CORPORATE ACCOUNTING 1
INSURANCE COMPANY ACCOUNTS
By
Dr. [Link],[Link] CS., [Link]., Ph.D.,
Assistant Professor,
Department of Corporate Secretaryship,
Sri Ramakrishna College of Arts & Science (Autonomous),
Avinashi Road, Nava India ,
Coimbatore – 641 006.
INSURANCE COMPANY ACCOUNTS 2
INSURANCE COMPANY ACCOUNTS FOLLOW SPECIFIC FORMATS PRESCRIBED
UNDER REGULATORY GUIDELINES, SUCH AS THOSE ISSUED BY THE INSURANCE
REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA (IRDAI). THEY
ENSURE TRANSPARENCY, ACCOUNTABILITY, AND UNIFORMITY IN FINANCIAL
REPORTING FOR INSURANCE BUSINESSES.
. Introduction to Insurance Company Accounts
Insurance company accounts involve recording transactions, ensuring compliance with
legal requirements, and presenting financial statements in a prescribed format. They
include:
Premiums Received
Claims Paid
Commission Paid
Investments and Income
Reserves for Future Liabilities
Key Regulations:
Governed by the Insurance Act, 1938, and the IRDAI Regulations, 2002.
Format prescribed in Schedule B of IRDAI (Preparation of Financial Statements
and Auditor’s Report of Insurance Companies) Regulations, 2002.
TYPES OF INSURANCE 3
INSURANCE IS BROADLY CLASSIFIED INTO TWO CATEGORIES:
A. LIFE INSURANCE:
COVERS LIFE RISKS, ENSURING FINANCIAL SUPPORT TO BENEFICIARIES UPON
THE INSURED'S DEATH OR MATURITY OF THE POLICY.
EXAMPLE: LIC, MAX LIFE INSURANCE.
B. GENERAL INSURANCE:
COVERS NON-LIFE RISKS SUCH AS PROPERTY, LIABILITY, HEALTH, AND
ACCIDENTS.
EXAMPLE: ICICI LOMBARD, NEW INDIA ASSURANCE.
NEW FORMAT FOR INSURANCE
4
COMPANY ACCOUNTS
The financial statements of insurance companies are prepared as per IRDAI guidelines. The new format includes:
Primary Financial Statements:
1. Revenue Account: To show the underwriting results.
2. Profit and Loss Account: Overall profitability of the company.
3. Balance Sheet: Financial position of the company.
Schedules (Mandatory Disclosures):
4. Premium Earned: Details of gross and net premiums.
5. Claims Incurred: Claims paid and outstanding claims.
6. Commission: Commission paid to agents or brokers.
7. Operating Expenses: Administrative costs.
Investments: Types of assets and their returns.
LIFE INSURANCE COMPANY
ACCOUNTS 5
KEY FEATURES:
LIFE INSURANCE IS A LONG-TERM CONTRACT.
REVENUE RECOGNITION IS DONE OVER THE POLICY PERIOD.
PREPARATION OF FINANCIAL STATEMENTS:
1. REVENUE ACCOUNT:
o Premiums earned.
o Expenses incurred (claims, commission, etc.).
2. PROFIT AND LOSS ACCOUNT:
o Surplus/Deficit after transferring from the Revenue Account.
3. BALANCE SHEET:
o Policyholders’ funds.
o Investments and reserves.
SCHEDULES SPECIFIC TO LIFE INSURANCE:
SCHEDULE 1: PREMIUMS.
SCHEDULE 2: BENEFITS PAID.
SCHEDULE 3: POLICY LIABILITIES.
EXAMPLE: IF RS.10 CRORE IS COLLECTED AS PREMIUMS AND RS.6 CRORE PAID IN CLAIMS, THE REVENUE ACCOUNT REFLECTS THE
NET SURPLUS.
GENERAL INSURANCE COMPANY 6
ACCOUNTS
Key Features:
• General insurance contracts are short-term (usually one year).
• Claims and expenses are recognized in the same period.
• Preparation of Financial Statements:
Revenue Account:
• Separate accounts for each business segment (e.g., motor, health, fire).
Profit and Loss Account:
• Consolidated results of various segments.
Balance Sheet:
• Assets and liabilities.
Schedules Specific to General Insurance:
• Schedule 1: Premium Earned.
• Schedule 2: Incurred Claims.
• Schedule 3: Commission Paid.
• Schedule 4: Operating Expenses.
• Example: A motor insurance company receives Rs.50 crore in premiums and incurs
Rs.30 crore in claims and expenses, leading to a net surplus in the revenue account.
SCHEDULES IN FINANCIAL STATEMENTS 7
• The schedules provide detailed disclosures required
by IRDAI. They include:
• Schedule 1: Premiums (gross, reinsurance, and net
premiums).
• Schedule 2: Claims (gross and net).
• Schedule 3: Commission expenses.
• Schedule 4: Operating expenses (marketing,
salaries, etc.).
• Schedule 5: Investments and their returns.
• Schedule 6: Reserves and surplus.
• Schedule 7: Fixed assets.
8
EXAMPLE OF SCHEDULE FORMAT
• Operating margins have improved, signaling operational efficiency, while
strengthening our reserves.
• This underscores our commitment to financial stability, positioning us for
sustained growth.
• Example of Schedule Format:
•
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