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SECTION 29 provides that

(1) No insurer shall grant loans or temporary advances either on hypothecation of property or on personal security or otherwise, except loans on life insurance policies issued by him within their surrender value, to any director, manager, actuary, auditor, manager or any officers of the insurance company, or to any company or firm, in which any such director, manager, officer etc., holds position of a director, manager, actuary, office or partner:


(1) Nothing contained in this Section 29(1) shall apply to such loans, made b an Insurance Company to a Banking Company according to regulations prescribed by the Authority.

(2) Noting contained in this Section 29(1) shall apply to such loans or advances ,made by an Insurance Company to its wholly owned subsidiary company subject to prior approval of the Authority(IRDAI).

NOTE: This restriction is similar as restrictions mentioned under provisions of Section 185 of the Companies Act,2013( as amended and re-acted from time to time).

Prohibition on loans or advances under Insurance Act, 1938

SECTION 29(2) provide that

If loan granted to a director of an insurer being a company on the security of a policy on which insurer bears the risk and the policy was issued to the director on his own life, and the loan is within the surrender value of the Insurance Policy. In this case the provisions of Section 185 of the Companies Act, 2013 are not applicable.

NOTE: it means that loan or advances given by an Insurance Company to its directors, manager, actuary, officers etc., on security of Insurance Policy on their own life and the amount of loan : must be under Surrender Value of Policy at the time of granting of loans/advances.

SECTION 29(3) provides that

Subject to the provisions of Section 29(1), no insurer shall grant:

  1. Any loans or temporary advances either on hypothecation of property or on personal security or otherwise , except such loans as may be specified by regulations including the loans sanctioned as part of salary package to the full time employee of the insurer as per Scheme duly approved by the Board of Director:
  2. Temporary advances to any insurance agents to facilitate him carrying out his functions as such except in cases where such advances do not exceed in the aggregate the renewal commission earned by him during immediately preceding financial year.

NOTE: Please note that an insurance company shall pay loans or advances in below mentioned cases:

  1. In case of its directors and full time employees of the company, if there is a board approved scheme for such loans or advances and applicable to all employees of an Insurance Company:
  2. In case of an agent, insurance intermediary/intermediaries the loans/advances given should not exceed renewal commission earned by such agent, insurance intermediary/intermediaries.

SECTION 29(4) provides that

Where any event occurs which giving raise to circumstances, the existence of which at the time of grant of any subsisting loan or advance would have made such grant a contravention of this section ,such loan or advance shall notwithstanding anything in the contract to the contrary , be repaid within a period of three months from the date of occurrence of such event.

NOTE: the above provisions clearly provide that when and contravention of provisions of this section occurs at the time of giving loan or advances by the company. The loan/advance will be repaid within a period of three months from the date of occurrence of such event. The employee/agent/intermediaries have to return loan/advance granted in contravention provisions of this section at the time of grating loan or at any time during tenure of the loan.

SECTION 29(5) provides that

In case of default in complying with the provisions of Section 29(4) , the director, manager, auditor ,actuary, officer or insurance agent concerned shall ,without prejudice to any other penalty which he may incur , cease to hold office under, to act for, the insurer granting loan on the expiry of three months.



Insurance Companies are treated as custodian of moneys of policyholders. These companies carries huge cash like banking companies. They have to protect the interest of their policyholders and hence the Authority (IRDAI) through various rules, regulations, circulars and guidelines exercising control on these types of Companies. The diversion of funds are common in profit making companies through loans/advances to their directors, managers, associates and other full time of employees of the companies. The Insurance Act,1938 and the Companies Act, 2013 have provided mechanism to check and prohibit diversion of funds through loans/advances. In Insurance act, loan /advance on insurance policies of full time employees of company is allowed provided that the amount of loan or advance should not exceed surrender value of policy at the time of granting loan/advance. The insurance company also grant loan/advance to its full time employees if there is a Board Approved Scheme and applicable to all employee of the company. An insurance company may also grant loan/advance to its agent/intermediaries provided that amount should. Not exceed their renewal commission earned by them during previous financial year. Non-compliance of these provisions attracts penalty and loss of office by the concerned employee.

DISCLAIMER: the above write up is only for knowledge of readers. It cannot be consider as an opinion or advise of the author. The write up has been completed on the basis of available materials on insurance at present time. The Author has no responsibility. Of any loss/damage occurs to readers acted on above write up. Do take advise of professionals before acting on any point of above write up.

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Category Corporate Law, Other Articles by - CS Deepak Pratap Singh