Regulation Of Insurance Business In India
Insurance Amendment Act-2002
IRDA has prescribed in specified formats for preparation
of financial statements of insurance business in part V of
‘schedule A’ of IRDA regulations 2002.
Insurance Act,1938 &IRDA Act,1999 provide legal
framework of insurance accounting in India.
Financial statements also to be in conformity with the
accounting standards issued by the Institute of Charted
Accountants of India(ICAI).
ACCOUNTS OF INSURANCE
Accounting point of view: Business of
1.Life Insurance Business
2.General Insurance Business
Major income- Premium
Other Sources – i. interest
ii. Dividends on
iii. Rent earned from
properties let out etc.
1. Settlements of claim
3. Bonus payment
4. Commission paid to agent
5. Office & managerial expenses
6. Income tax & Other taxes
Profit or loss = All incomes – Revenue expenses
BOOKS FOR MAINTENANCE OF
1.Statutory Book :- Consist of 3 registers
Register of policies:- Name & address of
policy holder, date of policy etc
Register of claims:- Date of claim, name &
address of claimant etc
Register of licensed insurance:- Name of
Insurance agent, address, no. of
license, commission due etc
2. Subsidiary Book :- Register of proposal, premium
register, general cash book, commission
register, cash receipt register etc
FINAL ACCOUNTS OF LIFE
1. REVENUE ACCOUNT
Sets out all income & expenses relating to the insurance
a) Premium after adjusting reinsurance ceded & reinsurance
b) Income from investments
b) Operating expenses
c) Benefits paid
d) Bonus paid
e) Change in valuation of liability against life policies in force
2. PROFIT AND LOSS ACCOUNT
All income and expenses relating to shareholders
income comprises of:-
a) Depreciation relating to assets held by
shareholder’s fund, investment expenses, directors
b) Transfer of funds to policy holder’s fund.
c) Preliminary expenses written off.
3. Balance sheet
includes:-a)share holders fund
b) policy holders fund
c) investments related to policy holder’s fund
4.Receipts and payments Account
Cash flow statements of insurance company needs to
be worked out as directed method as per IRDA
Major items are:-
a) Operating activities:- Receipts and payments
from policy holders, payment to reinsurers
agent, employee expenses & investment income.
b) Investing activities:-Purchase and sales of
investment, purchase of fixed assets
c) Financing activities:- Issue of share capital or
raising of funds from other sources.
Segmental Reporting :-
Have to prepare segment wise revenue account
and balance sheet of the business. The company has
to report segment results separately for :-
unit linked business
FINAL ACCOUNTS OF GENERAL INSURANCE
a) Revenue account
A separate revenue account is prepared for each type of
business. Eg: fire, marine etc.
It records: incomes & expenses of particular business, profit/loss
is transferred to profit & loss account.
b)Profit & loss account
It records incomes & expenses of general nature and it show how
profit has been appropriated in addition to profit/loss of
different business. Its balance is shown in balance sheet.
c) Balance sheet
It records various assets and liabilities of General insurance
Business of insurance having much importance in
India nowadays. Insurance Regulatory Authority
regulates the insurance business in India.
Accounts of insurance companies are divided into
two heads such as final accounts of life insurance
and final accounts of general insurance. Both the
business accounts contain revenue account, profit &
loss accounts and balance sheet in common. In
addition to this, life insurance contains receipts and
payments account and segmental reporting.
it must be observed that difference in revenue
account reveals profit or loss of business.