The IRDA stands for the Insurance Regulatory and Development Authority. The IRDA was established in 2000after the recommendation of the Malhotra committee report in 1999 before the government had complete control over the insurance industry. Foreign businesses also participated in 26% of the market.
The IRDA is a vital body that supervises the insurance sectors of India. The main aim of IRDA is to secure the interest and ensure the development of insurance all over India. IRDA not only deals with life insurance and looks over to the public companies within the country. The headquarters of IRDA is situated in Hyderabad.
History of IRDAI
The IRDA is a statutory governmental body that promotes both insurance and re-insurance industries in India and is established in 1999. It was formed after the Insurance Regulatory and Development Authority Act was introduced in 1999. IRDA act was passed by the recommendation of the Malhotra committee report (1994), headed by former RBI governor Mr. R N Malhotra. Initially, the head-quarter of IRDA was in Delhi but shifted to Hyderabad and Telangana in 2001.
Working of IRDAI
IRDA is a governmental organization whose main aim is to promote good practices in the insurance industry of policyholders to prevent consumer loss. The main objective of IRDA is to secure the interest of policyholders during policy termination and claim processing and make sure that any insurance company does not refuse a claim on its initiatives. In addition, the IRDA makes rules and regulations for any insurance company and promotes the industry’s financial fairness.
IRDA is also responsible for issuing registration certificates for new insurance companies. In addition, it regulates the code and conduct of insurance companies and other insurance intermediates associated with the insurance industry. It provides solutions to any disputed cases through the IRDA ombudsman. In addition, it controls and regulates insurance rates and secures insurance holders from an unwanted price hikes in insurance premiums.
IRDA is a governmental body that sets the minimum percentage limit of insurance companies for both general and life insurance. IRDA plays a vital role in the development of rural and urban areas. According to the section of the IRDA act 1999, the organization contains: The governor of India appoints a chairperson, five full-time members, and four part-time members.
Headquarter of IRDAI
The headquarters of IRDA is situated in Hyderabad, which deals with insurers’ financial stability and regulates different market entities. The regional office of IRDA is located in New Delhi, and its focus is on consumer awareness also responsible for licensing surveyors and loss assessors.
Type of insurance regulated by IRDA
The IRDA classifies the insurance sector into life and non-life, also known as general insurance. Handles that policy that ensures the safety of life. Life insurance contains term plans, endowment policies, unit-linked insurance policies, retirement policies, and money-back policies. But the question arises what general insurance is? Available insurance deals with everything other than life this insurance, including car insurance, health insurance, home insurance, two-wheeler insurance, travel insurance, and more. The IRDA also contains a property insurance policy, travel insurance policy, and gadget insurance policy.
IRDA insurance regulatory framework:
It is a governmental body formed under the insurance regulatory and development Act of 1999, passed by the parliament for the overall administration and development of the insurance sector in India.
The IRDA Act 1999 contains the power and functions of this Authority. The main aim of the IRDA is to enhance customers’ comfort by increasing fair premiums and providing financial security to the insurance sector. The Insurance Act of 1938 is the primary Act responsible for maintaining India’s insurance sector. It gives power to IRDA to frame laws for the supervision of the organization in this sector. Some other acts, like the Marine Insurance Act, of 1963 and the Public Liabilities Insurance Act of 1991, govern the Insurance business and its function.
IRDA adopted a mission for itself, which is given below:
- The main aim of IRDA is to secure the interest of policyholders and provide them with fair treatment.
- To make sure the rapid growth of the insurance industry is essential for the benefit of the commoner, and it also provides long-term funds for the economy’s growth.
- It promotes a high standard of integrity, financial soundness, and fair dealing. For the rapid settlement of genuine claims, it is essential to prevent insurance fraud and various malpractices.
Organizations regulated by IRDA
IRDA regulates various financial organizations which provide insurance to the people:
- Life insurance companies- Life insurance is a contract between the insurance policyholder and the insurer in which the insurer pays some money for some time, and the insurance company provides financial protection to the policyholder and pays an amount to the nominee after the insurer’s demise. Life insurance companies contain both public and private companies.
- General insurance companies are insurance contracts that do not come under the ambit of life insurance; it only contains two-wheeler, car, fire, and more. It includes both public as well as private companies.
- Reinsurance companies are a form of insurance coverage for insurance companies where many companies come together to issue one single risk.
Regulation making process of IRDA
114 A of the Insurance Act, 1938, and Section 26 (1) of the IRDA Act, 1999, the Authority is responsible for framing laws and regulations. Section 25 of the IRDAI Act, 1999 contains an insurance advisory committee with more than 30 members, and the chairperson shall be the Ex official member of this insurance advisory committee.
The main aim of the insurance advisory committee shall be to advise the Authority on the matter related under section 26.
- According to the draft regulation, an insurance advisory committee is first in the meeting. Then, after the recommendation of the insurance advisory committee, the draft regulations are placed before the Authority for its approval.
- Every regulation the Authority approves must be present in the Gazette of India.
Importance of IRDA
- It is paramount to avoid malpractices and help prevent fraud
- It is responsible for a reliable management system with high financial stability and standards.
- Provide faster and proper settlement of genuine insurance claims.
- Most importantly, it provides safety to the interest of policyholders.
- It offers long-term funds, which tend to the rapid increase in the country’s economy.
- It provides a reliable management system by which insurance companies offer high financial stability.
Feature of IRDA
- IRDA plays an essential role in the insurance industry.
- It was responsible for granting the certificate of registration to new companies to operate in India.
- It ensures the activities of the overseas insurance industry and promotes the development of insurers and policyholders.
- It frames rules for the insurance companies by different insurance regulating acts proposed by parliament.
Conclusion
The IRDA is a statutory body made by the insurance regulatory and development Authority act 1999. The IRDA ensures insurance companies’ growth and controls and supervises the entire insurance industry. The success of the insurance sector purely depends on the insurance companies. It provides quick service, financial stability, and the most advanced technology for staff and agents. Furthermore, it protects the policyholders from any fraud.
Frequently asked questions
Q1. What is an insurance ombudsman?
Ans. A scheme introduced by a central government is essential for policyholders’ grievances and equitable settlement.
Q2. Does IRDA give licenses to insurance agents?
Ans. IRDA gives a license when a person clears the exam.
Q3. How many insurance companies come under IRDA
Ans. There are around 24 life insurance companies and 34 other insurance companies.
Q4. Which type of insurance policy is responsible for the electronic format?
Ans. The electronic format includes all types of life insurance, general insurance, health insurance, and policies issued by insurance companies.
