What is Insurance Regulatory and Development Authority (IRDA) ?
The government of India decided to open up the insurance sector to provide better coverage to the citizens. It was also important for boosting the flow of long-term funds. For this purpose, the government instituted the IRDA Act. It was enacted in 1999 for the purpose of designing the policies for safeguarding the interests of the public, for regulating, promoting and ensuring the proper growth of the industry. The government also sought to amend the Insurance Act, 1938, the LIC Act, 1956, and the General Insurance Business (Nationalization) Act, 1972.
Features of Insurance Regulatory and Development Authority Act
The main features of IRDA Act are as follows :
- IRDA will consist of a chairman, whole-time member not exceeding five, part-time members not exceeding four. The members will have experience and training in various matters including life insurance, actuarial sciences, economics, administration and general insurance.
- IRDA will do the work of regulating, promoting and ensuring proper growth of the insurance as well as re-insurance business. It will also have the responsibility of issuing, modifying, renewing and cance lling certificate of registration.
- Protection of the interests of policy holders and the maintenance of professional workforce is another area of responsibility for the IRDA. It may undertake investigation and inquiry for ensuring the compliance with all the regulations.
- IRDA has the power to levy fees and charges for enforcing the rules. The Comptroller and Auditor General (CAG) also have the power to audit the financial statements of IRDA.
The government may decide the further policy matters for the IRDA. It may also provide proper direction. The government has the power to suspend the authorities of the IRDA. However, such suspension cannot extend beyond six months. However, in case of emergency, the government may appoint a new Controller of Insurance for carrying out the task.
Powers and Functions of Insurance Regulatory and Development Authority
Section 14 of the IRDA Act provides following powers to the authority under its sub-section 1 :
1) Registration :
Issuance, renewal, withdrawal and cancellation of certificate of registration.
2) Protection :
It aims to safeguard the interests of the policy holders. It also takes care of other issues such as nomination, settlement, surrender and terms and conditions of the contract.
3) Qualification :
It is entrusted the task of setting up code of conduct, benchmark and qualification.
4) Code of Conduct :
IRDA set up the code of conduct for loss assessors and surveyors.
5) Efficiency :
IRDA promotes the level of efficiency in the industry.
6) Professionalism :
IRDA promotes and regulates the organizations related with the business of insurance and re-insurance.
7) Fees :
The act also determines various fees charges to be levied.
8) Information :
Insurance Regulatory and Development Authority may also call for information, conduct inquiries and audits of the insurance businesses as well as the related organizations.
9) Terms of Business :
IRDA issues various. regulations for controlling rates, terms and conditions and other related issues.
10) Books of Accounts :
It specifies the form in which books of accounts need to be maintained by the insurance companies and insurance. intermediaries.
11) Funds Investment :
The act monitor the investment of funds by the insurance companies.
12) Margin of Solvency :
The act regulates the maintenance of margin of solvency.
13) Adjudication :
To resolve issues arising out between insurance companies and with the clients.
14) Supervising :
To monitor the functioning of the Tariff Advisory Committee.
15) Premium Income :
It also specifies the percentage of the premium income which may be used for different purposes.
16) Rural and Social Insurance :
It also specifies the requirement of rural and social insurance business to be undertaken by the insurance companies.
17) Other :
It needs to exercise other powers which may be assigned from time to time.
Role of Insurance Regulatory and Development Authority as a Regulatory Authority
Following are the main roles carried out by the IRDA :
- To safeguard the interest of the policyholders and to provide them fair treatment.
- To ensure speedy and proper growth of the insurance industry in order to benefit regular public and the economy.
- To set the benchmarks for the performance of the insurance industry.
- For ensuring that the policyholders are provided with correct and clear information. It is also with correct ensured that they know their rights and responsibilities.
- To ensure that the claims are settled in a fair and fast manner. It also ensures that there are no insurance frauds or malpractices.
- For promoting fair practices, transparency and proper conduct in the industry.
- To take adequate actions to ensure that the standards are properly applied.
- To evaluate proper amount of self-regulation in the industry.