TOOLS FOR CONTROLLING RISK

What Is Risk Management?

Risk management is the process of identifying and mitigating risk. In health insurance, risk
management can improve outcomes, decrease costs, and protect patient safety.
Why Is Risk Management Important in Healthcare?
When dealing with healthcare, risk management benefits both patient and insurer. Patients benefit
by avoiding dangerous habits, transferring the risk to the insurer, and preventing future health
problems through preventative care. Insurers benefit because people who avoid risk and take care of
their health are healthier, less costly patients.
1. Avoidance
Avoidance is a method for mitigating risk by not participating in activities that may incur injury,
sickness, or death. Smoking cigarettes is an example of one such activity because avoiding it may
lessen both health and financial risks.
2. Retention
Retention is the acknowledgment and acceptance of a risk as a given. Usually, this accepted risk is a
cost to help offset larger risks down the road, such as opting to select a lower premium health
insurance plan that carries a higher deductible rate. The initial risk is the cost of having to pay more
out-of-pocket medical expenses if health issues arise. If the issue becomes more serious or life-
threatening, then health insurance benefits are available to cover most of the costs beyond the
deductible. If the individual has no serious health issues warranting any additional medical expenses
for the year, then they avoid the out-of-pocket payments, mitigating the larger risk altogether.
3. Sharing
Sharing risk is often implemented through employer-based benefits that allow the company to pay a
portion of insurance premiums with the employee. In essence, this shares the risk with the company
and all employees participating in the insurance benefits. The understanding is that with more
participants sharing the risks, the costs of premiums should shrink proportionately. Individuals may
find it in their best interest to participate in sharing the risk by choosing employer health care and
life insurance plans when possible.
4. Transferring
The use of health insurance is an example of transferring risk because the financial risks associated
with health care are transferred from the individual to the insurer. Insurance companies assume the
financial risk in exchange for a fee known as a premium and a documented contract between the
insurer and individual. The contract states all the stipulations and conditions that must be met and
maintained for the insurer to take on the financial responsibility of covering the risk.
By accepting the terms and conditions and paying the premiums, an individual has managed to
transfer most, if not all, the risk to the insurer. The insurer carefully applies many statistics
and algorithms to accurately determine the proper premium payments commensurate to the requested
coverage. When claims are made, the insurer confirms whether the conditions are met to provide the
contractual payout for the risk outcome.
5. Loss Prevention and Reduction
This method of risk management attempts to minimize the loss, rather than completely eliminate it.
While accepting the risk, it stays focused on keeping the loss contained and preventing it from
spreading. An example of this in health insurance is preventative care.
Health insurers encourage preventative care visits, often free of co-pays, where members can receive
annual checkups and physical examinations. Insurers understand that spotting potential health issues
early on and administering preventative care can help minimize medical costs in the long run. Many
health plans also provide discounts to gyms and health clubs as another means of prevention and
reduction in order to keep members active and healthy.
FUNCTIONS OF AN INSURANCE
Definition
Insurance is a legal contract (insurance policy) made between two parties, i.e. the insurance company
(known as insurer) and the individual or group (known as insured). Both these parties enter into a
contract under which the insured pays a predetermined sum of money to the insurer (known as a
premium) with the promise that the company will compensate the insured in the event of a financial
loss (risk) due to the causes that the insurer has agreed to provide a cover for.
The basic principle behind any insurance contract is that the insured would prefer to spend small
amounts of money on a periodic basis against the possibility of incurring a huge unexpected loss. This
concept works because all the policyholders pool in their risks together, and in case there are any
losses arising due to the occurrence of the insured event, the person suffering the loss will be
compensated up to the extent agreed in the contract.
1] Provides Reliability
The main function of insurance is that eliminates the uncertainty of an unexpected and sudden financial
loss. This is one of the biggest worries of a business. Instead of this uncertainty, it provides the certainty
of regular payment i.e. the premium to be paid.
2] Protection
Insurance does not reduce the risk of loss or damage that a company may suffer. But it provides a
protection against such loss that a company may suffer. So at least the organisation does not suffer
financial losses that debilitate their daily functioning.
3] Pooling of Risk
In insurance, all the policyholders pool their risks together. They all pay their premiums and if one of
them suffers financial losses, then the payout comes from this fund. So the risk is shared between all of
them.
4] Legal Requirements
In a lot of cases getting some form of insurance is actually required by the law of the land. Like for
example when goods are in freight, or when you open a public space getting fire insurance may be a
mandatory requirement. So an insurance company will help us fulfil these requirements.
5] Capital Formation
The pooled premiums of the policyholders help create a capital for the insurance company. This capital
can then be invested in productive purposes that generate income for the company.
6. It allows the development of big businesses – Any large-sized organisation is exposed to a
greater amount of risk. If the chances of loss are relatively higher, it may prevent the
management in those organisations from taking calculated risks, which has the potential of
bringing more profits. Insurance helps to mitigate that risk in a way and encourage businesses
to take bold decisions. Insurance takes away some of the financial pressures and allows
businesses to flourish in the long run.
7. Risk Assessment – Insurance organisations play an important role in determining the actual
amount of risk from the occurrence of a particular event by assessing the situation. They
analyse all the aspects of a risk carefully to make an informed decision. It helps them to arrive
at the final insurance amount as well as fix the premium to be paid by the insured.
8. Collective Risks – Another function of an insurance contract is that it helps a number of
individuals get an insurance policy to safeguard themselves from the losses that may occur due
 to an unfortunate event. This strategy works on the principle that not all of the policyholders
for a particular risk will face it at the same time. For example, if a total of fifty thousand people
are insured against damage to their cars due to accidents, the most likely scenario is that only
a few of them would have accidents in a single year. So the amount that they can claim from
the insurance company for the financial losses due to the accidents would be adequately
covered by the insurance premiums from all fifty thousand policyholders.
ORGANIZATIONAL STRUCTURE OF IRDA
Composition of IRDA
As per Sec. 4 of IRDAI Act, 1999, the composition of the Authority is:
a) Chairman;
b) Five whole-time members;
c) Four part-time members,
(appointed by the Government of India)
Insurance
Insurance is a means to manage a contingent loss through which responsibility for a risk is transferred
to another party in exchange for payment before the loss. The cost of insurance is based upon the
insurance company's pooling of similar risks, occurrences that can be estimated using statistical
modeling (actuarial analysis). An insurance company earns revenue from premiums, as well as the
investment of those premiums in various financial instruments/markets. Insurance can be purchased
by individuals for life, health, property and liability losses. Corporations purchase insurance to cover
liability, property, business and executive health and life risks. Insurance can be purchased directly
from a company, through "captive" agents working for a single firm or through independent insurance
agents who sell products from multiple insurance providers.
Lines of Business
Lines of Business (LOB) refers to specific products and services offered by insurance companies to
both individual and commercial clients. Major LOBs typically include Commercial Insurance, Health
Insurance, Investment Management, Life Insurance, Property & Casualty Insurance, Reinsurance and
Risk Management. The insurance agents and back office staff members are responsible for pricing
these products/services, generating new business and managing policyholder relationships. LOBs are
supported by back office staff members, who work to perform non-customer-facing tasks like claims
processing, customer service support, payment collection, and policyholder onboarding.
Commercial/Institutional Lines
The Commercial/Institutional Lines Group offers property and casualty insurance products to
businesses. Commercial/Institutional Lines insurance include products such as commercial auto
insurance, workers compensation insurance, federal flood insurance and so on.
Commercial/Institutional lines protect businesses against potential losses (caused by accidents,
lawsuits, natural disasters, etc.) they could not cover on their own. Coverage availability and premium
costs vary by business type, size and location.
Health Insurance
The Health Insurance line of business offers health plan benefits to customers. While there are several
insurers that focus exclusively on health insurance, many multi-line insurers also offer health
coverage. Health insurance can be provided on an individual or group (company or family coverage)
basis and provides coverage for medicine, visits to the doctor or emergency room, hospital stays and
other medical expenses. Health insurance is often included in employer benefit packages as a means
of attracting quality employees.
Investment Management
The Investment Management line of business offers traditional retail investment products to
customers. Investment products and services typically offered by insurance firms include annuities,
universal life insurance, retirement planning and investment and college savings plans. Some
insurance companies may offer investment solutions for businesses.
Life
The Life Insurance Group provides policyholders protection against the loss of income that would
result if the insured passed away. The named beneficiary or beneficiaries then receive the proceeds
and are thereby safeguarded from the financial impact of the death of the insured. Depending on the
contract, some events such as terminal illness can trigger payment to the beneficiaries, while other
events such as claims relating to suicide, or fraud are written as exclusions so as to limit the liability
of the insurer. Life-based insurance contracts tend to fall into two major categories: protection policies
and investment policies.
Property & Casualty
The Property & Casualty (P&C) Group provides coverage that protects against property losses such
as to a home, car or other property, while also providing liability coverage to help protect
policyholders if found liable for an accident that causes injuries to another person or damage to another
person's belongings. P&C insurance can also cover the medical expenses of individuals involved in
accidents as well as restitution or repair of damaged property. P&C insurance policies can cover
several property types - aviation insurance, boiler and machinery insurance, marine insurance,
earthquake insurance, renters insurance, etc.
Reinsurance
The Reinsurance Group (usually called a reinsurer) takes on all or part of the risk covered under a
policy issued by another insurance company (usually called a cedent) in exchange for a percentage of
the premium payment. This allows cedent companies to reduce the likelihood of having to pay a large
amount of money should one or more policyholders file claims that would financially destabilize the
company (this usually occurs after a major disaster such as a hurricane or earthquake). The reinsurer
may be either a company specializing in reinsurance, or another insurance company.
Risk Management
The Insurance Risk Management function researches and analyzes potential liabilities for insurance
policies based on potential hazards and risks. Such risks can originate from the policyholders
themselves (how likely the policyholder will pay the premium and/or cause a claim to be filed), the
location of the policyholder (how likely a flood will occur in an area, for instance), how lucrative an
investment is (how likely the investment will incur a financial loss for the company) and so on. Based
on the information gathered, companies can either accept or attempt to mitigate the risk.
Back Office Operations
Insurance Back Office Operations refers to a set of essential non-customer-facing administrative and
support services. The Back Office is responsible for managing several activities such as claims
processing, policyholder service/support, premium payment collection, internal investments,
underwriting and insurance application processing. Back Office staff members support both the
insurance company's agency operation and individual lines of business such as Commercial &
Institutional Lines, Health Insurance, Investment Management, Life Insurance, Property & Casualty
Insurance, Reinsurance and Risk Management.
Claims Processing
The Claims Processing function is tasked with examining and processing insurance claims, paper
and/or electronic. Processors determine whether to return, pend, deny or pay claims within the client's
policy guidelines and determine steps necessary for adjudication. In addition, claims processing
compares claim applications and/or provider statements with policy files and other records to evaluate
completeness and validity of a claim.
Investments
Insurance company investment functions are responsible for taking profits earned from policyholder
premium payments and investing them in financial instruments such as bonds, stocks, mortgages and
real estate. In some cases, insurance investment teams may also lead mergers and acquisitions. The
management of the investment function is an important element of an insurance company's
profitability. Insurance companies face less regulation, on the securities trading front, than banking,
broker dealer and investment management companies.
New Business Processing
The New Business Processing function is responsible for 'onboarding' new insurance policyholders.
They collect the requisite information, pass that information to the appropriate underwriting and
application processing staff members (based on application type, language requirements and product
knowledge) to assess the appropriate premium and coverage levels, then communicate options and
premium/deductible structures to the prospective policyholder.
Policyholder Services
The Policyholder Services, or In-force Customer Service, function is tasked with serving as the
customer's reference point for all questions and needs concerning the policyholder's insurance policy
and its related products. This function provides personal service support to internal and external
customers for all areas within and outside the company. Additional tasks involve payment collection,
offering advice on various insurance products or services, policy renewals, and providing accurate
responses to other policyholders, providers and employee representatives as needed for issue
resolution. High quality customer service is a key differentiator in the hyper-competitive insurance
industry.
Payments & Commissions
The Payments & Commissions function is responsible for collecting customer premiums, processing
salaries and commissions and distributing any applicable benefits to insurance agents. Though
commissions are the most common form of compensation for insurance agents (amounts depend on
the type and amount of insurance sold as well as whether the transactions are new policies or
renewals), salaries are also managed and distributed.
Agency Operations
The Insurance Agency Operations function manages the firm's network of insurance agents and brick
and mortar branch offices. Agency operations managers are responsible for recruiting staff members
(sales and non-sales), ensuring that all agents have the proper licensing and training to sell products
on the firm's behalf, distributing marketing collateral, attracting and educating potential policyholders
and monitoring the performance of agency offices. As more potential customers move to the internet
and other direct channels to receive quotes and complete insurance applications, the importance of
superior customer service, policyholder retention, effecitve use of technology and
marketing/advertising reach for physical agency branch locations has taken on increased importance.
Agency Office Administration
The Agency Office Administration function manages insurance policies (whether for customers or for
company employees), dealing with the paperwork and the details of insurance contracts. Insurance
agency office administration staff act as liaisons between employees and insurance companies (i.e.,
"the home office"), conduct administrative tasks as needed, makes sure the company's insurance
certificates are in full compliance and helps the company develop policies for risk management and
loss control.
Agent Recruiting
The Agent Recruiting function attracts, screens and selects quality candidates for open insurance agent
positions within the company. This group identifies vacancies, develops position descriptions,
formulates a strategic recruitment plan (includes posting positions on social media and other
platforms, performing guest lectures at universities, attending job fairs and networking events, etc.),
reviews candidates and sends selected candidates to the HR Department for further review. Some
recruiters review applicants themselves and select individuals to be hired. Recruiters fall into two
categories: internal and external recruiters.
Agent Revenue Production (Sales)
The Agent Revenue Production (Sales) group is the main force behind insurance companies and
involves the agents themselves. Also known as the Insurance Sales Team, or "Sales Force," this group
is responsible for generating sales (involves new business, renewals and so on) for one or more
insurance companies by contacting and meeting with potential clients, providing information
concerning one or more types of insurance policies and generating accurate and timely insurance
premium quotes. Many agents spend a lot of their time marketing their services and creating their own
base of clients. Insurance agents fall under two categories: captive agents (agents who work for one
insurance company) and independent insurance agents (agents who work for insurance brokerages).
CODE OF CONDUCT
Every insurance broker shall follow recognised standards of professional conduct and discharge his
functions in the interest of the policyholders.
CONDUCT IN MATTERS RELATING TO CLIENTS RELATIONSHIP-
Every insurance broker shall:
 conduct its dealings with clients with utmost good faith and integrity at all times;
 act with care and diligence;
 ensure that the client understands his relationship with the broker and on whose behalf the
broker is acting;
 treat all information supplied by the prospective clients as completely confidential to
themselves and to the insurer(s) to which the business is being offered;
 take appropriate steps to maintain the security of confidential documents in their possession;
 hold specific authority of client to develop terms;
 understand the type of client it is dealing with and the extent of the client's awareness of risk
and insurance;
 obtain written mandate from client to represent the client to the insurer and communicate the
grant of a cover to the client after effecting insurance;
 obtain written mandate from client to represent the client to the insurer/ reinsurer; and confirm
cover to the insurer after effecting re-insurance, and submit relevant reinsurance acceptance
and placement slips;
 avoid conflict of interest.
CONDUCT IN MATTERS RELATING TO SALES PRACTICES-
Every insurance broker shall: -
 confirm that it is a member of the Insurance Brokers Association of India or such a body of
brokers as approved by the Authority which has a memorandum of understanding with the
Authority;
 confirm that he does not employ agents or canvassers to bring in business;
 identify itself and explain as soon as possible the degree of choice in the products that are on
offer;
  ensure that the client understands the type of service it can offer;
 ensure that the policy proposed is suitable to the needs of the prospective client;
 give advice only on those matters in which it is knowledgeable and seek or recommend other
specialist for advice when necessary;
 not make inaccurate or unfair criticisms of any insurer or any member of the Insurance Brokers
Association of India or member of such body of brokers as approved by the Authority;
 explain why a policy or policies are proposed and provide comparisons in terms of price, cover
or service where there is a choice of products;
 state the period of cover for which the quotation remains valid if the proposed cover is not
effected immediately;
 explain when and how the premium is payable and how such premium is to be collected, where
another party is financing all or part of the premium, full details shall be given to the client
including any obligations that the client may owe to that party; and
 explain the procedures to follow in the event of a loss.
CONDUCT IN RELATION TO FURNISHING OF INFORMATION -
Every insurance broker shall: -
 ensure that the consequences of non-disclosure and inaccuracies are pointed out to the
prospective client;
 avoid influencing the prospective client and make it clear that all the answers or statements
given are the latter's -own responsibility. Ask the client to carefully check details of information
given in the documents and request the client to make true, fair and complete disclosure where
it believes that the client has not done so and in case further disclosure is not forthcoming it
should consider declining to act further;
 explain to the client the importance of disclosing all subsequent changes that might affect the
insurance throughout the duration of the policy; and
 disclose on behalf of its client all material facts within its knowledge and give a fair
presentation of the risk.
CONDUCT IN RELATION TO EXPLANATION OF INSURANCE CONTRACT -
Every insurance broker shall:
 provide the list of insurer(s) participating under the insurance contract and advise any
subsequent changes thereafter;
  explain all the essential provisions of the cover afforded by the policy recommended by him
so that, as far as possible, the prospective client understands what is being purchased;
 quote terms exactly as provided by insurer;
 draw attention to any warranty imposed under the policy, major or unusual restrictions,
exclusions under the policy and explain how the contract may be cancelled;
 provide the client with prompt written confirmation that insurance has been effected. If the
final policy wording is not included with this confirmation, the same shall be forwarded as
soon as possible;
 notify changes to the terms and conditions of any insurance contract and give reasonable notice
before any changes take effect;
 advise its clients of any insurance proposed on their behalf which will be effected with an
insurer outside India, where permitted, and, if appropriate, of the possible risks involved; and
CONDUCT IN RELATION TO RENEWAL OF POLICIES -
Every insurance broker shall:-
 ensure that its client is aware of the expiry date of the insurance even if it chooses not to offer
further cover to the client;
 ensure that renewal notices contain a warning about the duty of disclosure including the
necessity to advise changes affecting the policy, which have occurred since the policy inception
or the last renewal date;
 ensure that renewal notices contain a requirement for keeping a record (including copies of
letters) of all information supplied to the insurer for the purpose of renewal of the contract;
 ensure that the client receives the insurer's renewal invitation well in time before the expiry
date.
CONDUCT IN RELATION TO CLAIM BY CLIENT-
Every insurance broker shall: -
 explain to its clients their obligation to notify claims promptly and to disclose all material facts
and advise subsequent developments as soon as possible;
 request the client to make true, fair and complete disclosure where it believes that the client
has not done so. If further disclosure is not forthcoming it shall consider declining to act further
for the client;
 give prompt advice to the client of any requirements concerning the claim;
  forward any information received from the client regarding a claim or an incident that may
give rise to a claim without delay, and in any event within three working days;
 advise the client without delay of the insurer's decision or otherwise of a claim; and give all
reasonable assistance to the client in pursuing his claim.
 Provided that the insurance broker shall not take up recovery assignment on a policy contract
which has not been serviced through him or should not work as a claims consultant for a policy
which has not been serviced through him.
CONDUCT IN RELATION TO RECEIPT OF COMPLAINTS -
Every insurance broker shall:-
 ensure that letters of instruction, policies and renewal documents contain details of complaints
handling procedures; accept complaints either by phone or in writing;
 acknowledge a complaint within fourteen days from the receipt of correspondence, advise the
member of staff who will be dealing with the complaint and the timetable for dealing with it;
 ensure that response letters are sent and inform the complainant of what he may do if he is
unhappy with the response; ensure that complaints are dealt with at a suitably senior level;
 have in place a system for recording and monitoring complaints.
CONDUCT IN RELATION TO DOCUMENTATION -
Every insurance broker shall:-
 ensure that any documents issued comply with all statutory or regulatory requirements from
time to time in force;
 send policy documentation without avoidable delay,
 make available, with policy documentation, advice that the documentation shall be read
carefully and retained by the client;
 not withhold documentation from its clients without their consent, unless adequate and
justifiable reasons are disclosed in writing and without delay to the client. Where
documentation is withheld, the client must still receive full details of the insurance contract;
 acknowledge receipt of all monies received in connection with an insurance policy;
 ensure that they reply is sent promptly or use its best endeavours to obtain a prompt reply to
all correspondence;
 ensure that all written terms and conditions are fair in substance and set out, clearly and in plain
language, client's rights and responsibilities; and
  subject to the payment of any monies owed to it, make available to any new insurance broker
instructed by the client all documentation to which the client is entitled and which is necessary
for the new insurance broker to act on behalf of the client.
CONDUCT IN MATTERS RELATING TO ADVERTISING -
Every insurance broker shall conform to the relevant provisions of the Insurance Regulatory and
Development Authority (Insurance Advertisements and Disclosure) Regulations, 2000, and :-

 ensure that statements made are not misleading or extravagant;

 where appropriate, distinguish between contractual benefits which the insurance policy is
bound to provide and non-contractual benefits which may be provided;
 ensure that advertisements shall not be restricted to the policies of one insurer, except where
the reasons for such restriction are fully explained with the prior approval of that insurer;
 ensure that advertisements contain nothing which is in breach of the law nor omit anything
which the law requires;
 ensure that advertisement does not encourage or condone defiance or breach of the law;
 ensure that advertisements contain nothing which is likely, in the light of generally prevailing
standards of decency and propriety, to cause grave or widespread offence or to cause
disharmony;
 ensure that advertisements are not so framed as to abuse the trust of clients or exploit their lack
of experience or knowledge;
 ensure that all descriptions, claims and comparisons, which relate to matters of objectively
ascertainable fact shall be capable of substantiation.
CONDUCT IN MATTERS RELATING RECEIPT OF REMUNERATION-
Every insurance broker shall:-
 disclose whether in addition to the remuneration prescribed under these regulations, he
proposes to charge the client, and if so in what manner;
 advise the client in writing of the insurance premium and any fees or charges separately and
the purpose of any related services;
 if requested by a client, disclose the amount of remuneration or other remuneration it receives
as a result of effecting insurance for that client. This will include any payment received as a
 result of securing on behalf of the client any service additional to the arrangement of the
contract of insurance; and
 advise its clients, prior to effecting the insurance, of their intention to make any deductions
from the amount of claim collected for a client, where this is a recognised practice for the type
of insurance concerned.
CONDUCT IN RELATION TO MATTERS RELATING TO TRAINING -
Every insurance broker shall:
 that its staff are aware of and adhere to the standards expected of them by this code;
 ensure that staff are competent, suitable and have been given adequate training;
 ensure that there is a system in place to monitor the quality of advice given by its staff;
 ensure that members of staff are aware of legal requirements including the law of agency
affecting their activities; and only handle classes of business in which they are competent;
 draw the attention of the client to Section 41 of the Act, which prohibits rebating and sharing
of commission.
COMMISSION
Definition:
The commission is the incentive that the insurance agents or the sales representative receive after
selling the insurance policy, be it life or non-life.
Description:
The commission is paid as a percentage of the premium under the insurance policies. Paying
commission is like paying rewards to the agents who made efforts to convert the sales.
The commission is paid only once a year, when the premium is paid annually.
The commission under the policy depends on two factors that include:
1. Type of the policy
2. Term of the policy
The commission is also computed based on these terms:
1. For 15 years, the maximum commission an agent gets is approximately 25%.
2. After the 4th year, the commission is cut down to 5% approximately.
Commission distribution is based on these type of the policies:

Type of Premium Payment Commission

 2%of individual life product
7.5% for individual pure risk products.
Single Premium Payment Policy 2% for immediate annuity and deferred annuity
products
5% for group-pure risk products.

40% for the first year

Pure Risk Regular Premium
10% for every renewal premium

15% for the first 5 years. Over 12 years the

Investment Based Regular commission will be 35%.
Premium Product 7.5% renewal premium per annum.
42.5% for the 12th year onwards.
Example:
Puneet is a life insurance agent who sold a regular premium term plan to Rahul. The premium under
the term plan paid by Rahul was Rs.10,000/- excluding GST. The commission for the first year earned
by Puneet will be 40% of Rs.10,000/- which will be Rs.4,000/-. The renewal commission will be 10%
issued until the policy is renewed.
ETHICAL BEHAVIOUR IN INSURANCE
Insurance Agency Code of Conduct and Ethics
As an insurance producer or agent (“Agent”) of one or more of the insurers of American Modern
Insurance Group, Inc. (“Company”), the Agent commits itself to this Code of Conduct and Ethics
(“Code of Conduct”). Moreover, by accepting these rules of the Code of Conduct, the Agent represents
that it applies the highest standards to its activities as an insurance Agent.
General
An insurance agent or producer has to fulfill an important economic task. As insurance coverage is
largely in need of explanation, insurance companies distribute their products via qualified insurance
intermediaries, known as producers or agents. They are thereby the indispensable link between the
insurer and the customer. Customer service is a demanding task: The variety of risks occurring, the
development of social security systems, the resulting variety of insurance options and insurance forms
and the need of explanation of the terms of insurance and risk/ reward potentials require a qualified
and competent insurance agent with appropriate expertise to guide a customer’s fully-informed
decision that is suited to the particular customer. It is an insurance agent’s task to consult the
prospectively insured or insured person about the coverage necessary and sufficient for him/her before
insurance coverage is bound and to properly and responsibly advise and support him/her during the
contract period. The successful execution of these tasks requires a relationship built on trust between
the insured and the insurance agent. Nevertheless, even for the most valued and trusted advisor, long-
term success is only guaranteed if the agent fulfills certain prerequisites and obligations. To fulfill
these obligations, insurance companies should work alongside their insurance agents in order to
support a proper and professional sales and consulting process. The Company is aware of its
responsibility with respect to the basic protection needs of consumers and therefore offers suitable
insurance products to meet those needs. The integrity and commitment to the principle of “honorable
business” in addition to a good level of qualification are the basis for every good business relationship.
That holds true for our relationship with our Agents as well as towards our insureds. These principles
shall apply for the Agents of the Company.
I. General Principles
1. The Agent represents a high level of qualification of the profession.
2. The Agent follows the precepts of honesty, competence, and financial care.
3. The Agent refrains from acts that are not in accordance with fair competition, including but not
limited to refraining from acts in violation of unfair competition laws, such as the Sherman Act and
the Clayton Act, Anti-Boycott laws and regulations, the Foreign Corrupt Practices Act, and the laws
and regulations administered by the Office of Foreign Assets Control.
4. Relationships with the Agent should be characterized by trust and partnership. The Agent should
respect the personal dignity, privacy, and personal rights of each individual, act openly, and be
tolerant.
5. The baseline for any action is compliance with contractual obligations and the law. Agents will
carefully and thoroughly fulfill their contractual duties and responsibilities while complying with all
laws and regulations.
6. Agents will bind this Code of Conduct upon persons acting on its behalf, including its employees.
II. Principles of Conduct Towards Policyholders
1. Compliance with the directives and legitimate interests of the insured should take precedence over
the Agent’s own personal interests. An Agent shall continuously endeavor to obtain, to earn and
maintain the trust of its customers.
2. An Agent may not represent itself to a prospectively insured or insured person as if it is an
independent or neutral consultant who has no economic interest in the purchase of the insurance
contract. An Agent who misleads a prospectively insured or insured person in this regard commits an
especially gross violation of this Code of Conduct.
3. In the course of preparing and placing the insurance contracts, the Agent is obliged to consult the
prospectively insured or insured person regarding adequate insurance, to determine the nature and
extent of covered risks and to ensure that identified needs are satisfied with the insurance coverage
under consideration.
4. Each Agent will, as far as it is part of its obligations, actively service the insured during the entire
term of the insurance contract. That means that the Agent should consult with an insured person about
changing the insurance coverage because of changed life situations (of which the Agent has become
aware). The service also includes support in the course of a loss event.
5. The conclusion of the insurance contract creates rights and obligations of the insured, the insurance
company and the Agent. It is an important task of the Agent to ensure that it has properly advised the
relevant stakeholders.
6. Insurance contracts shall be documented in writing without any other oral or written side
agreements or other unwritten terms.
7. Properly and professionally-placed insurance relates to the financial security of the insured person.
Therefore, each Agent is obliged to continuously deepen its expertise and to adapt to the ever-
changing requirements of the insurance market.
8. Possible complaints from prospectively insured persons, current policyholders, or former customers
should be promptly reported to the Company and be followed up fairly and promptly by the Agent or
by the Agent and the Company in the event that the complaint necessitates a coordinated response.
9. All information of prospective customers and policyholders shall be protected and treated
confidentially. Privacy and data protection laws and regulations shall be followed, including but not
limited to, the Health Insurance Portability and Accountability Act,
III. Principles of Conduct Toward the Company
1. The Company and the Agent respect each other’s corporate assets – in particular their respective
intellectual property, including but not limited to copyright laws, patent laws, the Lanham Act, and
trade secret laws.
2. The Agent will strongly contribute to the attainment of all objective and subjective risk assessment
information required to prevent losses for the Company, which could be caused by an incorrect risk
assessment. The Agent will – even after the conclusion of the insurance contract – provide Company
with any and all information available to enable a continuous evaluation of the insurance relationship.
3. Any received insurance premium will be administered properly and will be transferred to the
Company according to the contractual requirements.
4. Agreements between the Company and Agent shall be documented in writing without any other
oral or written side agreements or other unwritten terms.
5. In case of a loss event, the Agent will forward any and all information necessary or required by the
Company to clarify the circumstances. The Agent may not conceal any circumstances, which have
come to its attention and could affect the Company’s liability (or other obligation to pay). Agent may
never take any action or fail to act, if that conduct could result in an unjustified payment.
6. The Company and the Agent subsist on the trust from their customers, employees, shareholders and
the public. The Agent respects the legitimate rights of third parties and refrains from actions or
behavior which could possibly result in reputational harm to the Company or its Agents in public. The
interests of the parent company and affiliates of the Company will also be taken into consideration.
7. If an Agent has a reasonable suspicion that the Company has been used for economic crime, money
laundering, or other unlawful purposes, the Agent will inform the Company as soon as practicable
under the circumstances.
IV. Principles of Conduct Towards Colleagues
1. The relationship between the Agents of all Company distribution channels, but also to the
colleagues from other insurance companies, is based on solidarity and mutual respect. The
disparagement of colleagues or competitors or belittling of another insurance company in competition
is incompatible with the principles of honorable business.
2. Compliance with the principles of fair competition is an essential duty of all Agents. Fair
competition is promoted by competition based on merits, good commercial practices, and efforts to
prevent complaints and grievances.
3. Each Agent commits to the directives and submits to the authority of the government agency,
regulatory authority, or supervisory authority in the jurisdiction in which it resides or does business
as an insurance agent, as well as their respective officers, auditors, and investigators.
V. Violation of These Principles
1. Violations of the Code of Conduct can harm the Company, its Agents, and/or policyholders and
can lead to fines, sanctions, and other exposures.
2. The Agent should approach its contact or representative at the Company with issues related to the
Code of Conduct, but should also approach the Company’s person or organizational unit responsible
for compliance tasks regarding the Company’s distribution channels and sales support units
(“Compliance”).
3. If an Agent becomes aware of a violation of law or a significant breach of this Code of Conduct,
especially in cases of fraud, corruption, or comparably conduct, which could trigger criminal or civil
penalties, the Agent should inform its representative at the Company or Compliance.
4. Approaching or cooperating with government agencies, regulatory authorities, or supervisory
authorities by the Agents remains unaffected.
INSURANCE GRIEVANCE REDRESSAL MECHANISM
Wondering, what the insurance IRDA grievance redressal mechanism is? Having a complaint or a
grievance with the insurance company or an insurance intermediary is not uncommon. Various
policyholders feel that they have been cheated with respect to their insurance policy. They either feel
that the agent sold them a wrong policy or that the insurance company did not fulfil its end of the
bargain. What is to be done in the event of any complaint? Does the policyholder have any room for
redressal of his / her grievances?
Actually, the policyholder does. The Insurance Regulatory and Development Authority (IRDA) has
made sure that there is a grievance redressal insurance process for the aggrieved policyholders. It is
known as the Protection of Policy Holders Rights. This process starts with the insurance company and
escalates up to the consumer forum if the customer does not find the resolution to a complaint.
So, let’s understand the insurance grievance redressal mechanism in insurance available for insurance
policies –
Step 1 – Approaching The Insurance Company
The first step is to approach the insurance company from whom you have bought the insurance policy.
Every insurance company has a dedicated grievance handling cell as mandated by IRDA. The
company lists the details of its grievance cell in the policy document and also in the plan’s brochure.
There is an address, an email address and a contact number of all offices handling any complaints.
You can call the number, write a letter or leave a mail stating the nature of your grievance and the
company handles it internally. If you do not get a response to your complaint within 15 days, you can
contact the insurance company’s regional or central office’s grievance cell stating that your grievance
has not been acknowledged or addressed. If you do not get response from the central office as well
within 30 days, or if the resolution is not to your liking, you can escalate your matter to IRDAI as
explained below.
Step 2 – Approaching IRDAI Through Its Integrated Grievance Management System (IGMS)
IRDAI also provides grievance support through IGMS which can be reached at [Link].
You can visit this website and register your complaint. When you do so, IRDA follows-up with the
insurance company at its end with respect to your grievance. Though the regulator follows-up with
the insurance company, you might not get a suitable solution. In that case, approaching an ombudsman
is always recommended. So, while you register your complaint at IGMS, you can, simultaneously,
prepare to approach the ombudsman.
Step 3 – Going to An Insurance Ombudsman
An insurance ombudsman is a non-judicial arbitrator appointed to handle insurance claims (retail
and SME products) and seeking solutions for the same. If, after you have complained to the insurance
company, the company does not give a solution to your problem within 30 days, you can go to the
ombudsman. Ombudsmen hear cases and pass judgment and their details are found in the policy
document. There are different ombudsmen for different territories and you have to approach the
ombudsmen for your territory. Your case should be referred to the ombudsman within 12 months of
the dispute. Beyond this period, no grievance is handled. You should submit all relevant information
pertaining to your grievance in a specified format and also all documents showing that you have
followed-up with the insurer and the insurer’s response or lack of it you. The ombudsman has the
authority to hear cases up to Rs.30 lakhs and is supposed to give his verdict within 3 months. A
decision of the Ombudsman is binding on the insurer/intermediary and not on the complainant.
Step 4 – Consumer forum
Consumer forum gives you a judicial solution which is not possible for the ombudsman. You can
approach the consumer forum for your case in case of service deficiency complaints. The consumer
forum is a district court which helps in seeking solution of your grievances. If you are not satisfied
with the ombudsman’s solution or if the case is beyond the ombudsman’s authority, the consumer
forum can be your next stop. You can take the help of a lawyer to prepare your case is a specified
format. There would be no legal fees charged by the forum for filing the complaint. The forum
entertains your case only within 2 years from the date of grievance. Moreover, there are three levels
of the forum depending on your claim amount. If the amount is up to Rs.20 lakhs, the forum at the
 district level would help you. If the amount is above Rs.20 lakhs and up to Rs.1 crore, it would be
undertaken by the state forum. For claims over Rs.1 crore, the national forum handles the case.
IRDAI Guidelines for Health & Mediclaim Insurance
IRDAI has issued new rules and guidelines for health & mediclaim insurance in 2020 and they are
as follows:
Claim Rejection
If the policyholder has renewed the policy for 8 years without any lapse or break then the insurance
provider cannot reject the claim. The period is known as the Moratorium period. Expect in case
of fraud or malfunction, the insurer cannot reach out to IRDAI for the rejection or in case the
policyholder has raised a claim for any excluded cover.
Telemedicine Inclusions
With digitalization and advanced technology, the policyholder can consult with a doctor online.
The insurance providers are asked to include this feature in their health insurance policies after
the IRDAI order.
Claim Settlement
If the insurance company does not pay for the claim within the specified time then they will have
to pay interest on the amount of the claim. The insurance company should make sure that the claim
gets settled within 30-40 days from the date of submission of the final documents in support of a
claim.
As mentioned above an objection of setting this apex body is to regulate the insurance industry in
India and to protect the policyholders’ interest. It also ensures that the insurance companies are
working in an orderly manner and follow the rules and regulations set by IRDAI.
IRDA Rules for Health Insurance:
The IRDA has meticulously jotted down multiple rules that need to be complied with. These rules
help both the insurer and the insured to provide and avail a fair deal in terms of health insurance and
allied services. Following is a list of some important rules laid down by the IRDA, if interested you
can visit here to read more health insurance rules.
1. If the policyholder renews a health insurance policy in time (without any gaps in renewal), then the
policy may not have an exit age.
2. The validity of a Group Health insurance policy can only be of one year.
3. It is an obligation of the insurance company to inform the policyholder about the terms and conditions
of a health insurance policy with respect to availing treatment at medical facilities across India.
4. For specific health insurance policies that provide coverage to a particular group of people (for
example children up to a certain age, students, pregnant women, etc.) the insurance company shall
provide an option to the policyholder for migrating to another plan upon meeting the exit criteria. And
provide suitable credits if the policy was renewed without any gaps.
5. If an application for buying a health insurance policy is denied, the insurance company should provide
a fair, justifiable, and transparent reason in writing to the applicant.
6. The policyholder that renews the policy in time, has bought the policy early in life or provides a
favourable claims experience with an insurance company shall be rewarded. The rewards (as approved
by the board) should be clearly mentioned on the prospectus and policy document.
7. The insurance company should provide a list of medical facilities (government or others) to the
policyholder from where the medical reports will be accepted by the company before issuing the
policy.
8. The amount of premium charged, especially for senior citizens, should be justified, fair, and
transparent. The final amount should also be communicated in a clear manner to the potential
policyholder.
IRDAI’s New Rules: Standardization Guidelines for Health Insurance Policy:
IRDA guidelines for health insurance 2020 focus on aspects related to claim settlement, use of
multiple policies, etc. Take a look at the following new IRDA rules:
1. Claim Rejection: A health insurance company cannot reject a claim if the policy is renewed without
a break for 8 years by the policyholder. The 8-year period will be called the moratorium period. The
insurance company cannot appeal to the IRDA against the settlement of such claim except for fraud
and/or a claim raised against the exclusion of the policy after the moratorium [Link] insurance
company cannot reject a claim on the basis of misrepresentation or non-disclosure. IRDAI has given
a period of 8 years to the insurance company for verifying the information provided by the
policyholder and thus, a claim cannot be rejected on those grounds.
2. Inclusion Of Telemedicine Under Health Insurance: The COVID-19 pandemic has forced both
healthcare providers and patients to provide and avail remote consultations. The fee for such online
consultations can amount to a large sum that would prove to be a financial loss to the insured person.
Thus, IRDA has decided to ask health insurance companies to include telemedicine in the coverage
 where applicable. This move has allowed medical practitioners and patients to freely avail medical
opinions.
3. Claim Settlement: In case of a delay in claim settlement from the insurer’s end, the insurance
company is liable to pay the interest on the claim amount at the rate of 2% more than the bank rate.
The claim should be settled within 30 to 45 days from the date of communicating the last required
document to the policyholder. The time duration will be dependent upon the nature of the claim and
investigation required.
The above guidelines will be applicable to health insurance products filed from October 01, 2020. As
far as existing products are concerned, the terms and conditions will be modified to comply with the
rules upon renewal after April 01, 2021, and onwards.
What is Regulation 31 of IRDA?
Regulation 31 of the Insurance Regulatory and Development Authority of India (IRDA) is a
crucial regulatory provision that aims to safeguard the interests of policyholders and promote
transparency in the insurance industry. By understanding the essence of Regulation 31,
individuals can gain insights into the rights and protections afforded to them as insurance
consumers.
 The primary objective of Regulation 31 is to ensure that insurance brokers establish and
maintain robust internal systems that can effectively handle the challenges and demands of
their business. By doing so, insurance brokers can provide efficient and reliable services to
their clients while adhering to regulatory standards.
 The regulation recognizes that insurance brokerage firms vary in terms of size, clientele, and
scope of operations. Therefore, it emphasizes the importance of adapting internal systems
accordingly, ensuring that the systems are proportionate to the specific characteristics of the
brokerage business.
 One of the key elements of Regulation 31 is the emphasis on the adequacy of internal systems.
Adequate internal systems refer to the structures, processes, and controls put in place by
insurance brokers to manage their operations, risks, and compliance obligations effectively.
These systems encompass various aspects, such as governance, risk management, compliance,
information technology, human resources, and customer service.
 Under Regulation 31, insurance brokers are required to conduct an assessment of their
business operations to determine the appropriate level of internal system adequacy. This
 assessment should take into account factors such as the number of employees, the volume and
complexity of transactions, the types of insurance products offered, the geographical spread
of operations, and any specific risks associated with the business.
 Based on this assessment, insurance brokers must design and implement internal systems that
can address these factors adequately.
 Insurance brokers must ensure that their internal systems facilitate efficient and secure data
management. With the increasing reliance on technology in the insurance industry, brokers
must have robust information technology systems in place to handle data storage, processing,
and security.
 This includes protecting sensitive customer information, maintaining backups, implementing
cybersecurity measures, and ensuring compliance with relevant data protection laws and
regulations.
 Furthermore, Regulation 31 emphasizes the significance of effective risk management systems
within insurance brokerage firms. Brokers must identify, assess, and manage risks associated
with their operations to protect the interests of policyholders. This includes implementing risk
mitigation strategies, monitoring risk exposure, and establishing contingency plans to
minimize potential disruptions to their business.
 Compliance is another critical aspect addressed by Regulation 31. Insurance brokers must
establish mechanisms to ensure compliance with relevant laws, regulations, and codes of
conduct.
 The requirement for insurance brokers to have adequate internal systems serves multiple
purposes. It not only helps protect the interests of policyholders but also contributes to the
overall stability and integrity of the insurance industry.
 By maintaining robust internal systems, insurance brokers can enhance their operational
efficiency, minimize risks, improve customer service, and demonstrate their commitment to
regulatory compliance.
IRDA Health Insurance Regulations
The Insurance Regulatory and Development Authority of India has made some changes in the health
insurance guidelines in 2016 to address the changes taking place in the health insurance sector. The
aim of doing these changes is to increase transparency and satisfy customer needs.
On 12th July 2016, the Insurance Regulatory and Development Authority of India has announced a
set of Health Insurance Regulations which leaves a positive impact for insured individuals to replace
the last set of regulations that were set in 2013.
Updated health insurance guidelines are as follows:
Health insurance companies can offer Pilot Products
To make it easier for insurers to offer innovative products and features to the customers, IRDA’s new
regulations governing Health Insurance allowed the health insurance companies to offer Pilot
products. It is given to the policyholder for up to 5 years, following the expiry of which, the products
will start functioning as a regular health insurance plan.
Secondly, to continue the pilot product for 5 years is dependent on the feasibility of the health
insurance company. If the product is feasible, then it will transform into a regular health insurance
policy at the end of 5 years, and in case, it is not, then the company can freely discontinue the Pilot
Product before also.
Data Disclosure to improve transparency
The new regulations which are effective from the year 2016 improve the data disclosure and bring
transparency in the health insurance industry. Along with the repudiated claims, the insurer has
another category i.e. closed claims. It includes claims which could not be paid back due to incomplete
documentation or failure on the part of the policyholder. Higher is the number of closed claims, more
the insurer can project a lower percentage of rejected claims. According to the new regulations, the
insurer cannot put the claim status as ‘ closed’ in their books.
Give discounts to early buyers and health-conscious customers
All those individuals who buy a health insurance policy at an early age or practicing wellness or
wellness habits will get a benefit in the form of discounts in premium and/or on medical services like
diagnostics, consultation, or pharmaceuticals which are a part of the network. To motivate and
increase awareness regarding the importance of health insurance among the people, this is being
included in the new guidelines.
Loan/Credit Linked Health Insurance
Term insurance is based on the existing credit or loan offered by the insurance providers. The benefits
offered under these plans, based on the condition i.e. the death of the insured, and their nominee who
will utilize the claim amount of the policy to pay back the loan. These policies, however, do not give
any option, in case, the insured falls ill or unable to repay the loan amount, or in case of the sudden
medical expenses incurred towards the illness.
No commission for agents from portability
As per the new guidelines set for the health insurance by IRDA, the insurance agents will not earn
any commission for the cases where the customer is going for health insurance portability which
includes the portability of your mobile number or to carry forward the benefits of your existing health
insurance policy such as pre-existing conditions, accumulated bonuses, waiting period, etc. over to
the new policy.
No indemnity products allowed to offer further
As per this new regulation, the life insurance provider is not allowed to offer indemnity products to
the customer after July 2016. All those customers who hold indemnity products will continue to have
them until the respective policy expires. To meet the expected claims raised by such policies, insurers
have created adequate reserves.
This is done to ensure that the existing policyholders will not suffer in terms of policy servicing and
claims processing.
Avail of the benefits of combo Plans which comprises of any life & health plan.
According to the new IRDA Health insurance regulations, health insurers can offer combi-plans which
can be a hybrid of any health and life (endowment, money-back, or ULIP) plan.