An Indian Insurance Company is registered under the Companies Act, 2013. The
aggregate holdings of the equity shares by a foreign company either by itself or through its
subsidiary companies or nominees must not exceed twenty-six percent of the paid-up equity
capital of such insurance company. The primary object of an Indian Insurance Company is to carry
on life insurance business or general insurance business or reinsurance business.
The Insurance auditors while conducting insurance audits shall examine the policy and liability procedures, tax documents, risk valuation and other financial records of insurance. This is done to ensure that proper insurance rates and premiums are implemented, and the insurance companies follow regulator laws. Some of the core areas to verify during insurance audits are claims and commissions. Further, the insurance auditors must also maintain the quality control between the insurance companies and policyholders.
According to Section 12 of the Insurance Act, 1938, the financial statements of
every insurer must be audited annually by the auditor. As prescribed by IRDA, 1999, every insurer
with respect to his insurance business and also its shareholder’s funds should prepare:
The insurance audit service applies to all types of insurance contracts, either it is
for individuals or companies.
Some of the types of insurance where insurance audit is applicable are as follows:
The essential points to look at in the Profit and Loss Account while conducting an insurance Audit are as follows:
The auditor from each division or branch must obtain the information for all classes of
The auditor shall determine the total number of documents that are to be checked, providing due importance to claims of higher value.
The claim account gets debited with all the payments that include the repair charges, survey fees, photograph charges, etc. The auditor shall verify:
The remuneration paid to an agent is made through commission. The remuneration amount is
calculated by applying a percentage to the premium collected by the agent.
The commission is paid to the agents for the business procured, and it is then debited to the commission on Direct Business Account. Insurance agents usually solicit the insurance business. The auditor shall verify:
The auditor must check the following operating expenses:
The essential points considered during an insurance audit in the Balance Sheet of the Company are as follows:
The auditor must follow the following prescribed provisions with regard to the
investments of the Insurance Act, 1938, at the time of the inspection of the investments of the
The audit procedures that may be followed in an agent’s balance are as
There are several Legislations with regard to life insurance and general
insurance companies. The essential statutory provisions relevant to the audit of life insurance
companies are mentioned in the following acts and rules.
According to the guidelines, insurance companies must form the following mandatory committees such as:
The claim is audited in the following ways:
• Determine the criteria for defining errors.
• Choose a sampling method.
• Identify the time period to sample.
• Choose the number of claims to review.
• Identify critical data sources.
• Review documentation and assess findings.
• Perform a ‘reverse’ audit.
• Quantify findings.
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