Short note on IRDAI

1. Introduction

The insurance sector is made up of companies that offer risk management in the form of insurance
contracts. The basic concept of insurance is that one party, the insurer, will guarantee payment for an
uncertain future event. Meanwhile, another party, the insured or the policyholder, pays a smaller premium
to the insurer in exchange for that protection on that uncertain future occurrence. In india insurance sector
is dealt by IRDAI.The creation of IRDA has brought revolutionary changes in the Insurance sector. In
years of its establishment, the insurance sector has seen tremendous growth. When IRDA came into
being; only players in the insurance industry were Life Insurance Corporation of India (LIC) and General
Insurance Corporation of India (GIC), however in last decade 23 new players have emerged in the field of
insurance. The IRDA also successfully deals with any discrepancy in the insurance sector.

The preamble of the Act states that it is, “An Act, to provide for the establishment of an authority to
protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of
the Insurance Industry and for matters connected there with or incidental thereto.” It is clear from the
preamble that the Act is to establish authority which will:

Protect the interests of holders of insurance policies;

Regulate, promote and ensure orderly growth of Insurance Industry;

and other matters which may be connected with or incidental to the above mentioned purposes

2. Establishment

IRDA - Insurance Regulatory Development and Authority is the statutory, independent and apex
body that governs and supervise the Insurance Industry in India.

o It was constituted by Parliament of India Act called Insurance Regulatory and

Development Authority of India (IRDA of India) after the formal declaration of
Insurance Laws (Amendment) Ordinance 2014, by the President of India Pranab Mukherjee
on December 26,2014
 o IRDA Act was passed upon the recommendations of Malhotra Committee report (7
Jan,1994), headed by Mr R.N. Malhotra (Retired Governor, RBI)
o Main Recommendations - Entrance of Private Sector Companies and Foreign
promoters & An independent regulatory authority for Insurance Sector in
India
o In April,2000, it was set up as statutory body, with its headquarters at New Delhi.
o The headquarters of the agency were shifted to Hyderabad, Telangana in 2001

3. MISSION OF IRDA
The mission of Insurance Regulatory and Development Authority (IRDA) is to protect the interests of the
policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters
connected therewith or incidental thereto.

Objectives of IRDA:
o To promote the interest and rights of policy holders.
o To promote and ensure the growth of Insurance Industry.
o To ensure speedy settlement of genuine claims and to prevent frauds and
malpractices
o To bring transparency and orderly conduct of in financial markets dealing
with insurance.

Organisational Setup of IRDA:

IRDA is a ten member body consists of :

o One Chairman (For 5 Years & Maximum Age - 60 years )

o Five whole-time Members (For 5 Years and Maximum Age- 62 years)
o Four part-time Members (Not more than 5 years)
The chairman and members of IRDAI are appointed by Government of India.
The present Chairman of IRDAI is Subhash Chandra Khuntia.
Powers and Functions of IRDA

1. It issues the applicants in insurance arena, a certificate of registration as well as

renewal, modification, withdrawal, suspension or cancellation of such
registrations.
2. It protects the interests of the policyholders in any insurance company in the
matters related to the assignment of policy, nomination by policyholders, insurable
interest, and resolution of insurance claim, submission value of policy and other
terms and proposals in the contract.
3. It also specifies obligatory credentials, code of conduct and practical
instructions for mediator as well as the insurance company. Apart from this, it also
defines the code of conduct for the surveyors and loss assessors involved with the
insurance business.
4. One of the major functions of IRDA includes endorsing competence in the
insurance business. Apart from this, upholding and regulating professional
organizations in insurance and re-insurance business is also a major duty of IRDA.
5. IRDA is also entitled to for asking information, undertaking inspection and
investigating the audit of the insurers, mediators, insurance intermediaries and
other organizations related to the insurance sector. 74 6. It is also concerned with
the regulation of the rates, profits, provisions and conditions that may be offered by
insurers in respect of general insurance business if it is not controlled or regulated
by the Tariff Advisory Committee.
7. It is also entitled to supervise the functioning of the Tariff Advisory Committee.
8. IRDA specifies the terms and pattern in which books of accounts are to be
maintained and statement of accounts shall be provided by insurers and other
insurance mediators.
9. It also regulates investment of funds by insurance companies as well as the
maintenance of margin of solvency.
10.It is also empowered to be involved in the arbitration of disagreements between
insurers and intermediaries or insurance intermediaries.
11.It is meant to specify the proportion of premium income of the insurer to
finance policies.
12.IRDA also specifies the share of life insurance business and general insurance
business to be accepted by the insurer in the rural or social sector.
13. Promoting efficiency in the conduct of insurance business; 75
14. Promoting and regulating professional organisations connected with the
insurance and re-insurance business;
15. Ievying fees and other charges for carrying out the purposes of this Act;
16. Calling for information from, undertaking inspection of, conducting enquiries
and investigations including audit of the insurers, intermediaries, insurance
intermediaries and other organisations connected with the insurance business;
17.Control and regulation of the rates, advantages, terms and conditions that may
be offered by insurers in respect of general insurance business not so controlled
and regulated by the Tariff Advisory Committee under section 64U of the
Insurance Act, 1938 (4 of 1938);
18.Specifying the form and manner in which books of account shall be maintained
and statement of accounts shall be rendered by insurers and other insurance
intermediaries;
19.Regulating investment of funds by insurance companies;
20.Regulating maintenance of margin of solvency.
21.Adjudication of disputes between insurers and intermediaries or insurance
intermediaries; 76 22.Supervising the functioning of the Tariff Advisory
Committee;
23.Specifying the percentage of premium income of the insurer to finance schemes
for promoting and regulating professional organisations referred to in clause (f);
24.Specifying the percentage of life insurance business and general insurance
business to be undertaken by the insurer in the rural or social sector; and exercising
such other powers as may be prescribed