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This article is written by Ayushma Sharma of Faculty of Law, Aligarh Muslim University in which she has discussed the Role of Insurance Regulatory and Development Authority of India (IRDA).

Introduction

IRDA Full Form

Insurance Regulatory and Development Authority of India, commonly known as, IRDA, is the supreme authority that authorizes the insurance business in India. It was established by the Insurance Regulatory and Development Authority of India Act, 1999 after the declaration made by the former President of India, Pranab Mukherjee, on Insurance Laws (Amendment) Ordinance of 2014. 

Establishment of IRDA

The Insurance Regulatory and Development Authority of India was established on the recommendations made by the Malhotra Committee in its report. This committee was headed by Mr. R.N. Malhotra (retired Governor of the Reserve Bank of India). It was finally set up at New Delhi on April 2000, but later on, it was shifted to Hyderabad, Telangana in 2001. The main recommendation made by this committee was to allow the entrance of private sector companies and foreign promoters and independent regulatory authority for the Insurance sector in India.

Objectives of IRDA

Following are the objectives of the IRDA:

  • To carry forward the interests of the policyholders.
  • To uphold the development of the Insurance industry.
  • To ensure speedy resolution of claims.
  • To prevent frauds and malpractices.
  • To ensure fair conduct on the part of the financial market and transparency when dealing with insurance. 

Composition of IRDA

According to Section 4 of the Insurance Regulatory and Development of Authority Act, 1999, the members of the Authority will consist of the following :

  • a chairman
  • not more than five full-time members
  • not more than four-part time members

And together they are supposed to work as a team, work cooperatively and not individually.

These members are to be appointed by the Government of India from amongst the persons exhibiting qualities that would be useful to the Authority like, exceptional knowledge in the field of life insurance, financial markets, economics, law, accountancy, general insurance. They should have good experience in these fields, too. Though, the chairman and each of the five full-time members are expected to have knowledge and experience in life insurance, general insurance, or actuarial science respectively. The current chairman of the Authority is Subhash Chandra Khuntia. He was appointed in 2018.

It has the right to sue the other party on its name. It can also be sued in its name. Also, if any of the members dies or resigns, the Authority will continue to work.

Powers of IRDA / IRDA Functions

As per Section 14 of the Insurance Regulatory and Development of Authority Act, 1999 the Authority has to ensure the regulation, development and promotion of the insurance business and reinsurance business. Following are the other powers, duties and functions of the Authority:

  • To avail the applicant a certificate of registration, renewal, modification, withdrawal, suspension or cancellation of such registration.
  • To protect the interests of the policy holders in cases related to assigning and nomination of policy holders, understanding of insurance claims, insurable interests, surrendering of the value of the policy and other terms and conditions of the insurance contract.
  • To specify the necessary qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents.
  • Explaining the required code of conduct to the surveyors and loss assessors.
  • To ensure that the proficiency and efficiency of the conduct of the business of insurance.
  • To encourage and regulate the relationship between the professional organisations and the insurance and reinsurance businesses. 
  • To levy charge to carry out the purpose of the Act.
  • To call for the information, undertaking an inspection of, conducting enquiries and investigations including the audit of insurers, intermediaries, insurance intermediaries and other organisations connected with the insurance business.
  • To control and regulate the rates, benefits, terms and conditions which are offered to the insurer in respect of general insurance business that is not controlled and regulated by the Tariff Advisory Committee under Section 64U of the Insurance Act of 1938 (4 of 1938).
  • To specify the manner in which the books are to be maintained and the way in which the statement of accounts shall be rendered by insurers and other insurance companies.
  • To maintain the investment funds by the insurance companies.
  • To regulate the maintenance of margin solvency.
  • Deciding the disputes between the insurers and the intermediaries of insurance intermediaries.
  • Administering the functioning of the Tariff Advisory Committee. 
  • To set down the percentage premium income of the insurer of finance schemes for promoting and regulating the professional organisations.
  • To protect the interests of the policyholders in cases related to assigning and nomination of policyholders.
  • To set out the percentage of life insurance business and general insurance business to be taken forward by the insurer in the rural or social sector.
  • Exercising other powers as may be prescribed.

Chairman of IRDA 

The Chairman of the Insurance Regulatory and Development of Authority of India is appointed by the collegium (consisting of three members) in consultation with the President of India. The present (as of August 2019) Chairman of the Insurance Regulatory and Development of Authority of India is Subhash Chandra Khuntia. He was appointed in 2018. The Government had short-listed eight candidates for the appointment.

As per the Insurance Regulatory and Development of Authority Act, 1999, the salary of a Chairman of the Insurance Regulatory and Development of Authority of India is Rs. 4.5 lakh per month. He holds office for a term of five years, according to Section 5 Insurance Regulatory and Development of Authority Act, 1999.

Role of IRDA

The role of IRDA includes:

  • To ensure interests and fair treatment to the insurance policy holders.
  • To ensure the development of the insurance industry or sector and to impart benefits to people and long-term funds to increase the growth of the economy.
  • To promote and apply high standards of integrity, fair dealing, the ability of all those companies that it administers.
  • To ensure clarity and accuracy while contracting with the insurance policyholders. The Authority has to ensure that true information has been rendered regarding products and services. Also, to make policyholders aware of the different plans and policies that are being implemented by the Insurance sector.
  • To provide speedy trials in case of disputes and to prevent fraud or any other misconduct.
  • To initiate new standards where they are needed or where there is lack of such standards.
  • To promote self-regulation in daily activities with the necessary regulations

IRDA Effect

Effects of Insurance Regulatory and Development Authority are as follows:

Effects over-regulation of Insurance Sector

IRDA has a huge impact on the Insurance sector of India. The Authority has to keep a close check on the Insurance sector to ensure that the interests of the policyholders remain intact. It regulates every activity of the insurance sector.

Effects over Policyholders Interests Protection 

The main purpose of this Authority is to protect the interests of the policyholders and it has kept up with its purpose.

Effects over Awareness to Insurance

The IRDA, in order to ensure that the interests of the policyholders are protected, has to make sure that policyholders are aware of all the latest policies and plans of the Authority that would benefit them. 

Effects over Insurance Market

There is a great transformation in the market due to the effects of the Insurance Regulatory and Development Authority be it with respect to marketing, insurance products, competitions and customer awareness.

Effects over Development of Insurance Product

In order to ensure the growth of the insurance market, IRDA has to introduce new methods that would help in increasing its efficiency. The development of Unit-Linked Insurance Plans is the result of privatization of the insurance sector, a step taken by the Insurance Regulatory and Development Authority of India.

Effects over Competition in the Insurance Sector

Initially, when there was no privatisation there was no competition. The different companies in the Insurance sector had to compete amongst themselves. But, after the advent of privatization of the Insurance sector the competition has increased, now it means international competition. It has increased the level of competition.

Effects over Government Responsibility

It is because of the Insurance Regulatory and Development Authority (IRDA) that the government is doing everything possible to ensure uniformity, accountability and responsibility in the Insurance sector.

Effects over Banks and Post Offices

Insurance has resulted in giving security against any kind of uncertainties or risks, so the Insurance sector has become a popular medium for savings and investments. Thus, the Insurance Regulatory and Development Authority has helped in diverting the flow of funds from banks and post offices to the insurance industry.

Effects over individual Life’s 

Now, because of the awareness created by the Insurance Regulatory and Development Authority and the policies introduced by it has resulted in a great impact on the life of an individual.

Effects over Share Market

Since the Insurance Regulatory and Development Authority has introduced Unit-Linked Insurance plans (an insurance plan in which the policyholders get investment and insurance in a single plan) more and more people are trying out the plan. Therefore, with the help of insurance products can now be raised more easily for the companies and has attached many persons indirectly with the activities of the share market.

Effects over the Economy of India 

Insurance Regulatory and Development Authority effects over the economic development of the country because money invested by the investors or the individuals in various types of insurance products has channelized the funds of a country for a non-economic activity to economic activity and has made available to the government of a country in order to implement the various developmental activities in the country.

IRDA Complaint

In case the insurer is not happy with the workings of the insurance, then he can seek redressal by following the steps mentioned below:

Step 1 – file your complaint in writing and attach the required documents

Step 2 – take a written acknowledgement of your complaint with the date

The insurance company is supposed to resolve the problem of the applicant within 15 days from the date of filing the complaint. In case, the applicant is not satisfied with the redressal, then, in that case, he can approach the Grievance Redressal Officer of its branch or any other office that he can deal with.

  • Send an email to [email protected] to approach the Grievance Redressal Cell of the Consumer Affairs Department of IRDA.
  • By using an Integrated Grievance Management System the applicant can register and track the complaint at www.igms.irda.gov.in.
  • The applicant can then send a letter or fax to the Insurance Regulatory and Development Authority with the complaint.

IRDA Guidelines 

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IRDA Guideline and Rules for Health and Mediclaim Insurance

India has seen a high rise in the growth of the health insurance sector for the past few years. The reason behind this growth can be considered as an increase in the awareness amongst the people regarding the importance of health and insurance and also, rise in the disposable income of the people. The main purpose of the insurance of the health industry is not only to sell health insurance policies but also to effective and speedy remedy in case of any necessity. But some complaints have been made by the customers about denial by the insurance companies on perky grounds. Therefore, the Authority decided to introduce reforms that would help people in making successful claims and getting the appropriate remedies.

New Rules to standardize Health Insurance Sector by IRDA

The Insurance Regulatory and Development Authority of India aims at increasing the efficiency and protecting the interests of the policyholders. To avoid any kind of misunderstanding the Authority has decided to introduce guidelines. This also helped in standardizing the health insurance policies. The guidelines include some provisions that are necessary to be fulfilled by every health insurance policy and the policyholders.

The guidelines introduced by the IRDA aims to reduce fraudulent cases and provide contentment to the policyholders. Normally, the policyholders don’t trust the insurance policies, so the Authority tried to work on this aspect, too. It has tried to increase the level of trust between the policyholder and the insurer. Through this the policy seekers will be able to understand different clauses which in turn help them in investing in only those policies which will satisfy their requirements. 

Below mentioned is the link that will provide you with all the guidelines of the issued by the Insurance Regulatory and Development Authority of India.

https://www.irdai.gov.in/ADMINCMS/cms/frmG

IRDA Regulations 

According to section 26 of the Insurance Regulatory and Development Authority of India Act, 1999, the Authority after consulting the Insurance Advisory Committee can introduce some new regulations under the Act which will help in achieving the objectives of the Act. The Authority make regulations in the following matters:

  1. The time and place of the meetings and the manner in which they are to be held.
  2. In the provisions mentioned in section 10(4) of the Act.
  3. The conditions of service of officers and other employees.
  4. The powers entrusted in the hands of the committees of the members under section 23(2).
  5. In any other matter that requires new rules. 

Insurance Regulatory and Development Authority of India (IRDA) Act, 1999

Some of the important provisions of the Insurance Regulatory and Development Authority of India Act, 1999 are as follows:

  • Section 5 – Tenure of office of chairperson and the other members.

The Chairperson and all the whole- time members shall remain in office for a term of five years from the date on which they first entered their office. Also, they will be eligible for re-appointment. The Chairperson can not remain in the office after they have attained the age of sixty-five years and the whole-time members shall not hold the office once they have the age of sixty-two years. The part-time members can hold their position for a term not more than five years from the date on which he entered his office.

Any member of the Authority can be removed from his office if:

  1. He has been declared as insolvent.
  2. He has lost his ability to work mentally or physically.
  3. He has committed any offence which in Central Government’s opinion involves moral turpitude.
  4. He has developed any financial interest which in turn will jeopardize his position in the office.
  5. He has used his position in such a way that it is no longer in the interest of the public.

Though the removal of a member under the 4th and 5th point mentioned above cannot be done unless the accused person has been given an opportunity to explain his conduct.

  • Section 9 – Administrative powers of the Chairperson.

The Chairperson will have the powers related to general superintendence and direction in respect of all the administrative matters of the Authority.

  • Section 13 – Transfer of assets, liabilities, etc., of Interim Insurance Regulatory Authority  

On the appointed day:

  1. All the assets and the liabilities of the Insurance Regulatory Authority will be transferred to the Authority. The assets of the Interim Insurance Regulatory Authority will include assets like movable and immovable property, rights and powers, cash balances, deposits, interests that arises out of the property possessed by the Interim Insurance Regulatory Authority, and all the books and documents. The liabilities in such cases will include all kinds of debts and any kind of liability.
  2. Irrespective of the fact mentioned in the above point, all the activities that involved the participation of the Interim Insurance Regulatory Authority and were related to the Insurance Authority will be deemed as having been constituted and engaged by the Authority.
  3. All the amount of money that was due to the Interim Insurance Regulatory Authority exactly before such an appointed day will be presumed to be due to the Authority.
  4. All those legal proceedings (either by or against the Interim Insurance Regulatory Authority) that were supposed to be constituted before that day will be continued or constituted by or against the Authority.

According to this provision, a fund will be constituted which will be known as ‘the Insurance Regulatory and Development Authority of India Fund’. This fund will be credited to:

  1. All the government grants, fees that the Authority receives.
  2. The amount received by the Authority from the sources agreed by the Government.
  3. The percentage of the minimum premium income that the insurers receive.

The fund constituted will be used for meeting the salaries, allowances, and remuneration of all the members of the Authority and also, to meet the expenses incurred by the Authority to fulfil its daily functions.

  1. The Authority will have to maintain accounts and annual statements in accordance with the guidelines prescribed by the Government. 
  2. The accounts and the annual statements of the Authority will be maintained by the Comptroller and Auditor General of India. If any expense is incurred by the Comptroller and Auditor General in maintaining such accounts then, the Authority will have to pay the Comptroller and Auditor General. 
  3. Any person appointed by the Comptroller and Auditor General of India concerning the maintenance of the accounts and annual statements of the Authority will have the same rights and privileges as that of the Comptroller and Auditor General. These rights include the right to demand the production of books of accounts, connected vouchers, and other relevant documents and papers.
  4. The audit report prepared by the Comptroller and Auditor General of India and the other person appointed by him will be forwarded annually to the Central Government. The Government, in turn, will present it before each House of the Parliament. 
  • Section 18 – Powers of the Central Government to issue Directions.

The Central Government can issue directions to the Insurance Regulatory Authority on matters related to questions of policy. Such directions will bind the Authority to act according to the Government’s directions. But, all this will happen only when the Authority will also be given the chance to present its views before the Government before the directions are issued. 

Whether a question is one of the policies or not, will be decided by the Central Government.

  • Section 19 – Powers of Central Government to supersede the Authority.

In case of any fault on the part of the Authority, the Government has the right to intervene in the matter. If not satisfied by the functioning of the Authority the Government will appoint a person to act as the Controller of Insurance under section 2B of the Insurance Act, 1938 (Act 4 of 1938). But before appointing Controller of Insurance the government will have a reasonable amount of time to the Authority to make corrections in its functioning. 

But first, the Government will issue a notification of superseding the Authority. Though the Government can only supersede for a period specified in the notification and this period shall not be more than six months. 

  1. If the Central Government realises that the Authority is not able to discharge its functions properly like it was supposed to perform. 
  2. If because of the functioning of the Authority the financial condition or the administration of the Authority has suffered. 
  3. If the circumstances are such that it becomes necessary for the Government to intervene to ensure public interest.
  • Section 20 – Furnishing of Returns, etc. to the Central government.
  1. The Authority will have to furnish all those documents, returns, statements and other particulars that the Government demands from the Authority. 
  2. The Authority will  provide the Government a report consisting of all the activities it performs, expenses incurred, assets formed, cash generated, promotion and development of the insurance business during the previous financial year. The accounts should be correct. This report is to be submitted within nine months after the close of every financial year. 
  3. The copies of the report submitted by the Authority to the Government will have to present before each House of the Parliament by the Government. 
  • Section 22 – Protection of Action taken in Good Faith.

If any action is taken by the Authority or the Central Government in good faith under the provisions of the Act, then, no suit can be filed against them. But if any step is taken which is not in accordance with the provisions of the Act, and is against some person, then, the person has the right to file a suit against the Authority or the Central Government. 

This provision entitles the Central government to make rules regarding the provisions of the Act. These provisions include salaries and allowances payable to the members of the Authority, the format of the annual statements accounts prepared by the Authority, powers that may be exercised by the Authority in accordance with Section 7(2) of the Act, etc. 

IRDA List 

Click here to check the list of life insurers. 

https://www.irdai.gov.in/ADMINCMS/cms/NormalData_Layout.aspx?page=PageNo129&mid=3.1.9

Conclusion 

Insurance is an important aspect of the economy which requires changes from time to time according to the needs of the people. An individual should be aware of the opportunities that are available to him in the form of health and life insurances. The Insurance Regulatory and Development Authority of India plays a significant role in ensuring that the interests of the policyholders remain secured. Though competition has increased with necessary changes, the objectives of the insurers and policyholders can be achieved. 

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