Corporate and Economic Laws · Laws and Regulations related to Insurance Sector

IRDA Act 1999: Advisory Committee, Accounts and Audit

Updated 11 October 2026 · Fact-checked

This topic covers the machinery around the Authority under the IRDA Act, 1999: the Insurance Advisory Committee under section 25, the Authority's accounts and CAG audit under section 17, and linked Insurance Act rules on insurer accounts, funds and audit. Identify the provision, then state the body, number, purpose and condition exactly.

Understand IRDAI Finances, Accounts, Penalties and Miscellaneous Provisions

The IRDA Act, 1999 creates the Authority. It also sets up supporting machinery: an advisory body, rules for the Authority's own money and accounts, and powers to enforce and to hear appeals. Questions on this topic test whether you can state each piece accurately.

Start with the Insurance Advisory Committee (section 25). The Authority may establish it by notification, from a date it specifies. It has not more than twenty-five members, excluding ex officio members. They represent commerce, industry, transport, agriculture, consumer fora, surveyors, agents, intermediaries, safety and loss prevention bodies, research bodies and employees' associations in the insurance sector. The Chairperson and members of the Authority are the ex officio Chairperson and ex officio members. Its object is to advise the Authority on making regulations under section 26. It may also advise on other matters as may be prescribed.

Next, the accounts and audit of the Authority (section 17). The Authority keeps proper accounts and other records. It prepares an annual statement of accounts in the form the Central Government prescribes in consultation with the Comptroller and Auditor-General (CAG). The CAG audits those accounts at intervals the CAG specifies. The Authority pays the audit expenses. The CAG and persons appointed by the CAG have the same rights as in auditing Government accounts, including the right to demand books, vouchers and documents and to inspect the Authority's offices. The certified accounts and audit report go to the Central Government every year, and that Government lays them before each House of Parliament.

Do not mix this with insurers' own accounts under the Insurance Act, 1938. Section 12 says an insurer's balance sheet, profit and loss account, revenue account and profit and loss appropriation account are audited annually by an auditor, unless they are already subject to audit under the Companies Act, 2013. That auditor has the powers, functions, duties and liabilities of a company auditor under section 147 of that Act. Section 10 requires separate accounts for each class of business, and a separate life insurance fund held for life policyholders alone.

The Insurance Act also has a separate advisory committee under section 101B. The Authority, with the previous approval of the Central Government, constitutes it for the purposes of section 101A. It has not more than five persons with special knowledge and experience of insurance business. Its term, allowances, procedure and quorum are set by regulations made by the Authority. Do not confuse it with the larger committee under section 25 of the IRDA Act.

For the Authority's grants and fund, and for penalties and appeals, use your ICMAI study material and the Act. Learn who pays, who decides and where the appeal lies. Give section numbers only when you are sure of them.

Key rules to remember

Insurance Advisory Committee: size: Members ≤ 25, excluding ex officio members (IRDA Act, section 25(2)); The limit excludes the ex officio members. Do not say 25 including the Authority's members.
Insurance Advisory Committee: chair and object: Chairperson of the Authority = ex officio Chairperson; object = advise on making regulations under section 26; Section 25(3) and (4). Section 25(5) allows advice on other prescribed matters.
Establishment of the Committee: Authority establishes it by notification, effective from the date it specifies; Section 25(1). The word is 'may', so establishment is discretionary.
Audit of the Authority: Accounts audited by the CAG; report forwarded to the Central Government; laid before each House of Parliament; Section 17(2) and (4). The Authority pays the audit expenses.
Annual accounts form: Form prescribed by the Central Government in consultation with the CAG; Section 17(1).
Insurer audit under the Insurance Act: Annual audit of the four statements unless audited under the Companies Act, 2013; auditor has section 147 powers of that Act; Insurance Act, section 12.
Separate accounts and funds: One account per class; separate life insurance fund; fund usable only for life business; Insurance Act, section 10(1), (2) and (3).
Advisory Committee under the Insurance Act: Not more than five persons; formed by the Authority with previous Central Government approval; Section 101B. Do not confuse it with the IRDA Act section 25 committee.

How to solve IRDAI Finances, Accounts, Penalties and Miscellaneous Provisions questions

Use this method for any question on the IRDA Act's finance, accounts, committee, penalty or appeal provisions.

1Read the question and find the body or act involved: the Authority, the Insurance Advisory Committee, the CAG, an insurer, or the Central Government.
2Decide which Act applies: the IRDA Act, 1999 for the Authority, or the Insurance Act, 1938 for insurers.
3Recall the rule in order: who acts, what they do, the number or limit, and the condition. Example: the Authority, by notification, establishes a committee of not more than 25 members excluding ex officio members.
4For a case or scenario, apply the rule to the facts. Say clearly whether the action is allowed, and why.
5Separate look-alike provisions. Keep the section 25 committee distinct from the section 101B committee, and the CAG audit of the Authority distinct from the insurer's audit under section 12.
6For penalties and appeals, state who imposes the penalty, the ground, and the forum for appeal, using your study material. Add section numbers only if sure.
7Close with a one-line conclusion that answers the question asked.

Quickest way: Four-question check

When to use it: Use it for MCQs and short case questions when you have under two minutes.

Who? Authority, Committee, CAG, insurer or Central Government.
What action? Establish, advise, audit, forward, lay, keep separate accounts.
What number or limit? 25 excluding ex officio, or five persons.
Which Act? IRDA Act section 25 or 17, or Insurance Act section 10, 12 or 101B. Pick the option that matches all four.

Common mistakes in IRDAI Finances, Accounts, Penalties and Miscellaneous Provisions

Saying the Insurance Advisory Committee has 25 members including the Authority's members.
Students remember the number and forget the words 'excluding ex officio members'.
Fix: Write: 'not more than twenty-five members, excluding ex officio members'. The Chairperson and members of the Authority are ex officio.
Treating the Committee's object as advising on every insurance matter.
The name sounds broad.
Fix: The object is advice on making regulations under section 26. Other matters are covered only if prescribed.
Saying a chartered accountant firm audits the Authority.
Students mix the Authority's audit with company or insurer audits.
Fix: The CAG, or a person appointed by the CAG, audits the Authority's accounts under section 17. The Authority pays the expenses.
Confusing the section 25 committee with the section 101B committee.
Both are advisory committees in insurance law.
Fix: Section 25 (IRDA Act): up to 25 members, representative of stakeholders, established by the Authority by notification. Section 101B (Insurance Act): up to five experts, for section 101A, constituted with Central Government's previous approval.
Saying the Authority lays its report before Parliament.
Students skip the routing step.
Fix: The accounts and audit report are forwarded annually to the Central Government, which lays them before each House of Parliament.
Quoting section numbers for penalties and appeals from memory.
Students try to sound precise.
Fix: State the rule in words if unsure. A wrong section number costs more than none.

Worked examples

Example 1

The Authority wishes to set up an Insurance Advisory Committee. State the legal position on how it is established, its composition and its object. Can it advise on matters other than regulations? (Answer as under the IRDA Act, 1999.)

Show the solution

Establishment: under section 25(1), the Authority may, by notification, establish the Committee with effect from a date it specifies.
Composition: not more than twenty-five members excluding ex officio members, representing commerce, industry, transport, agriculture, consumer fora, surveyors, agents, intermediaries, safety and loss prevention bodies, research bodies and employees' associations in the insurance sector (section 25(2)).
Ex officio: the Chairperson and members of the Authority are the ex officio Chairperson and ex officio members (section 25(3)).
Object: to advise the Authority on matters relating to the making of regulations under section 26 (section 25(4)).
Other matters: without prejudice to that object, the Committee may advise on such other matters as may be prescribed (section 25(5)).

Answer: The Authority may establish the Committee by notification. It has up to 25 members excluding ex officio members, with the Authority's Chairperson as ex officio Chairperson. Its object is advice on regulation-making under section 26. It may advise on other matters only as prescribed.

Example 2

Explain how the accounts of the Authority are maintained, audited and placed before Parliament. Who bears the cost of audit?

Show the solution

Maintenance: the Authority keeps proper accounts and records and prepares an annual statement of accounts in the form the Central Government prescribes in consultation with the CAG (section 17(1)).
Audit: the CAG audits the accounts at intervals the CAG specifies (section 17(2)).
Cost: any expenditure on the audit is payable by the Authority to the CAG (section 17(2)).
Powers: the CAG and persons the CAG appoints have the same rights as in auditing Government accounts, including demanding books of account, vouchers and documents and inspecting the Authority's offices (section 17(3)).
Reporting: the accounts as certified, with the audit report, are forwarded annually to the Central Government, which causes them to be laid before each House of Parliament (section 17(4)).

Answer: The Authority maintains accounts in the prescribed form. The CAG audits them and the Authority bears the audit cost. The certified accounts and report go yearly to the Central Government, which lays them before both Houses of Parliament.

Exam tips

Learn section 25 and section 17 almost word for word. The 'excluding ex officio members' condition is a likely MCQ trap.
For an MCQ with four options, check each against the numbers: 25 and 'excluding ex officio' for section 25; five persons for section 101B.
In a case question, name the provision first, then apply it to the facts, then conclude.
Write a short contrast line when two similar bodies appear, such as the two advisory committees or the CAG audit versus the insurer's audit.
Where you do not recall a penalty or appeal section number, describe the rule in words rather than guessing.

Practice questions from Laws and Regulations related to Insurance Sector

IRDAI Finances, Accounts, Penalties and Miscellaneous Provisions in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CS ProfessionalFinances, Accounts, Offences and Miscellaneous Provisions

IRDAI Finances, Accounts, Penalties and Miscellaneous Provisions: frequently asked questions

How many members can the Insurance Advisory Committee have?

Not more than twenty-five members, excluding ex officio members. The Chairperson and members of the Authority are ex officio. This is in section 25(2) and (3) of the IRDA Act, 1999.

Who audits the accounts of IRDAI?

The Comptroller and Auditor-General of India, or a person the CAG appoints, audits the Authority's accounts under section 17. The Authority pays the audit expenses. The certified accounts and report go to the Central Government, which lays them before Parliament.

What is the difference between the section 25 committee and the section 101B committee?

Section 25 of the IRDA Act sets up a stakeholder committee of up to 25 members that advises on regulations. Section 101B of the Insurance Act provides for a committee of not more than five experts for section 101A, constituted by the Authority with the Central Government's previous approval.

Are insurers' accounts audited under the IRDA Act?

No. Insurers' accounts are governed by the Insurance Act, 1938. Section 12 requires annual audit of the main statements unless they are already audited under the Companies Act, 2013. The auditor has the powers and duties of a company auditor under section 147 of that Act.