Insurance

• Risk

  • Endemic to life and business and something that risk-averse individuals and firms have good reason to manage.
• Uncertainty

  • Perception of risk, which may or may not correspond closely to reality.
• Pure Risk

  • -          No chance of economic gain and uncertainty of financial loss will occur and possibly how much financial loss will be.
• Speculative Risk

  • Chance of gain or loss
  • It is not insurable
• Peril

  •      an event that causes a loss
• Indemnity

  • insureds should not profit from a covered loss but should be restored to no better than their financial position prior to the loss.
• Indemnity

  • To ensure that insureds do not gain financially from losses and, in turn, reduce moral hazard.
• Insurable Interest

  •   The insured must suffer some form of loss or harm if the insured event occurs.
• The Central and Branch Auditors of an insurance company are appointed at the Annual General Meeting of the Company.
•    Before making the appointment, an appointment from the Comptroller and Auditor General must be received.
• ·         Insurance Act, 1938, and the Companies Act, 2013 must comply with the provisions with regard to the appointment of auditors.
• The board appoints the statutory auditors subject to shareholder’s approval at the general meeting of the Indian Insurance Company.
• The appointment of branch auditors is made to conduct the audit of the divisions. The branch auditors submit their report to the statutory auditors.
• Premium collections are credited
• -          The collections are transferred to the Regional Office or Head Office.
• -          The cover notes must be numbered serially. The auditor need to check if the premium registers are maintained chronologically
• The commission is paid to the agents for the business procured. Debited to the commission of Direct Business Account.
• -          Expenses more than 1% of the net premium, whichever is higher, must be shown separately.
•   Expenses not directly related to the insurance business must be shown separately.
• An insurance company can invest only in approved securities
• ·         An insurance company is not allowed to invest in the shares and debentures of a private company.
• ·         The insurance companies are not permitted to invest in funds of their policyholders outside India.
• ·         The auditor must obtain the confirmation of Bank Balances for all operative and inoperative accounts.
• ·         The auditor shall verify the deposits and withdrawal transactions and also check if the account is operated by authorized persons only.
• ·         In the case of General insurance, there shall be the applicability of Employees State Insurance Act 1948
• ·         Every insurer must constitute an Audit Committee according to Section 177 of the Companies Act, 2013.
• ·         The committee shall look at the financial statements both on an actual and quarterly basis.
• ·         The Chairperson of the Audit Committee shall be an Independent Director of the Board and maybe a Chartered Accountant.
• ·         Association of the CEO in the Audit Committee must be limited to occasions.
• ·         Under Section 177 of the Companies Act, 2013, the audit committee shall comprise of a minimum of three (3) directors, the majority of whom shall be Independent Directors.
• ·         The Audit Committee shall discuss with the statutory auditors before the audit commences.
• ·         Check if the figures of premium mentioned in the register tally with those in General Ledger.