Irda (Insurance Regulatory & Development Authority)

IRDA
( Insurance Regulatory & Development

Authority )
PRESENTED BY MMM-
BATCH -II
Amit Rathod 79
Hema Raghani 76
Gaurav Sawant 88
Guruprasad Shetti 96
Vishal Pol 72
Contents
What is IRDA ?
Evolution/History of IRDA ?
Mission of IRDA & Composition of Authority.
Expectation of IRDA
Insurance History
Duties, Powers & Functions of IRDA
Impact Of IRDA On Indian Insurance Sector
Conclusion
What is IRDA?
 Insurance Regulatory & Development Authority (IRDA)
is regulatory and development authority under
Government of India in order to protect the interests of
the policyholders and to regulate, promote and ensure
orderly growth of the insurance industry.
 It is basically a ten members' team comprising of a
Chairman, five full time members and four part-time
members, all appointed by Government of India.
 Came into being in 1999 after the bill of IRDA was
passed in the Indian parliament.
Mission of IRDA
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.
Composition of Authority under IRDA Act, 1999
As per the section 4 of IRDA Act' 1999, Insurance Regulatory and

Development Authority (IRDA, which was constituted by an act of
parliament) specify the composition of Authority
The Authority is a ten member team consisting of

(a) a Chairman;
(b) five whole-time members;
(c) four part-time members,
(all appointed by the Government of India)

Expectations
The law of India has following expectations from IRDA
 To protect the interest of and secure fair treatment to policyholders;
 To bring about speedy and orderly growth of the insurance industry

(including annuity and superannuation payments), for the benefit of the
common man, and to provide long term funds for accelerating growth of the
economy;
 To set, promote, monitor and enforce high standards of integrity, financial

soundness, fair dealing and competence of those it regulates;
 To ensure that insurance customers receive precise, clear and correct

information about products and services and make them aware of their
responsibilities and duties in this regard;
Contd..
 To ensure speedy settlement of genuine claims, to prevent insurance frauds
and other malpractices and put in place effective grievance redressal
machinery;
 To promote fairness, transparency and orderly conduct in financial markets

dealing with insurance and build a reliable management information system
to enforce high standards of financial soundness amongst market players;
 To take action where such standards are inadequate or ineffectively

enforced;
 To bring about optimum amount of self-regulation in day to day working of

the industry consistent with the requirements of prudential regulation.
What is INSURANCE?
Insurance, in law and economics, is a form of risk management
primarily used to hedge against the risk of a contingent loss.
Insurance is defined as the equitable transfer of the risk of a potential

loss, from one entity to another, in exchange for a premium.
Insurance rate is a factor used to determine the amount, called the

premium, to be charged for a certain amount of insurance coverage
Risk management, the practice of appraising and controlling risk, has

evolved as a discrete field of study and practice
Evolution/History of IRDA and insurance
1818 - Oriental Life Insurance Company – 1st Insurance Company.
1870 - Bombay Mutual Life Assurance Society – 1st Life Insurance

Company.
1912 - The Indian Life Assurance Companies Act enacted the 1st Law
to Regulate the Life Insurance Business.
1928 - The Indian Insurance Companies Act enacted to enable the

government to collect statistical information about both life & non-
life insurance businesses.
Contd…..
 1938: Earlier legislation consolidated & amended the Insurance Act with the
objective of protecting the interests of the insuring public.
 1956: 245 Indian & foreign insurers & provident societies are taken over
by the central government & nationalized.

 LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital
contribution of Rs. 5 crore from the Government of India.
 The first General Insurance Company established in the year 1850 in

Calcutta by the British.
Duties, Powers & Functions of IRDA
 It issues the applicants in insurance arena, a certificate of registration as well as
renewal, modification, withdrawal, suspension or cancellation of such
registrations.
 It protects the interests of the policy holders in any insurance company in the
matters related to the assignment of policy, nomination by policy holders,
insurable interest, and resolution of insurance claim, submission value of policy
and other terms and proposals in the contract.
 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.
 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.
 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.
 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.
Contd..
 It is also entitled to supervise the functioning of the Tariff Advisory

Committee.
 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.
 It also regulates investment of funds by insurance companies as well as
the maintenance of margin of solvency.
 It is also empowered to be involved in the arbitration of disagreements
between insurers and intermediaries or insurance intermediaries.
 It is meant to specify the proportion of premium income of the insurer
to finance policies.
 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.
Types of Insurance
Life insurance
Non - Life Insurance
(general insurance)
Property (eg.Builders risk insurance)

Aviation (eg.Private aircraft insurance)
Marine (eg. Marine hull insurance)
Miscellaneous (eg.Purchase insurance)
 Regulatory Body:
• The insurance act should be changed.
• An insurance regulatory body should be set up.
• Controller of insurance-a part of the Finance Ministry – should be made

independent.
 Investments :
• Mandatory Investments of LIC Life Fund in government securities to be

reduced from 75% to 50%.
• GIC and its subsidiaries are not to hold more than 5% in any company.
 Customer Service:
• LIC should pay interest on delay on payment beyond 30 days.
• Insurance companies must be encouraged to set up unit link pension plans.

INDIAN SCENARIO
OF INSURANCE
Life insurance industry grows 49% New Delhi June 14,
2007
 Life insurance industry - 49 % growth in new businesses,
 General insurance players - 16 % increase in April,
 Life Insurance Corporation, ICICI Prudential and SBI Life & 16 other players
 Rs 2,982 crore in April’07 ------- with Rs 1,996 crore in April’06
 Country’s largest life insurer – LIC saw new premiums grow 57 % to Rs 2,134
crore in April by selling 15,89,684 policies against Rs 1,355 crore last year. It
had a market share of 71.56 % in April.
 Life insurers - Bajaj Allianz, ING Vysya Life & Reliance Life saw a decline in
premium collections.
“Indian Insurance Industry: New Avenues for Growth
2012”,
The potential of the Indian insurance industry is huge. HOW???

….. It has an annual growth rate of 15-20% &
…..the largest number of life insurance policies in force.
Total value of the Indian insurance market (2004-05) is at Rs. 450

billion (US$10 billion).
Insurance & Banking Services’ contribution to the country's gross

domestic product (GDP) is 7%
The funds available with the state-owned Life Insurance Corporation

(LIC) for investments are 8% of GDP.
The year 1999 saw a revolution in the Indian insurance sector------
the ending of government monopoly -----the passage of the Insurance
Regulatory and Development Authority (IRDA) Bill
“A foreign partner can hold 26% equity in an insurance company, but
there was a proposal to increase this limit to 49%.
Foreign investments of Rs. 8.7 billion have poured into the Indian
market & 21 private companies have been granted licenses.
Insurance study
LIC PRIVATE PLAYERS
Growth – 21.87% Growth – 129%
Earned – Rs.197.86 billion[04-05] Earned – Rs.55.57 billion[04-05]
Against Rs.24.29 billion [03-04]
Sold – 2.4 billion policies
Market share – Market share –

87.04% 78.07% 75% 13% 22% 24%
Source: www.rncos.com
Study : India's insurance sector to see 500 per cent growth by
2010
 India's insurance sector - 500 % growth over the next three years -
60 billion-dollar industry by 2010
 India's more than one billion people are uninsured, the study by the Associated
Chambers of Commerce and Industry (Assocham) said.
 'A large part of rural India is still untapped due to poor distribution, large
distances & high costs relative to returns,‘ said Assocham president Anil K
Agarwal
 He said the study had revealed that rural & semi-urban India would contribute
35 billion dollars to the Indian insurance industry by 2010.
 The study added that the urban sector insurance was estimated to reach 25
billion dollars by 2010, life insurance 15 billion and non- life insurance 10
billion dollars. Source: Business News
Conclusion
Insurance can be summed up as

“Praying for the best …
…being PREPARED for the WORST”.

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IRDA

( Insurance Regulatory & Development

Composition of Authority under IRDA Act, 1999

As per the section 4 of IRDA Act' 1999, Insurance Regulatory and

The Authority is a ten member team consisting of

(all appointed by the Government of India)

 To protect the interest of and secure fair treatment to policyholders;

 To bring about speedy and orderly growth of the insurance industry

 To set, promote, monitor and enforce high standards of integrity, financial

 To ensure that insurance customers receive precise, clear and correct

 To promote fairness, transparency and orderly conduct in financial markets

 To take action where such standards are inadequate or ineffectively

 To bring about optimum amount of self-regulation in day to day working of

Insurance is defined as the equitable transfer of the risk of a potential

Insurance rate is a factor used to determine the amount, called the

Risk management, the practice of appraising and controlling risk, has

1818 - Oriental Life Insurance Company – 1st Insurance Company.

1870 - Bombay Mutual Life Assurance Society – 1st Life Insurance

1928 - The Indian Insurance Companies Act enacted to enable the

 The first General Insurance Company established in the year 1850 in

 It is also entitled to supervise the functioning of the Tariff Advisory

Property (eg.Builders risk insurance)

• The insurance act should be changed.

• An insurance regulatory body should be set up.

• Controller of insurance-a part of the Finance Ministry – should be made

• Mandatory Investments of LIC Life Fund in government securities to be

• LIC should pay interest on delay on payment beyond 30 days.

• Insurance companies must be encouraged to set up unit link pension plans.

 General insurance players - 16 % increase in April,

 Rs 2,982 crore in April’07 ------- with Rs 1,996 crore in April’06

The potential of the Indian insurance industry is huge. HOW???

Total value of the Indian insurance market (2004-05) is at Rs. 450

Insurance & Banking Services’ contribution to the country's gross

The funds available with the state-owned Life Insurance Corporation

Market share – Market share –

Insurance can be summed up as

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