In this article, Bhargav K.S from KLE Law College discusses Insurance Regulatory and Development Authority (IRDA) Act, 1999.
INSURANCE
Insurance is a contract. In which there is a full or partial financial compensation provided for the loss or damage caused by events which are beyond the control of the insured party.There are a wide range of insurance policy available. The most common types of insurance policies are based on automobiles, health, homeowners and life insurance policies. There are insurance policies available for specific needs such as medical malpractice, professional liability insurance etc.
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY
Insurance Regulatory and Development Authority regulates and promotes the insurance and re-insurance industries of India. It was established by the Insurance and Regulatory and Development Authority Act,1999, an Act passed by the government of India. It’s headquarters is in Hyderabad which was moved from Delhi.
HISTORY OF INSURANCE IN INDIA
Insurance has a deep-rooted history in India. Insurance practices was found in the ancient Indian texts of Rig-Veda. Rig-Veda refers to the concept of ‘Yogakshema’ which means, ‘prosperity, well being and security of people’.
In India Insurance was also mentioned in the ancient writings of Kautilya (Arthasastra), Manu (Manusmrithi), Yagnavalkya (Dharmashastra) which states the re-distribution of resources after a God’s Act (Flood, earthquake)etc or during famine or epidemics. Ancient history has found traces of insurance in the form of marine trade loans.
Business in life insurance began with the establishment of Oriental life insurance company in Calcutta. In the nineteenth century, Bombay Mutual, Oriental and Empire of India began their business in the Bombay presidency. But in the nineteenth Century the whole insurance sector was dominated and controlled by the foreign insurance companies. Hence, Indian insurance company had to put up with strong competition from the foreign insurance companies like Liverpool, London Global Insurance etc.
The first statute which regulated the life insurance was passed in 1912. The Indian life insurance was passed in 1912. The Indian life Assurance Companies Act was enacted to help the government to collect all the necessary information regarding the life and non-life insurance business which is conducted by Indian and foreign insurers in India. There were unfair trade practices in the insurance sector due to a large number of competition among the insurance companies. Hence, the Government of India decided to nationalize the insurance business.The life-insurance sector was nationalized by an ordinance issued on January 19th, 1956. The life insurance corporation was established in the same year. The life insurance corporation absorbed 154 Indian,16 Non-Indian insurers, and 75 provident societies.
The Government passed the general insurance business Act in 1972 which nationalized the insurance sector,107 insurers were grouped into four companies:-
1) National Insurance Company Ltd at Kolkata.
2) New India Assurance Company Ltd at Mumbai.
3) Oriental Insurance Company Ltd at New Delhi.
4) United India Insurance Company Ltd at Chennai.
The government set up a committee headed by the former chairman of the Reserve Bank of India governor R.N Malhotra to propose recommendation for the initiation and implementation of reforms in the Indian Insurance sector. The committee submitted a report in 1994 which recommended that the private sector be permitted to enter the insurance sector. It also recommended the participation of the foreign insurance companies but a joint venture was preferred with Indian partners. With the recommendation from the Malhotra Committee, the Insurance Regulatory and Development Authority (IRDA) Act was passed in 1999 by the Parliament of India. Insurance Regulatory and Development Authority is an autonomous body was set up to develop the Indian insurance authority.
The Insurance Regulatory and Development Authority (IRDA) opened up the Indian insurance markets in August 2000 by providing invitation for registration proposal. And the foreign companies were allowed to enter the Indian insurance sector with an ownership up to 26%.
The main aim of the Insurance Regulatory and Development Authority of India was to increase customer satisfaction with a variety of Insurance products and services and also promote healthy competition in the Insurance sector. IRDA also aimed at increasing the consumer choice and provide security in the insurance market in India.
The Insurance Regulatory and Development Authority has powers to regulate the insurance sector under section 144A of the insurance Act, 1938. The main objectives of the IRDA are the protection of Indian policy holders and also includes the registration of life and non life insurance companies.
IRDA increased the Foreign Direct Investment from 26 % to 49%.
STRUCUTRE OF IRDA
IRDA consists of ten-members with five full time and four part time members appointed by the Government of India. As of September 2016 the present authority is chaired by T.S Vijayan.
And it’s full-time members are :-
- J Joseph
- Nilesh sathe
- R Iyer
- Pournima Gupte
- D Singh.
POWERS AND FUNCTIONS OF INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY
The IRDA has the duty to promote and develop the growth of insurance and re-insurance business across India. The duties, powers, functions of IRDA has been mentioned under the section 14 of IRDA Act, 1999.
POWERS OF IRDA
- IRDA determines the capital structure of all the companies.
- IRDA stipulates the money to the companies which has to be deposited with the RBI.
- Company’s balance sheet and Accounts have to submitted to the IRDA.
- Only insurance business should be undertaken by companies.
- IRDA will prescribe the investment of assets in the form of approved securities.
- IRDA prescribes the nature of general insurance business.
- Every financial year statement of investment should be submitted to the IRDA by insurance companies.
- The insurance companies have to take a prior permission of the IRDA to appoint a chief executive officer .
- Insurance agents should obtain licence from IRDA.
- IRDA can levy penalty on companies which fail to comply with the rules and regulations.
FUNCTIONS OF IRDA
- IRDA issues certificate of registration as well as modify, renew, withdraw and suspend registration that is deemed unfit.
- IRDA protects the interests of the policy holders, they settle the disputes of insurance claims.
- IRDA provides the proper qualification required for the insurance agents
- IRDA promotes the efficiency of the insurance business.
- IRDA also conducts the necessary information and also investigates organizations connected with the insurance business.
- IRDA specifies the way in which the book of account has to maintained by the insurance companies.
- IRDA regulates and controls the investment of funds by insurance companies.
- IRDA supervises the Tariff Advisory Committee.
- IRDA also fixes the percentage of insurance business in rural and social sectors.
DUTIES OF INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY
1) Regulates the working of the insurance companies in the following ways:-
* Nature of the insurance business
* Persons to be employed.
2) Promotes the growth of insurance companies.Even the banks are also permitted to promote the insurance companies.Different kinds of policies and also different kind of insurances are also suggested by IRDA.
INSURANCE OMBUDSMAN
The main aim of the creation of the ombudsman is to settle the disputes between the insured and insurer. Judicial powers are given to the ombudsman to have a speedy settlement of the cases. Any complaint filed on the insurance companies will be settled by the ombudsman.
THE OTHER DEVELOPMENTS IN THE INSURANCE SECTOR
The establishment of the insurance repository system which helps policy holders to buy and maintain insurance policies electronically.
The insurance sector is massive industry with an expansion rate of 15-20% which constitutes to 7% to the whole GDP. Hence, a well developed insurance sector is a big boom for the whole economy of a country.
REFERENCE:-
5)www.bankexamstoday.com
