Role of IRDA in the Insurance Sector
Insurance Regulatory and Development Authority (IRDA) is an autonomous regulatory body that protects the interests of the policyholder. They oversee the growth of the insurance sector in India and also maintain a speedy development. The IRDA was formed under the IRDA Act in 1999 with various functions and responsibilities conferred upon them.
Here are the roles of the IRDA in the insurance sector:
- IRDA issues a certificate of registration to the life insurance company and also renews, modifies, withdraws, suspends and cancels the registration
- The regulatory body secures the interests of the policyholders in areas like assigning of policy, nomination by policyholders, insurable interest, settlement of insurance claim, surrender value of the policy and other terms and conditions applicable to an insurance contract
- It specifies the requisite qualifications, code of conduct and the practical training required for insurance intermediaries and agents
- IRDA makes certain that the code of conduct is followed by surveyors and loss assessors
- The autonomous body promotes efficiency in the conduct of insurance business
- It also promotes and regulates professional organizations connected with the insurance and reinsurance business
- ;It levies fees and other charges for carrying out the purposes of the IRDA Act
- IRDA carries out functions like inspection, conducting inquiries and investigations including an audit of the insurers, insurance intermediaries and other organizations involved with the insurancebusiness
- The rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business are controlled and regulated by the regulatory body
- It also specifies the form and manner in which books of account should be maintained and the statement of accounts should be rendered by insurers and insurance intermediaries
- IRDA monitors the investment of funds by insurance companies and governs the maintenance of margin of solvency
- It also judges the disputes between insurers and intermediaries or insurance intermediaries
- It supervises the functioning of the Tariff Advisory Committee
- IRDA specifies the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organizations referred to in clause (f)
- It specifies the percentage of life insurance and general insurance business to be undertaken by the insurer in the rural or social sector
With so many roles, the IRDA maintains the standard of the industry and takes measures to eliminate insurance frauds.
What is IRDAI?
IRDAI is an abbreviation which stands for the Insurance Regulatory and Development Authority of India. It is an authority that acts as a regulatory board for the insurance industry in India and supervises the functioning of Life Insurance as well as General Insurance companies which are operating in the country.
IRDAI has set various rules and regulations for the operation of the insurance industry. Its sole objective is to defend the interest of the policyholders and grow and evolve the insurance industry as a whole. IRDAI regularly issues notice to insurance companies in case there are any changes in the rules and regulations. It leads the insurance companies to foster efficiency in the conduct of insurance business and control the rates or any other charges related to insurance.
What is the IRDA Act?
The IRDA Act provides a complete regulation of the insurance sector in India. A committee was established by the Government of India to examine the structure of the insurance sector and to advocate revisions to the rules and regulations to make it more effective and efficient.
The Insurance Regulatory and Development Authority was presented in the parliament in 1999. The bill was discussed and debated before it finally became the Insurance Regulatory and Development Authority (IRDA) Act of 1999.
What is an Insurance Ombudsman?
You must approach your insurance company for any query or distress with regards to your policy. However, if you feel your issue is not resolved, you can approach the Insurance Ombudsman which plays the role of grievance redressal forum for policyholders.
Insurance Ombudsman is a scheme launched by the Central Government for impartial, efficient and cost-effectively settlement of grievances of a policyholder. You can employ Insurance Ombudsman in case of:
- Claim settlement delay
- Dispute over insurance premium
- Total or partial rejection of the claim by the insurance company
- Conflict over policy terms and conditions
- Disputes over the legal aspects of policy
- Disputes related to policy services
- Any breach of rules or regulation of the Insurance Act, 1938
You can lodge a complaint in writing duly signed by the complainant or by employing any legal heirs or nominees. You can lodge the complaint either in person or via email/post/fax along with a hard copy.
Understanding The Role of IRDA in Indian Insurance Sector
The Insurance Industry in India, established back in the early 1800s, has developed over the decades with better transparency and emphasis on protecting the interest of the policyholders. Here are the roles IRDA plays in the Indian Insurance Sector:
- Protecting the interest of the policyholder
- Assist in advancing the growth of the insurance industry in an organised manner for the benefit of the common man
- Grant, renew, revoke, modify or suspend the registration certificate of an insurance company
- Safeguard policyholder in matters concerning the grant of policies, settlement of a claim, selection of a nominee by the policyholder, surrender policy value and other such terms and conditions of the policy
- Provide long-term funds to accelerate the nation’s economy
- Enforce high standards of integrity and competence among policy providers
- Ensure genuine claims are settled efficiently
- Prevent malpractices and policy frauds by providing a grievance redressal forum for policyholders
- Promote fairness and transparency of insurance in financial markets
- To build a reliable management system in order to ensure high standards are maintained and financial stability is observed by the policy providers
- Take appropriate actions when high standards are not maintained
- To ensure an optimal level of self-regulatory is maintained in the insurance industry
The Objective of IRDA:
The primary objective of the Insurance Regulatory and Development Authority is to implement the provisions under the Insurance Act. The mission statement of IRDA is:
- To safeguard the interest of policyholder and ensure his/her fair treatment
- To govern the insurance industry impartially and to make sure the financial sanity of the industry remains intact
- To routinely formulate regulations to ensure the insurance industry functions without any uncertainty.
Establishment of IRDA:
The Government of India was the regulatory body for the insurance industry until the year 2000. However, in order to establish a stand-alone body, the IRDA was built following the recommendation of the Malhotra Committee Report in 1999. By August 2000, IRDA began accepting applications for registrations and allowed companies through invites from different countries to invest as much as 26% in the Indian market.
The IRDA has defined several rules and regulations under the Insurance Act of 1938. These regulations range from registration of insurance companies to operate in the country to protecting the interest of policyholders. As of September 2020, there are 24 Life Insurance companies and 31 General Insurance companies who are registered with the IRDA.
How Does IRDA Work?
IRDA, known to be the apex body of the insurance sector, ensures that it frames rules and regulations without any uncertainty or ambiguity towards any insurance company. To ensure the integrity and financial soundness in the industry, the primary work of the IRDA revolves around the interest of the policyholder. Let us catch a look at the various roles of the IRDA in which the IRDA is mainly involved:
- To issue the certificate of registration to new insurance companies
- Establish rules and regulations to take care of interests of the policyholders
- To monitor all claims are settled in a fair manner, and no claim is denied by the insurance company under their free will
- To regulate the code of conduct of the insurance company and of those associated with the insurance industry
- Address issues and provide solutions in case of disputes which are arisen via the IRDA ombudsman
- Regulate and control the rate of insurance to impede undesirable and superfluous price hikes in insurance premiums which might cause distress to the policyholder
- The IRDA is also accountable for setting a minimum percentage limit of insurance companies for both Life Insurance and General Insurance, consequently developing both the rural as well as the urban sectors
- IRDA is also responsible for granting licenses to insurance agents. It issues licenses to individuals to clear the required exam. It was integrated with the IRDA regulations and comprised the rules for applying and acquiring an insurance agent license.
Features and Benefits of IRDA:
Given below are some of the leading features and benefits of the Insurance Regulatory and Development Authority (IRDA):
- Acts as a regulatory body for the insurance industry
- Safeguards the interests of the policyholder
- Rules and regulations are established by the IRDA under Section 114A of the Insurance Act of 1938
- IRDA has the authority to grant certificates of registration to new insurance companies who wish to operate in India
- IRDA oversees the activities of the insurance industry to guarantee persistent development of both the insurance company and the policyholder
- IRDA can control and regulate insurance rates, terms and conditions, advantages which are offered by the insurance providers to the policyholders
- IRDA also undertakes inspections and conduct audits of insurance companies, mediator parties and other organisations who are associated with the insurance business to keep an eye for malpractices and safeguard policyholder against frauds
- IRDA can specify code of conduct, training and qualifications for insurance agents