INSURANCE IN INDIA (PART 5)

INSURANCE REGULATORY & DEVELOPMENT AUTHORITY (IRDA)

Background

Ä  1991: Government of India begins the economic reforms programme and financial sector reforms

Ä  1993: Committee on Reforms in the Insurance Sector, headed by Mr. R. N. Malhotra, (Retired Governor, Reserve Bank of India) set up to recommend reforms.

Ä  1994: The Malhotra Committee recommends certain reforms having studied the sector and hearing out the stakeholders

Some recommended reforms

Ø  Private sector companies should be allowed to promote insurance companies

Ø  Foreign promoters should also be allowed

Ø  Government to vest its regulatory powers on an independent regulatory body answerable to Parliament

Birth of IRDA

F Insurance Regulatory and Development Authority (IRDA) set up as autonomous body under the IRDA Act, 1999

F IRDA’s Mission: To protect the interests of policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto

IRDA’s Activities

'  Frames regulations for insurance industry in terms of Section 114A of the Insurance Act 1938

'  From the year 2000 has registered new insurance companies in accordance with  regulations

'  Monitors insurance sector activities for healthy development of the industry and protection of policyholders’ interests

IRDA’s Mission

Insurance Regulatory and Development Authority (IRDA) Act, 1999 spells out the Mission of IRDA as:

§      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 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.

Functions and Duties of IRDA

Section 14 of the IRDA Act, 1999 lays down the duties, powers and functions of IRDA. 

F Registering and regulating insurance companies

F Protecting policyholders’ interests

F Licensing and establishing norms for insurance intermediaries

F Promoting professional organisations in insurance

F Regulating and overseeing premium rates and terms of non-life insurance covers

F Specifying financial reporting norms of insurance companies

F Regulating investment of policyholders’ funds by insurance companies

F Ensuring the maintenance of solvency margin by insurance companies

F Ensuring insurance coverage in rural areas and of vulnerable sections of society

Composition of IRDA

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)

Present Chairman of IRDA  : T S Vijayan

The Authority is functioning from its Head Office at Hyderabad, Andhra Pradesh.