Insurance Regulatory and Development Authority of India (IRDAI)
Insurance Regulatory and Development Authority of India (IRDAI) was incorporated in April 2000. IRDA was constituted by the Insurance Regulatory and Development Authority Act, 1999. By the Act of Parliament passed by the Government of India, IRDAI is tasked with regulating and promoting the insurance and re-insurance industries in India. IRDA is an autonomous and statutory body.
IRDA was constituted based on the recommendation made by a committee under the chairmanship of RN Malhotra, former Governor of RBI, set up by the government in 1993. IRDA was incorporated in 2000 with headquarters in Delhi. The headquarters was shifted to Hyderbad in 2001.
What are the objectives of Insurance Regulatory and Development Authority of India (IRDAI)?
The key objectives behind setting up the IRDA was promotion of competition in insurance sector to enhance customer satisfaction through more customer choices at lower premiums and ensuring the financial safety of the insurance market.
IRDA was constituted with the following objectives:
i. Protect the interest and ensure fair treatment to policyholders;
ii. Ensure speedy and orderly growth of insurance industry, for the benefit of common man and to be a source of long term funds for the growth of economy
iii. Set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of insurance companies and allied entities
iv. Ensure efficient, fast and fair settlement of genuine claims and prevent insurance frauds
v. Put in place an effective redressal mechanism
vi. Ensure good corporate governance practices among insurers and enforce high level of financial soundness.
vii. Ensure prudent regulation through self-regulation and
viii. Take appropriate remedial action wherever standards are inadequate or ineffective
What are the major duties handled by IRDA?
The duties of the Insurance Regulatory and Development Authority of India include
i. Issuance of certificate of registration, renewal and cancelation of such registration of insurance companies
ii. Protection of the interests of the policy holders in various matters related to the policy like policy assignment, nomination, settlement of insurance claim, matters related to surrender value of policy etc.
iii. Specifying qualification requirements and code of conduct and training insurance intermediaries, agents and insurance surveyors
iv. Promotion of insurance and re-insurance businesses, and promotion of life insurance and general insurance business in rural and social sectors
v. Undertaking inspections and audits of the insurers and other organisations connected with the insurance business and matters related to maintenance of books
vi. Regulation of investment of funds by insurance companies and maintenance of margin of solvency by insurance companies.
What are the major contributions of IRDA for insurance business in India?
The major objectives of formation of IRDA included enhancing efficiency in insurance sector through competition and maintaining stability. IRDA has discharged these duties effectively since its incorporation in 2000 through various regulations ranging from registration of insurance companies to protection of interest of policy holders.
The insurance market was opened up in August 2000 with invitation of application for registrations. Foreign investment up to 26% was also permitted. In December, 2000, the General Insurance Corporation of India was restructured by converting GIC as national re-insurer and subsidiaries as independent companies thereby forming four independent. Today, India can be proud of 31 general insurance companies (including the ECGC and Agriculture Insurance Corporation of India) and 24 life insurance companies.
Through the consistent efforts of IRDA in promotion of insurance, insurance sector is presently growing at a rate of 15-20% per annum. The corpus mobilized by insurance companies has become a major source of long term funds for the infrastructure development of the country. Banking services and insurance services together account for 7% of the GDP of the country at present.
