IRDA - Role, Objectives and Functions

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.

ESTABLISHMENT
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.

OBJECTIVES
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.

ORGANISATION SETUP: 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.

FUNCTIONS AND DUTIES OF IRDA

Section 14 of IRDA Act,1999 lays down the duties and functions of IRDA:
o It issues the registration certificates to insurance companies and regulates them.
o It protects the interest of policy holders.
o It provides license to insurance intermediaries such as agents and brokers after specifying the
required qualifications and set norms/code of conduct for them.
o It promotes and regulates the professional organisations related with insurance business to promote
efficiency in insurance sector.
o It regulates and supervise the premium rates and terms of insurance covers.
o It specifies the conditions and manners, according to which the insurance companies and other
intermediaries have to make their financial reports.
o It regulates the investment of policyholder's funds by insurance companies.
o It also ensures the maintenance of solvency margin (company's ability to pay out claims) by
insurance companies.
IRDA
 The Insurance Regulatory and Development Authority (IRDA) is a Statutory, autonomous and apex
body to regulate the insurance sector in India.
 It was created upon the recommendations by the Malhotra Committee report of 1994. The
report recommended that a independent authority to regulate the insurance industry in India should be
established.
 By the IRDA Act, 1999 this authority was setup. In 2000 it received the staus of a Statutory body by the
Parliament.
 Therefore, IRDA was setup in 2000 as an autonomous body with its headquarters at New Delhi.
  In 2001, the headquarters of IRDA were shifted to Hyderabad, Telangana.
 New Development: Since July 2014 the FDI limit in the insurance sector has been raised to 49% by the
government. Earlier it was 26 percent.
 The members and the Chairman of IRDA are appointed by the Government of India.
Mission of Insurance Regulatory and Development Authority (IRDA)
The IRDA has a mandate to fulfill the following :
 To protect the interests of policyholders and ensure fair treatment to them.
 To facilitate speedy and orderly growth of the insurance industry sector in Indian economy, for the
benefit of common man, and to give long- term funds which will accelerate growth of our economy.
 To ensure that the customers of insurance receive clear and correct information about the products as
well as the services.
Organisational setup of IRDA
The Insurance Regulatory and Development Authority (IRDA) is a ten member team, appointed by the
Government of India, consisting of the following:
 One Chairman
 Five whole-time members
 Four part-time members
Functions of Insurance Regulatory and Development Authority
The Insurance Regulatory and Development Authority (IRDA) is a national apex regulatory agency of the
Government of India. It performs the following functions with respect to the insurance sector in India.
 It issues the certificate of registration or renewal to Insurance companies, insurance agents or surveyors,
Insurance brokers. To function in the insurance sector, a company has to register with the IRDA.
 IRDA Protects the interests of the policyholders in matters like, nomination by policyholders, assigning
of the policy, insurable interest, surrender values of the policy, settlement of insurance claim, and
various other terms involved in the conditions of contracts of insurance.
 It specifies the requisite qualification, practical training, and code of conduct for agents, insurance
brokers, and surveyors.
 IRDA is involved in promoting efficiency in insurance business conduction.
 It promotes and regulates professional organisations that connect with the insurance and re-insurance
business.
 IRDA also specifies the code of conduct for surveyors and loss assessors.
 It regulates the fees and other similar charges levied by the insurance companies, brokers, agents,
surveyors, etc.
 IRDA controls the rates, advantages, and terms and conditions which are offered by the insurers.
 It specifies the form and manner in which books of accounts are to be maintained by the insurers and
other insurance intermediateries.
 It regulates the investment of funds made by the insurance companies and firms.
 IRDA settles disputes between insurers and intermediateries, whenever they arise.
 It also regulates the maintenance of margin of solvency(To possess sufficient funds to settle insurance
claim amounts).
 It specifies the percentage of premium income of the insurer that can go to finance schemes for
promotion and regulation of professional organisations.
 It also specifies the percentage of life insurance business and general insurance business that can be
undertaken by the insurer in the social and rural sector.
 It supervises the working of the Tariff Advisory Committee also.
 IRDA has the power to frame regulations regarding the Insurance market.
 It promotes competition among the insurance companies and insurers in order to enhance customer
satisfaction, by providing increased choice to consumers. Like it allowed Health Insurance Portability.
 IRDA is also involved in the field of Consumer education and assistance.
Summary of IRDA – Short Note
The primary aim to form IRDA has been to create a regulator, that will be able to regulate and develop the
insurance industry in the country, while also controlling all organizations or individuals who are directly
or indirectly involved in the insurance sector.
The Insurance Regulatory and Development Authority has been given the powers to issue such regulations that
are related to the insurers, the insurance intermediaries, the surveyors, or any third party administrators. It
canframe provisions for their registration, or renewal of their licenses as well as to review their functioning for
smooth working of the insurance sector.
The Insurance Regulatory and Development Authority is also entrusted with responsibilities of protecting the
interest of the policyholders, for whom the insurance companies and intermediaries are issuing the policies.
Even after these powers to regulate the insurance sector, the Authority remains accountable to the
Central Government for its actions and inactions.