IRDA
( Insurance Regulatory & Development
Authority )
Contents
What is IRDA ?
Mission of IRDA & Composition of Authority.
Expectation of IRDA
Evolution/History of IRDA
Insurance History
Duties, Powers & Functions of IRDA
Impact Of IRDA On Indian Insurance Sector
Conclusion
What is INSURANCE?
Insurance, in law and economics, is a form of risk management
primarily used to hedge against the risk of a contingent loss.
Insurance is defined as the equitable transfer of the risk of a potential
loss, from one entity to another, in exchange for a premium.
Insurance rate is a factor used to determine the amount, called the
premium, to be charged for a certain amount of insurance coverage
Risk management, the practice of appraising and controlling risk, has
evolved as a discrete field of study and practice
What is IRDA?
Mission:
Insurance Regulatory & Development Authority (IRDA) is
regulatory and development authority under Government of
India in order to protect the interests of the policyholders
and to regulate, promote and ensure orderly growth of the
insurance industry.
Came into being in 1999 after the bill of IRDA was passed in
the Indian parliament.
It is a national agency.
It seeks to open up insurance sector for private companies.
Composition of Authority under IRDA Act, 1999
As per the section 4 of IRDA Act' 1999, Insurance Regulatory and
Development Authority (IRDA, which was constituted by an act of
parliament) specify the composition of Authority
The Authority is a ten member team consisting of
(a) a Chairman;
(b) five whole-time members;
(c) four part-time members,
(all appointed by the Government of India)
Expectations
The law of India has following expectations from IRDA
To protect the interest of and secure fair treatment to policyholders;
To bring about speedy and orderly growth of the insurance industry
(including annuity and superannuation payments), for the benefit of the
common man, and to provide long term funds for accelerating growth of
the economy;
To set, promote, monitor and enforce high standards of integrity, financial
soundness, fair dealing and competence of those it regulates;
To ensure that insurance customers receive precise, clear and correct
information about products and services and make them aware of their
responsibilities and duties in this regard;
Contd..
To ensure speedy settlement of genuine claims, to prevent insurance frauds
and other malpractices and put in place effective grievance redressal
machinery;
To promote fairness, transparency and orderly conduct in financial markets
dealing with insurance and build a reliable management information system
to enforce high standards of financial soundness amongst market players;
To take action where such standards are inadequate or ineffectively
enforced;
To bring about optimum amount of self-regulation in day to day working of
the industry consistent with the requirements of prudential regulation.
Evolution/History of IRDA and insurance
1818 - Oriental Life Insurance Company – 1st Insurance Company.
1870 - Bombay Mutual Life Assurance Society – 1st Life Insurance
Company.
1912 - The Indian Life Assurance Companies Act enacted the 1st Law
to Regulate the Life Insurance Business.
1928 - The Indian Insurance Companies Act enacted to enable the
government to collect statistical information about both life & non-
life insurance businesses.
Contd…..
1938: Earlier legislation consolidated & amended the Insurance Act with the
objective of protecting the interests of the insuring public.
1956: 245 Indian & foreign insurers & provident societies are taken over
by the central government & nationalized.
LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital
contribution of Rs. 5 crore from the Government of India.
The first General Insurance Company established in the year 1850 in
Calcutta by the British.
Duties, Powers & Functions of IRDA
It issues the applicants in insurance arena, a certificate of registration as well as
renewal, modification, withdrawal, suspension or cancellation of such
registrations.
It protects the interests of the policy holders in any insurance company in the
matters related to the assignment of policy, nomination by policy holders,
insurable interest, and resolution of insurance claim, submission value of policy
and other terms and proposals in the contract.
It also specifies obligatory credentials, code of conduct and practical instructions
for mediator as well as the insurance company. Apart from this, it also defines
the code of conduct for the surveyors and loss assessors involved with the
insurance business.
One of the major functions of IRDA includes endorsing competence in the
insurance business. Apart from this, upholding and regulating professional
organizations in insurance and re-insurance business is also a major duty of
IRDA.
IRDA is also entitled to for asking information, undertaking inspection and
investigating the audit of the insurers, mediators, insurance intermediaries and
other organizations related to the insurance sector.
It is also concerned with the regulation of the rates, profits, provisions and
conditions that may be offered by insurers in respect of general insurance
business if it is not controlled or regulated by the Tariff Advisory Committee.
Contd..
It is also entitled to supervise the functioning of the Tariff Advisory
Committee.
IRDA specifies the terms and pattern in which books of accounts are
to be maintained and statement of accounts shall be provided by
insurers and other insurance mediators.
It also regulates investment of funds by insurance companies as well
as the maintenance of margin of solvency.
It is also empowered to be involved in the arbitration of
disagreements between insurers and intermediaries or insurance
intermediaries.
It is meant to specify the proportion of premium income of the
insurer to finance policies.
IRDA also specifies the share of life insurance business and general
insurance business to be accepted by the insurer in the rural or social
sector.
Types of Insurance
Life insurance
Non - Life Insurance
(general insurance)
Property ([Link] risk insurance)
Aviation ([Link] aircraft insurance)
Marine (eg. Marine hull insurance)
Miscellaneous ([Link] insurance)
Regulatory Body:
• The insurance act should be changed.
• An insurance regulatory body should be set up.
• Controller of insurance-a part of the Finance Ministry – should be made
independent.
Investments :
• Mandatory Investments of LIC Life Fund in government securities to be
reduced from 75% to 50%.
• GIC and its subsidiaries are not to hold more than 5% in any company.
Customer Service:
• LIC should pay interest on delay on payment beyond 30 days.
• Insurance companies must be encouraged to set up unit link pension plans.
INDIAN SCENARIO
OF INSURANCE
“Indian Insurance Industry: New Avenues for Growth
2012”,
The potential of the Indian insurance industry is huge.
It has an annual growth rate of 15-20% & the largest number of
life insurance policies in force.
Insurance & Banking Services’ contribution to the country's gross
domestic product (GDP) is 7%
The funds available with the state-owned Life Insurance
Corporation (LIC) for investments are 8% of GDP.
The year 1999 saw a revolution in the Indian insurance sector------
the ending of government monopoly -----the passage of the Insurance
Regulatory and Development Authority (IRDA) Bill
“A foreign partner can hold 26% equity in an insurance company, but
there was a proposal to increase this limit to 49%.
Foreign investments of Rs. 8.7 billion have poured into the Indian
market & 21 private companies have been granted licenses.
INSURANCE OMBUDSMAN
Created by a Government of India
Quick disposal of the grievances of the insured
customers and to mitigate their problems involved in
redressal of those grievances.
This institution is of great importance and relevance
for the protection of interests of policy holders and
also in building their confidence in the system.
The institution has helped to generate and sustain
the faith and confidence amongst the consumers and
insurers.
Its Power…
Two types of functions to perform (1) conciliation, (2) Award making.
The insurance Ombudsman is empowered to receive and consider complaints in
respect of personal lines of insurance from any person who has any grievance
against an insurer for complaints related to
any grievance against the insurer i.e.
(a) any partial or total repudiation of claims by the insurance companies,
(b) dispute with regard to premium paid or payable in terms of the policy,
(c) dispute on the legal construction of the policy wordings in case such dispute
relates to claims;
(d) delay in settlement of claims and
(e) non-issuance of any insurance document to customers after receipt of premium.
Ombudsman's powers are restricted to insurance contracts of value not exceeding
Rs. 20 lakhs. The insurance companies are required to honour the awards passed by
an Insurance Ombudsman within three months
Conclusion
Insurance can be summed up as
“Praying for the best …
…being PREPARED for the WORST”.