Accounts, Audit and the Actuary

Annual accounts and audit: sections 11 and 12

Section 11(1) requires every insurer, in respect of insurance business transacted by it and in respect of its shareholders' funds, to prepare at the expiration of each financial year a balance sheet, a profit and loss account, a separate account of receipts and payments, a revenue account and other financial statements, in accordance with the regulations.

Section 11(2) is the second fence. Every insurer shall keep separate accounts relating to the funds of shareholders and of policyholders.

Section 11(3) provides that unless the insurer is a company as defined in section 2(20) of the Companies Act, 2013, the accounts and statements shall be signed by the insurer, or by the chairman if any, two directors and the principal officer of a company, or by the person in charge of an insurance co-operative society; and shall be accompanied by a statement of the names, descriptions, occupations and directorships of the persons in charge of the management during the period, and by a report on the affairs of the business.

Section 12 provides that the balance sheet, profit and loss account, revenue account and profit and loss appropriation account of every insurer shall, unless they are subject to audit under the Companies Act, 2013, be audited annually by an auditor; and that the auditor shall have the powers, exercise the functions, discharge the duties and be subject to the liabilities and penalties imposed on auditors of companies by section 147 of that Act.

The Actuary: sections 12A and 13

Section 12A, inserted by Act 40 of 2025 with effect from 5 February 2026, provides that the eligibility criteria and experience for the appointment of an Actuary by an insurer, and the powers and functions of the Actuary, shall be such as may be specified by the regulations.

Section 13(1) requires every insurer, in every financial year, to cause an investigation to be made by an Actuary into the financial condition of the business carried on by it, including the valuation of its liabilities in respect of that business, and to cause a report of that Actuary to be made in the manner specified by the regulations.

Section 13(1A) allows the Authority, having regard to the circumstances of a particular insurer, to permit the investigation to be made at a date not later than two years from the previous one.

The annual actuarial investigation is the heart of insurance supervision. It answers the question no accountant can answer: what is this insurer actually going to have to pay. Everything else, the solvency margin, the surplus available for bonus, the price of next year's policies, is calculated from it.

The record of policies and claims: section 14

Section 14(1), as substituted in 2026, requires every insurer, in respect of all business transacted by it, to maintain a complete record of policies containing all details of the policy application, the policy contract and other relevant and connected information. For a policy issued to an individual that includes the name, date of birth, address and where available email address of the policyholder; the Aadhaar number or Permanent Account Number or other identification number issued by a Central Authority for unique identification; the date the policy was effected; a record of any transfer, assignment or nomination of which the insurer has notice; and any other information the Authority specifies.

The section also requires a record of claims, with the date of the claim, its nature, the name and address of the claimant and the date on which it was discharged or, in the case of a rejected claim, the date of rejection and the grounds.

The data protection sections: 14A, 14B and 14C

These three sections are new, inserted by Act 40 of 2025, and they are the most modern provisions in the Act.

Section 14A empowers the Authority to direct insurers and other regulated entities to process the Know Your Customer information of policyholders in the form and manner specified by the regulations; provides that such processing shall be deemed valid for the performance of their functions under this Act or any other law; and requires that the information be used solely for the efficient discharge of their duties under the Act.

Section 14B requires an insurer or other regulated entity in possession or control of policyholders' information to take such steps as the regulations specify to ensure that the information is accurate, complete and updated in all respects, secure, and duly protected against loss, unauthorised access or use, or unauthorised disclosure.

Section 14C(1) requires that the Know Your Customer information and the documents processed during solicitation or afterwards be maintained at all times with utmost confidentiality and comprehensively protected.

Section 14C(2) lists the only three exceptions. The information shall not be parted with or shared with any third party except where disclosure is compulsory in law; where there is a duty to the public to disclose; or where the disclosure is made with the express consent of the customer.

Those three exceptions will be familiar to anyone who has read the banker's duty of secrecy, and they are drawn from the same source. Their significance here is that Indian insurance law now has a statutory confidentiality duty of its own, alongside the general data protection legislation.

Returns to the Authority: sections 15, 18 to 20, 23, 25 and 116A

Section 15, as substituted in 2026, provides that the audited accounts and statements referred to in section 11 or section 13(5), and the statement referred to in section 13, shall be furnished to the Authority in such form and manner as the regulations specify, within a period of six months from the end of the period to which they refer.

Section 18 requires every insurer to furnish the Authority a certified copy of every report on the affairs of the concern submitted to its members or policyholders, immediately after its submission to them.

Section 19 requires an insurer that is a company or body incorporated in India to furnish the Authority a certified copy of the minutes of the proceedings of every general meeting, as entered in its minute book, within thirty days of the meeting.

Section 20(1) provides that every return furnished to the Authority, or a certified copy of it, shall be kept by the Authority and shall be open to inspection, and that any person may procure a copy on payment of the fee the regulations specify.

Section 20(2) entitles a shareholder or policyholder who applies within two years to be supplied with a printed or certified copy of the accounts, statements and abstract furnished under section 15, within fourteen days if the insurer is constituted, incorporated or domiciled in India, and within a month otherwise. Section 20(3) entitles a policyholder to a copy of the memorandum and articles on payment of the specified fee.

Section 23 makes the returns evidence: a return certified by the Authority to be one so furnished is deemed to be so, and a document purporting to be certified by the Authority to be a copy is received in evidence as if it were the original unless a variation is proved.

Section 25 provides that no insurer shall publish in India any return in a form other than that in which it has been furnished to the Authority, with a proviso permitting a true and accurate abstract for publicity.

Section 26 requires an insurer to furnish the Authority full particulars, forthwith, of any alteration affecting a matter required under section 3(2) to accompany an application for registration, authenticated in the same manner.

Section 116A required a yearly published summary of the returns, and is now spent as to the Central Government, whose obligation ran only before the commencement of the Act of 1999.

A worked example

Sahyadri Assurance Limited writes life, fire and motor insurance.

Section 10 requires four things at once. A separate account of receipts and payments for life, for fire and for miscellaneous business; separate accounts for each prescribed sub class of miscellaneous business, unless the Authority waives it in writing; a life insurance fund into which all life receipts are carried, whose assets are kept distinct from every other asset; and, by section 11(2), separate accounts for shareholders' funds and policyholders' funds.

At the end of the financial year it prepares its statements under section 11, has them audited under section 12, has an Actuary appointed under section 12A investigate its financial condition and value its liabilities under section 13, and furnishes the audited accounts and the actuarial statement to the Authority within six months under section 15.

A policyholder writes asking for a copy of the accounts. Section 20(2) entitles him to it within fourteen days, if he applies within two years of the accounts being furnished.

Sahyadri then publishes a shorter version of its revenue account in a newspaper advertisement, adjusted to look better. Section 25 forbids it: no return may be published in a form other than that furnished to the Authority, though a true and accurate abstract for publicity is allowed.

And its marketing team proposes to sell its policyholder database to a bank. Section 14C(2) forbids it. The only exceptions are compulsion of law, a duty to the public, and the express consent of the customer.

What it does NOT mean

It does not mean the life fund belongs to the policyholders in law. It is the insurer's asset, fenced by statute. What section 10(2) does is make it unavailable for other purposes; it does not create a trust.

It does not mean an insurer that is a company escapes section 11. Only the signing requirement in section 11(3) is disapplied for a company as defined in the Companies Act, 2013, and only because that Act supplies its own.

It does not mean the Actuary works for the regulator. The Actuary is appointed by the insurer under section 12A, and section 22 gives the Authority a separate power to order a revaluation where a valuation does not properly indicate the insurer's condition.

And it does not mean Know Your Customer data may be used for anything the insurer finds convenient. Section 14A(3) confines its use to the efficient discharge of duties under the Act.

Quick revision

Section 10: separate accounts for each class and each prescribed sub class of miscellaneous business; a separate life insurance fund whose assets are kept distinct.

Section 11: annual balance sheet, profit and loss account, receipts and payments account, revenue account and other statements per the regulations; separate accounts for shareholders' and policyholders' funds; signature and reporting requirements for a non company insurer.

Section 12: annual audit unless audited under the Companies Act, 2013, the auditor having the powers and duties of a company auditor under section 147 of that Act.

Section 12A: the appointed Actuary, criteria and functions by regulations, inserted 2026. Section 13: an annual actuarial investigation and report, extendable to two years by the Authority.

Section 14: the record of policies and of claims, including the identifiers and the grounds of any rejection.

Sections 14A to 14C, inserted 2026: processing of Know Your Customer information; accuracy and security; confidentiality, with only three exceptions, compulsion of law, duty to the public, and express consent.

Section 15: returns to the Authority within six months of the period they cover. Section 18: reports to members. Section 19: minutes within thirty days. Section 20: inspection and copies. Section 23: returns as evidence. Section 25: no publication in a different form. Section 26: alterations reported forthwith.

Test yourself

1. What is the life insurance fund and why does it exist? Under section 10(2), all receipts due in respect of life insurance business are carried to a separate fund, whose assets are kept distinct from all other assets of the insurer. It exists to stop the policyholders' money being used for the insurer's other business.

2. Within what time must an insurer furnish its audited accounts to the Authority? Six months from the end of the period to which they refer: section 15 as substituted in 2026.

3. Who values an insurer's liabilities, and how often? An Actuary, appointed under section 12A, by an annual investigation into the financial condition of the business under section 13(1); the Authority may allow an interval of up to two years under section 13(1A).

4. When may an insurer share a policyholder's Know Your Customer information with a third party? Only where disclosure is compulsory in law, where there is a duty to the public to disclose, or where the customer has expressly consented: section 14C(2).

5. A policyholder asks for a copy of the insurer's accounts. What is he entitled to? Under section 20(2), a printed or certified copy of the accounts, statements and abstract furnished under section 15, if he applies within two years, supplied within fourteen days by an Indian insurer and within a month by any other.

6. May an insurer publish a summarised revenue account in an advertisement? Only as a true and accurate abstract. Section 25 forbids publishing any return in a form other than that in which it was furnished to the Authority.