A Law of Insurance Project on

INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA)

The Insurance Regulatory and Development Authority (IRDA) is a national agency of the Government of India, based in Hyderabad. It was formed by an act of Indian Parliament known as IRDA Act 1999, which was amended in 2002 to incorporate some emerging requirements. The Act declares the Authority to be a body corporate with perpetual succession and common seal. It can hold property, enter into contracts and is entitled to sue and liable to be sued by its name. Mission of IRDA as stated in the act 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." This Act helps for the conduction of insurance business across the country in an ethical manner.

COMPOSITION OF IRDA The composition of IRDA under section 4 of IRDA Act, 1999, signifies Authority. The Authority is a 10 member team who are appointed by the government of India. This 10 member team comprises of the following members: (a) Chairman (b) (b) five whole-time members. (c) (c) four part-time members. The Chairperson and other members shall hold office for 5 years and are eligible for reappointment. The Chairperson shall not be above 65 years and the other members shall not be above 62 years. The members are permitted to relinquish their offices and are also liable to be removed from office in accordance with section 6 of the Act. The Central Government may remove a member from office if he has or at any time had been adjudicated as: a) An insolvent; or b) has become mentally challenged; or c) has been convicted of any offence which, in the opinion of the Central Government, involves moral turpitude; or d) has acquired such financial or other interest as is likely to affect prejudicially his functions as a member; or e) had abused his position so as to render his continuation in office detrimental to the public interest. The member can be removed from his office by the Central Government only after giving him a reasonable opportunity of being heard.

EXPECTATIONS FROM IRDA The IRDA law has been enacted with following expectations:

To protect the interests of and secure fair treatment pertaining to policyholders. To bring about speedy, regulated 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 Indian economy.

To set, promote, monitor and enforce high standards of competence, fair dealing, financial soundness and integrity of those that comes under the purview of its jurisdiction and regulation.

To ensure that insurance policyholders and prospective customers receive precise, clear, correct and factual information regarding Insurance products and services being offered and make them aware of their responsibilities and duties in this regard.

To ensure speedy settlement of genuine insurance claims, to prevent insurance frauds, misappropriation of funds and other malpractices. To promote, regulate and oversee effective functioning of grievance redressal machinery and disposing off grievances in a swift manner. To promote fairness, transparency and orderly conduct in financial markets dealing with insurance and build reliable MIS (Management Information Systems) to enforce high standards of financial soundness amongst market players and maintain high confidentiality of data.

To take appropriate and corrective measures where such standards are felt inadequate or remain ineffectively enforced. To bring about optimum amount of self-regulation in day to day working of the insurance sector consistent with the requirements of prudential regulation.

POWERS, DUTIES AND FUNCTIONS OF THE AUTHORITY According to Section 14 of the IRDA Act, 1999, the Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business. The following are the major rights, duties and functions of the authority as envisaged under the Act: Issuing a certificate of registration to the applicant as well as modify, renew, withdraw, suspend or cancel any such registration that is deemed unfit. Protecting the interests of the policyholders in matters concerning assigning of insurance policy, nomination by policyholders, settlement of insurance claim, insurable interest, surrender value of policy and other terms and conditions based on contracts of

insurance. Specifying requisite qualifications, practical training and code of conduct for insurance intermediaries, insurance brokers and agents. Specifying the code of conduct for surveyors and loss assessors. Promotion of efficiency in the conduct of insurance business. Promoting and regulating professional organizations connected with the insurance and re-insurance business across India. Levying fees, commission and other charges for carrying out the purposes of this Act. Calling for data or information from, undertaking inspection of, conducting enquiries and investigations, conducting audit of the insurers, intermediaries, insurance intermediaries and other organizations connected with the insurance business. Under section 64U of the Insurance Act, 1938 (4 of 1938), controlling and regulation of the rates, advantages, terms and conditions etc that may be offered by insurers (or Insurance Companies) in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee. Specifying the manner and form in which books of account shall be maintained and statement of accounts, financial statements etc shall be rendered by insurers and other insurance intermediaries. Keeping a tab, exercising control and regulating investment of funds by insurance companies. Regulating the maintenance of margin of solvency by the Insurers. Adjudication of disputes between insurers and intermediaries or insurance intermediaries, hospitals, healthcare organizations or with customers. To effectively supervise the functioning of the Tariff Advisory Committee. Specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organizations. Specifying the percentage of life insurance business and general (or non-life) insurance business to be undertaken by the insurance company in the rural or social sector. Exercising any such other powers that may be prescribed with passage of time.

CONCLUSION Full force and maximum utility of various institutions like Advisory Committee and selfregulatory organizations are not yet realized in India as the regulator seems to be in a long-

learning mode. Due to over delegations, it is the individual incumbents that decide the pace and extent of utilization of prudential and statutory bodies. Research on insurance sector is limited to opinion being sought through legacy channels. The Indian market mulls and patiently awaits the revision of insurance act along with establishment meaningfully functioning regulatory bodies that are devoid of excess delegation and subjective localization of development agencies. Unlike other Indian administrative Regulatory Bodies which are highly proactive, IRDA is perceived as a silent regulator with activities confined to its local existence.