Insurer
The company that provides insurance and promises to pay compensation for a specified future loss, in exchange for the premium the insured pays.
In plain language
The insurer is the other side of every insurance policy. It is the entity that takes on your risk, in exchange for your premium.
The workbook's definition is short: an entity which provides insurance is known as the insurer. It is the party making the promise — the one who pays out when the insured event happens, and the one bound by the conditions written into the policy.
Insurers do not operate freely. The workbook names the Insurance Regulatory and Development Authority of India (IRDAI) as the body that regulates the insurance sector, protects the interests of policy holders, and works to ensure the industry grows in a systematic way.
How it works
Insurance itself is described in the workbook as a form of risk management: it lets people, businesses and other entities protect themselves against a significant potential loss, at a reasonably affordable cost, by shifting that risk onto the insurer. The insurer takes on many such risks across many policy holders and pays the ones who actually suffer a loss, funded by the premiums collected from everyone.
The workbook gives one clear regulatory fact about insurers rather than a numeric one: IRDAI regulates the sector and aims to protect the interests of the insurance policy holders while ensuring systematic growth of the insurance industry. It does not give a specific capital, solvency or licensing figure for an insurer in this booklet.
A worked example
Meera pays an annual premium of Rs 9,500 to an insurer for a term policy with a sum assured of Rs 50,00,000.
Of the thousands of policy holders paying similar premiums to the same insurer, only a small number will die during any given year and trigger a claim. The insurer uses the pooled premium from everyone to pay the sum assured to those families — this pooling of risk across many insured people, funded by everyone's premium, is what allows one company to promise Rs 50,00,000 in exchange for a premium of a few thousand rupees.
If that insurer mis-sells policies or delays claims unfairly, policy holders can escalate to IRDAI, the regulator the workbook names for the sector — not to SEBI, which regulates the securities market instead.
Why NISM asks about it
Chapter 6 (Insurance Related Products) defines the insurer in its opening lines and names IRDAI's role in the same chapter. Expect the exam to test which regulator oversees insurers — IRDAI, not SEBI — since Chapter 12's grievance-redressal table repeats this mapping for a contract of insurance.
Common exam traps
- IRDAI regulates insurers, not SEBI. A question that swaps the regulator for insurance products is a common trap, especially since this is an SEBI-run exam.
- The insurer promises to pay; the insured pays the premium. Do not reverse the two roles.
- The workbook does not give a specific solvency or capital figure for an insurer — do not assume one that is not stated here.
Check yourself
1.In insurance terminology, who is the insurer and who is the insured?
- a)The insurer buys the policy; the insured provides the cover
- b)The insurer is the entity which provides insurance; the insured or policy holder is the person who buys it
- c)Both terms refer to the person covered
- d)The insurer is the agent and the insured is the company
Show the answer
Answer: (b) The insurer is the entity which provides insurance; the insured or policy holder is the person who buys it
"An entity which PROVIDES insurance is known as the INSURER. A person who BUYS insurance is known as an INSURED OR THE POLICY HOLDER." The remaining two words complete the vocabulary: the premium is "a periodic payment", and the insurance policy is the contract the insured receives, "which contains details like the conditions and circumstances under which the insured will be financially compensated." The agent, incidentally, is not part of this definition at all — the contract runs between the insurer and the insured. Health insurance uses the same word with a specific gloss: "the 'insured' is the owner of the health insurance policy or the person with the health insurance coverage."
2.An investor has grievances against a stock broker, a life insurer, a housing finance company and a chit fund. Which of these is SEBI's?
- a)All four, since SEBI is the capital market regulator
- b)Only the stock broker — SEBI's remit is the Indian securities market; the others belong to IRDAI, the National Housing Bank and the State Government respectively
- c)The stock broker and the housing finance company
- d)The stock broker and the chit fund, both being investments
Show the answer
Answer: (b) Only the stock broker — SEBI's remit is the Indian securities market; the others belong to IRDAI, the National Housing Bank and the State Government respectively
SEBI exists "to protect the interests of investors and to regulate and develop the INDIAN SECURITIES MARKET", and this chapter lists the participants it regulates — stock exchanges, brokers, depositories, depository participants, portfolio managers, merchant bankers, share transfer agents. A broker is squarely inside. The others are not: Chapter 13's table gives "Contract of Insurance — IRDAI", "Housing Finance Institutions — National Housing Bank" (its only appearance in the booklet) and "Chit Fund Business — State Governments", the last alongside cooperative society schemes and multi-level/pyramid marketing in the largest single block of that table. Option (d) applies the wrong test: "it is an investment" is not a jurisdictional test — Chapter 12 confined SCORES to grievances "pertaining to securities market" against a listed company or registered intermediary. Where an investor cannot place a matter, the helpline names the right authority among RBI, IRDAI, PFRDA and MCA.
3.Which of the following is a feature of Pradhan Mantri Jan Aarogya Yojana (Ayushman Bharat)?
- a)Cover is limited to a family of five members below 60 years of age
- b)There is no restriction on family size, age or gender, and all pre-existing conditions are covered from day one
- c)Pre-existing conditions are covered after a waiting period of four years
- d)Treatment is free only at government hospitals in the beneficiary's home state
Show the answer
Answer: (b) There is no restriction on family size, age or gender, and all pre-existing conditions are covered from day one
Two of the scheme's bullets are extraordinary in insurance terms and are therefore the ones asked. "There is NO RESTRICTION ON FAMILY SIZE, AGE OR GENDER" and "ALL PRE-EXISTING CONDITIONS ARE COVERED FROM DAY ONE of the policy." A commercial health insurer does neither — it counts members, prices by age, and excludes pre-existing conditions for a waiting period, which is exactly why an elderly relative with long-standing illness is the hardest person to insure privately. The rest follows the same logic of removing obstacles: eligibility is drawn from the SECC (Socio-Economic Caste Census 2011) database so "all members of eligible families... are AUTOMATICALLY COVERED"; "no money needs to be paid by the family for treatment in case of hospitalization"; the benefit includes pre & post hospitalization expenses; and treatment is free at "public or empanelled private hospitals ACROSS THE COUNTRY", which disposes of option (d).
Where this is taught
Free preparation for NISM Series SEBI-ICERelated terms
- IRDAIThe Insurance Regulatory and Development Authority of India, the regulator of India's insurance sector. It protects policyholders' interests and handles grievances on insurance contracts and ULIPs.
- Insurance policyThe written contract an insurer gives a policy holder. It states the premium, the sum assured, and the conditions under which the insurer will pay a claim.
- Insured / policy holderThe person who buys an insurance policy, pays the premium, and receives the insurer's promise of compensation for a specified future loss.