Insurance Regulatory and Development Authority
Insurance Act
The passage of the Insurance Act, 1938 and its subsequent amendments in 1950 and 1999 are serious attempts to bring order in the business of insurance in India. The Act attempted to address various issues relating to the business. Some of them are:
- Protection of policy holder interest
- Limiting the expenses of insurance organizations
- Establishment of tariff advisory committee
- Solvency levels to be maintained
- Creation of Insurance organization
- Defining the roles and responsibilities of various functionaries associated with the business
Insurance Regulatory and Development Authority Act
The passage of Insurance Regulatory and Development Authority Act in 1999 can be seen a dividing line for insurance business in India. It was an outcome of the implementation of the recommendations of a high powered committee, which suggested the setting up of a statutory body called the Insurance Regulatory Authority in 1996. This body was later renamed as Insurance regulatory and Development Authority with the passage of IRDA Act by the parliament.
Objectives of IRDA Act
- To protect the investor's interest
- To promote orderly growth of insurance industry in the country, including registration of insurance companies
- To administer the provisions of Insurance Acts
- To devise control activities needed for smooth functioning of the insurance companies including investment of funds and solvency requirements to be maintained by insurance companies.
- To lay down the accounting methodology to be adopted
- To adjudicate on disputes
Functions of IRDA
As defined by the IRDA Act, 1999, the broad functions of IRDA are as follows:
- Ensure orderly growth of the Insurance industry
- Protection of policyholder's interest
- Issue consumer protection guidelines to insurance companies
- Grant, modify, and suspend license for insurance companies
- Lay down procedure for accounting policies to be adopted by the insurance companies
- Inspect and audit of insurance companies and other related agencies
- Regulation of capital adequacy, solvency, and prudential requirements of insurance business
- Regulation of product development and their pricing including free pricing of products
- Promote and regulate Self Regulating organizations in the insurance industry
- Re-insurance limit monitoring
- Monitor investments
- Vetting of accounting standards, transparency requirements in reporting
- Ensure the health of the industry by preventing sickness through appropriate action
- Publish information about the industry
- Prescribe qualification and training needs of agents
- Monitor the charges for various services provided by insurance companies
IRDA Initiatives
Some of the initiatives of IRDA, by way of subsequent rules framed by it are:
- IRDA's regulation stipulate that the prospectus issued by the insurer should explicitly state the scope of benefits, conditions, warranties, entitlements exceptions, and right to participate in bonus under every plan of insurance
- A decision on the proposal should be made by the insurer within 15 days
- IRDA has framed regulations regarding advertisement by insurance companies and other intermediaries. They apply to all categories and media employed
- IRDA can adjudicate disputes between the insurance companies and intermediaries
- IRDA regulation requires that every insurance company appoint an actuary
- IRDA regulation has laid down the following stipulations as regards settlement of claim:
- All the requirements needed under death claim are to be sought in one instance
- Admit or repudiate the claim in 30 days
- All investigations need to be completed in 6 months
- Interest at 2 % over bank rate is payable in case of delayed settlement
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