform/level paying premiums. Any additional payments shall be treated as single premium for the purpose of insurance cover. 34 Slide 35: (3) Even Distribution of Charges: Charges on ULIPs are mandated to be evenly distributed during the lock in period, to ensure that high front ending of expenses is eliminated. (4) Minimum Premium Paying Term Of Five Years: All limited premium unit linked insurance products, other than single premium products shall have premium paying term of at least five years. (5). Increase In Risk Component: Further, all unit linked products, other than pension and annuity products shall provide a mortality cover or a health cover thereby increasing the risk cover component in such products. 35 Slide 36: (6).MINIMUM GUARANTEED RETURN FOR PENSION PRODUCTS: As regards pension products, all ULIP pension/annuity products shall offer a minimum guaranteed return of 4.5% per annum or as specified by IRDA from time to time. This will protect the life time savings for the pensioners, from any adverse fluctuations at the time of maturity. (7) RATIONALISATION OF CAP ON CHARGES: With a view to smoothening the cap on charges, the capping been rationalized to ensure that the difference in yield is capped from the 5th year onwards. This will not only reduce the overall charges on these products, but also smoothen the charge structure for the policyholder. 36 DISCONTINUANCE OF CHARGES: : DISCONTINUANCE OF CHARGES: IRDA has also addressed the issue of discontinuance of charges for surrender of ULIPs. Regulations brought out by IRDA in this regard ensure that policyholders do not get overcharged when they wish to discontinue their policies for any emergency cash requirement. The Regulations stipulate that an insurer shall recover only the incurred acquisition costs in the event of discontinuance of policy and that these charges are not excessive. The discontinuance charges have been capped both as percentage of fund value and premium and also in absolute value. Upon discontinuance of a policy, a policyholder shall be entitled to exercise an option of either reviving the policy or completely withdrawing from the policy without any risk cover. Further, the regulations also enable IRDA to order refund of discontinuance charges in case they are found excessive on enquiry. These regulations are applicable to all new ULIP products approved by IRDA after these regulations are notified. 37 THANK YOU : 38 THANK YOU You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.
Insurance (1) samidha Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINT lite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 607 Category: Business & Fin.. License: All Rights Reserved Like it (0) Dislike it (0) Added: August 01, 2010 This Presentation is Public Favorites: 0 Presentation Description No description available. Comments Posting comment... By: cooldude1987 (7 month(s) ago) can u send this ppt urgently. Need tp present in my college pls. ishaancooldude@gmail.com Saving..... Post Reply Close Saving..... Edit Comment Close By: VIJAY24886 (8 month(s) ago) excellent Saving..... Post Reply Close Saving..... Edit Comment Close By: AMITAG86 (20 month(s) ago) hello ,, Friend can u please send this ppt to me by mail. As i want to use it with ur credit mentioned in the group ppt .Hope u dont mind My id is amitag86@gmail.com Saving..... Post Reply Close Saving..... Edit Comment Close By: RahulApte (20 month(s) ago) Sir, Your ppt is ecellent. I shall be happy to get the same on ryapte@shriramlife.in Thanks & regards. Rahul Apte Pune Saving..... Post Reply Close Saving..... Edit Comment Close Premium member Presentation Transcript REGULATIONS OF FINANCIAL SERVICES WITH SPECIAL EMPHASIS ON INSURANCE AND IRDA : Presented to – Prof. Godbole 1 REGULATIONS OF FINANCIAL SERVICES WITH SPECIAL EMPHASIS ON INSURANCE AND IRDA GROUP MEMBERS : GROUP MEMBERS Vaishnavi Amkar 02 Aditi Kadam 36 Avinash Mugle 57 Aditya Pimple 74 Pratik Thaker 106 2 Introduction – Financial Services : Introduction – Financial Services Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are banks, credit card companies, insurance companies, consumer finance companies, stock brokerages, investment funds and some government sponsored enterprises. Financial services includes asset management companies and liability management companies. 3 Regulators of Financial services in India : Regulators of Financial services in India Reserve Bank of India (RBI) Securities and Exchange Board of India (SEBI) Forward Markets Commission (India) (FMC) 4 Reserve Bank of India (RBI) : Reserve Bank of India (RBI) Duvvuri Subbarao was appointed the twenty-second Governor of Reserve Bank of India (RBI); his term will end in September 2011. 5 Regulations of RBI : Regulations of RBI Monetary Authority - Objectives are maintaining price stability and ensuring adequate flow of credit to productive sectors. Manager of exchange control - To facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India. Issuer of currency - The basic objectives of RBI are to issue bank notes, to maintain the currency and credit system of the country and to maintain the reserves Related functions - The RBI is also a banker to the Government and performs merchant banking function for the central and the state governments. It also acts as their banker. 6 2. Securities & Exchange Board of India (SEBI) : 2. Securities & Exchange Board of India (SEBI) SEBI is the regulator for the securities market in India. It was formed officially by the Govt of India in 1992 with SEBI Act 1992. Chaired by C B Bhave. 7 Regulations of SEBI : Regulations of SEBI SEBI has to be responsive to the needs of three groups, which constitute the market: Issuers of securities Investors market intermediaries. 8 3. Forward Market Commission (FMC) : 3. Forward Market Commission (FMC) The Forward Markets Commission (FMC) is the chief regulator of forwards and futures markets in India. As of March 2009, it regulates ` 52 Trillion worth of commodity trade in India under the chairmanship of Mr. B.C. Khatua 9 Regulations of FMC : Regulations of FMC To advise the Central Government in respect of the recognition or the withdrawal of recognition from any association or in respect of any other matter arising out of the administration of the Forward Contracts (Regulation) Act 1952. To keep forward markets under observation and to take such action in relation to them, as it may consider necessary, in exercise of the powers assigned to it by or under the Act. To make recommendations generally with a view to improving the organization and working of forward markets 10 INSURANCE : INSURANCE A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured. 11 Types of Insurance : Types of Insurance 1.LIFE INSURANCE A protection against the loss of income that would result if the insured passed away. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured. e.g. LIC Jeevan Anand, LIC Money Bank Policy e.t.c. 12 Types of Insurance : Types of Insurance 2.NON LIFE INSURANCE General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance that is not determined to be life insurance e.g. Fire Insurance, Motor Car Insurance, Health Insurance e.t.c. 13 Types of Insurance : Types of Insurance 3.REINSURANCE Reinsurance is insurance that is purchased by an insurance company (insurer) from a reinsurer as a means of risk management, to transfer risk from the insurer to the reinsurer. The reinsurer and the insurer enter into a reinsurance agreement which details the conditions upon which the reinsurer would pay the insurer's losses (in terms of excess of loss or proportional to loss). The reinsurer is paid a reinsurance premium by the insurer, and the insurer issues thousands of policies. 14 INSURANCE REGULATORY & DEVELOPMENT AUTHORITY : INSURANCE REGULATORY & DEVELOPMENT AUTHORITY Chairman: Mr. J Hari Narayan To protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto 15 Duties, Powers & Functions of IRDA : Duties, Powers & Functions of IRDA Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration; Protection of the interests of the policy holders Specifying requisite qualifications, specifying the code of conduct for surveyors and loss assessors; promoting efficiency in the conduct of insurance business and regulating professional organisations connected with the insurance and re-insurance business 16 Contd…. : Contd…. undertaking inspection, conducting enquiries and investigations including audit of the insurers, intermediaries. specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries regulating investment of funds by insurance companies regulating maintenance of margin of solvency 17 Contd…. : Contd…. Adjudication of disputes between insurers and intermediaries or insurance intermediaries Supervising the functioning of the Tariff Advisory Committee Specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f). Specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector. 18 Regulatory Framework : Regulatory Framework The main regulations that regulate the insurance business are : The Insurance Act, 1938, the Life Insurance Corporation Act, 1956 The General Insurance Business Act, 1982 The Marine Insurance Act, 1963 and the Motor Vehicles Act, 1988. The Indian Contract Act, 1872, governs most of the aspects of the insurance contract. Additionally, the Foreign Exchange Management Act, 2000, Income Tax Act, 1961, Indian Stamp Act and the Hindu and Indian Succession Act govern some aspects involved in insurance. 19 1. Deposits : 1. Deposits Every insurer should, in respect of the insurance business carried on by him in India, deposit with the Reserve Bank of India (“RBI”) for and on behalf of the Central Government of India the specified amounts, either in cash or in approved securities estimated at the market value of the securities on the day of deposit, or partly in cash and partly in approved securities In case of Life Insurance co. `100 crores In case of General Insurance co. ` 100 crores In case of reinsurance ` 200 crores 20 2. Investment : 2. Investment Every insurer is required to invest and keep invested certain amount of assets as determined under the Insurance Act. The funds of the policyholders cannot be invested (directly or indirectly) outside India. 21 Slide 22: 22 3. Valuation of assets liabilities and solvency margins : 3. Valuation of assets liabilities and solvency margins An insurer should maintain, at all times, an excess of the value of his assets over the amount of his liabilities of not less than the relevant amount specified by the regulatory authority in order to maintain the required solvency margin 23 4. Submission of Returns : 4. Submission of Returns Every insurer should submit to the Authority the returns, showing that as of 31 day of December of the preceding year - The assets held and invested Investments made out of the controlled fund All other particulars necessary to establish that the requirements of the Insurance Act have been complied with. 24 5. Actuary : 5. Actuary An insurer carrying on the business of insurance or reinsurance in India is required, under the IRDA (Appointed Actuary) Regulations, 2000, to appoint a person fulfilling the eligibility requirements, to act as an appointed actuary, after seeking the approval of the Authority in this regard. It is mandatory for an insurer carrying on the business of life insurance in India to appoint any actuary. 25 6. Insurance Advertisement : 6. Insurance Advertisement Any insurer who is coming up with new advertisement of his product needs to take prior approval of IRDA (IRDA regulation act, 2000) Advertisement should not be unfair and misleading. 26 7. Obligation to Rural and Social sector : 7. Obligation to Rural and Social sector Every insurer has to design policy taking into consideration the Rural population of India It should also give importance to factors like Income, Agriculture etc. 27 8. Assignment & Nomination : 8. Assignment & Nomination 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. 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. 28 9. Forex laws : 9. Forex laws Insurance companies that are registered with the IRDA, are permitted to issue general insurance policies denominated in foreign currency and are also permitted to receive premiums in foreign currency without the prior approval of the RBI. However, this is permitted only for certain kinds of cases such as marine insurance for vessels owned by foreign shipping companies and chartered by Indian companies, aviation insurance for aircrafts imported from outside India on lease/hire basis for the purpose of air taxi operations etc. 29 10. Tax aspects in Insurance : 10. Tax aspects in Insurance 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. 30 11. Stamp Duty : 11. Stamp Duty An insurance policy needs to be duly stamped in accordance with the stamp duty prescribed for each kind of policy under the Indian Stamp Act, 1899 (“Stamp Act”). The rates of stamp duty on insurance policies are the same throughout the territories of India. Generally, the stamp duty on a 20 life insurance policy or group insurance is borne by the person effecting the insurance. 31 RECENT REGULATORY INITIATIVES : RECENT REGULATORY INITIATIVES Distribution channel related changes: 1. IRDA has amended: to remove any scope for the involvement of unlicensed personnel/entities in the sale of insurance products. 2. IRDA has amended: to further tighten the Code of Conduct of corporate agents to ensure that the prospect does not deal with any unlicensed person. 3. The Regulations have also been amended to ensure that there is no scope for any kind of remuneration other than commission where sale has been effected. This measure will reduce the expenses of the insurer, thereby lowering premiums to be paid by the policyholder. 32 Contd… : Contd… 3. Regulations for referrals: Companies which wish to share their database of customers with insurers would need to get approval from IRDA after having conformed to the requirements as laid down in the Regulations. For instance, the referral company shall not be in any business of extending loans and advances or accepting deposits etc though there are exceptions such as for Regional Rural Banks, Co-operative banks etc. The Regulations cast obligations on the referral company as well as the insurer including submission of data as and when called for by the Authority. 33 ULIP STRUCTURE RELATED CHANGES: : ULIP STRUCTURE RELATED CHANGES: (1) Lock in period increased to five years: IRDA has increased the lock-in period for all Unit Linked Products from three years to five years, including top-up premiums, thereby making them long term financial instruments which basically provide risk protection. (2) Level Paying Premiums: Further, all regular premium /limited premium ULIPs shall have uniform/level paying premiums. Any additional payments shall be treated as single premium for the purpose of insurance cover. 34 Slide 35: (3) Even Distribution of Charges: Charges on ULIPs are mandated to be evenly distributed during the lock in period, to ensure that high front ending of expenses is eliminated. (4) Minimum Premium Paying Term Of Five Years: All limited premium unit linked insurance products, other than single premium products shall have premium paying term of at least five years. (5). Increase In Risk Component: Further, all unit linked products, other than pension and annuity products shall provide a mortality cover or a health cover thereby increasing the risk cover component in such products. 35 Slide 36: (6).MINIMUM GUARANTEED RETURN FOR PENSION PRODUCTS: As regards pension products, all ULIP pension/annuity products shall offer a minimum guaranteed return of 4.5% per annum or as specified by IRDA from time to time. This will protect the life time savings for the pensioners, from any adverse fluctuations at the time of maturity. (7) RATIONALISATION OF CAP ON CHARGES: With a view to smoothening the cap on charges, the capping been rationalized to ensure that the difference in yield is capped from the 5th year onwards. This will not only reduce the overall charges on these products, but also smoothen the charge structure for the policyholder. 36 DISCONTINUANCE OF CHARGES: : DISCONTINUANCE OF CHARGES: IRDA has also addressed the issue of discontinuance of charges for surrender of ULIPs. Regulations brought out by IRDA in this regard ensure that policyholders do not get overcharged when they wish to discontinue their policies for any emergency cash requirement. The Regulations stipulate that an insurer shall recover only the incurred acquisition costs in the event of discontinuance of policy and that these charges are not excessive. The discontinuance charges have been capped both as percentage of fund value and premium and also in absolute value. Upon discontinuance of a policy, a policyholder shall be entitled to exercise an option of either reviving the policy or completely withdrawing from the policy without any risk cover. Further, the regulations also enable IRDA to order refund of discontinuance charges in case they are found excessive on enquiry. These regulations are applicable to all new ULIP products approved by IRDA after these regulations are notified. 37 THANK YOU : 38 THANK YOU