Page 17 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Insurance Laws and Practices

Notes
At the end of this period (6 years + 4 years = 10 years), investors will get 20% of the SA
every year for 5 years.
Source: http://articles.economictimes.indiatimes.com/2004-03-01/news/27377588_1_premium-sbi-life-
insurance-policy

Protection of the interest of policy holders

You need to know that IRDA has the responsibility of protecting the interest of insurance
policyholders. Towards achieving this objective, the Authority has taken the following steps:
IRDA has notified Protection of Policyholders Interest Regulations 2001 to provide for: policy
proposal documents in easily understandable language; claims procedure in both life and non-
life; setting up of grievance redressal machinery; speedy settlement of claims; and policyholders’
servicing. The Regulation also provides for payment of interest by insurers for the delay in
settlement of claim.

The insurers are required to maintain solvency margins so that they are in a position to meet
their obligations towards policyholders with regard to payment of claims.
It is obligatory on the part of the insurance companies to disclose clearly the benefits, terms and
conditions under the policy.

!

Caution The advertisements issued by the insurers should not mislead the insuring public.
All insurers are required to set up proper grievance redress machinery in their head office and
at their other offices.

The Authority takes up with the insurers any complaint received from the policyholders in
connection with services provided by them under the insurance contract.

Self Assessment

Fill in the blanks:

12. Several international leaders in the insurance sector are trying to …………………………
into the India insurance industry.
13. It is obligatory on the part of the insurance companies to ………………………. clearly the
benefits, terms and conditions under the policy.

1.6 Role of Insurance in Financial System

You will find it interesting to note that insurance is a part of financial system. Financial system
may be defined as set of institutions, instruments and markets, which gather savings and channel
them to their most efficient use.
The system consists of individuals (savers), intermediaries, markets and users of savings. Economic
activity and growth are greatly facilitated by the existence of the market in mobilizing the
saving and allocating them among competing users.

An economy needs institutions that impartially enforce property rights and contracts. Economic
growth of a country depends on the existence of a well-functioning financial infrastructure. It is
essential that the financial infrastructure be developed sufficiently so that the market operates
in an efficient manner.

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