Introduction to Insurance Regulatory and Development Authority (IRDA)
The insurance industry in India is vast and there are various insurance companies that deal with different types of insurances including life insurance and general insurance. These companies need a regulatory body to manage their work. This is done by an autonomous body called the Insurance Regulatory and Development Authority or IRDA. This body was constituted in the year 1999, to regulate and develop the insurance industry and was incorporated in August 2000. The Insurance Regulatory and Development Authority or IRDA operates with the objectives of promoting competition to enhance customer satisfaction with increased customer choice and lower premiums while ensuring financial security of the insurance market. To understand how the insurance industry operates in the country, it is important to understand the working and functions of the Insurance Regulatory and Development Authority or IRDA.
What is the Insurance Regulatory and Development Authority or IRDA?
Insurance Regulatory and Development Authority or IRDA is an autonomous body in India that is responsible for managing the insurance industry of India, which covers both life insurance and general insurance companies. Insurance sector is one of the vast sectors in India that provides various opportunities to the insurance holders. Hence, it is governed by a separate body known as the insurance regulatory and development authority or IRDA. IRDA works as the head of the insurance industry in India and regulates all the rules and guidelines for different insurance companies in the country. The insurance industry in India has grown extensively over the years as more new companies are entering the market. This has led to increased competition in the industry both in the general and life insurance sectors. All these companies had their own set of rules and guidelines which led to confusion in the market. So to bring a set model of rules and guidelines to be followed by all insurance companies, the insurance regulatory and development authority or IRDA was established. When talking about the Insurance Regulatory Development Authority (IRDA), you can say that it acts as the head of the family that guards the needs of each member of the family and maintains a balance between the family while also resolving any differences between the family members and helping them in crisis. As the head of the family is responsible for the entire family, similarly the Insurance Regulatory Development Authority or IRDA is responsible for the insurance industry in the country and it runs the insurance industry by setting certain rules and regulations which all members and insurance companies have to follow.
How does the Insurance Regulatory and Development Authority (IRDA) work?
The insurance regulatory and development authority (IRDA) works with the aim to regulate fair practice in the insurance industry. With this aim, IRDA ensures that no insurance company can deny claims to the policy holders unless they fall beyond the scope of cover. To ensure fair practice in the industry the IRDA also calls for monthly or annual audits from the insurance companies. It also regulates the rates and terms set by the insurance companies to ensure equality among all consumers. The insurance regulatory and development authority or IRDA also works to solve any disputes or misunderstandings that may arise between the insurance company and the policyholder regarding the concerned policy.
Structure of the Insurance Regulatory and Development Authority or IRDA
The structure and composition of the Insurance Regulatory and Development Authority or IRDA is specified in the section 4 of the IRDA act, 1999. The Insurance Regulatory and Development Authority is a ten member body that consists of a chairman, five full time and four part time members who have been appointed by the government of India.
Functions of the Insurance Regulatory and Development Authority or IRDA
Now that we have seen what the Insurance Regulatory and Development Authority or IRDA is and how it works, it is also important to understand the functions that are carried by the IRDA. The functions of IRDA are defined in section 14 of the Insurance Regulatory and Development act or IRDA act, 1999. These functions are as follow:
- To issue, renew, modify, withdraw, suspend, or cancel registrations is one of the important functions of the Insurance Regulatory and Development Authority or IRDA.
- To protect policyholders interests which gives them a sense of security and confidence regarding the policy they have invested in.
- To specify the qualifications, code of conduct and training for intermediaries and agents, so as to ensure that only the best and talented people are involved in the process.
- To promote efficiency in conducting the insurance business.
- To promote and regulate professional organisations that are connected to the insurance and reinsurance companies.
- To inspect and investigate insurers, intermediaries, and other relevant organisations.
- To regulate company investment of funds and margin of solvency.
- To adjudicate disputes between insurers and intermediaries or insurance intermediaries.
- To specify the percentage of premium income to finance schemes for promoting and regulating professional organisations.
- To specify the percentage of life and general insurance business undertaken in the rural and social sector.
- To specify the form and manner in which the books of accounts are to be maintained, and statements of accounts shall be rendered by insurers and other insurance intermediaries.
- To regulate the rates, advantages, terms and conditions, which may be offered by insurers and not covered by the Tariff Advisory Committee under section 64U of the insurance Act, 1938.
- To supervise the Tariff Advisory Committee.
- To encourage the systemic growth of the insurance industry in order to benefit the common people who invest in the policies.
The Insurance Regulatory and Development Authority or IRDA plays an important role in maintaining the smooth functioning of the insurance sector. This is mainly because the Indian economy is a growing economy and more and more insurance companies are making their entry in the market. So to maintain a steady pace of growth the Insurance Regulatory and Development Authority or IRDA needs to maintain the standards of quality. It also further contributes to strengthening the financial capacity of a country.
