Insurance Regulatory and Development Authority of India

• The Insurance Regulatory and Development Authority of India (IRDAI) is an Autonomous, statutory agency entrusted with regulating and marketing India’s insurance and reinsurance sectors. The Insurance Regulatory and Development Authority Act, 1999, was enacted by Parliament and signed into law by the Indian government. The agency’s headquarters are in Hyderabad, Telangana, where it relocated from Delhi in 2001.
• The IRDAI is a 10-member body comprised of the chairman, five full-time and four part-time members nominated by the government of India.
• In India, insurance was discussed in the works of Manu (Manusmrithi), Yagnavalkya (Dharmasastra), and Kautilya (Arthashastra), who investigated the pooling of resources for redistribution following fire, floods, diseases, and hunger. The Oriental Life Insurance Company, founded in Calcutta in 1818, pioneered the life-insurance industry before failing in 1834. Madras Equitable started offering life insurance in the Madras Presidency in 1829. The British Insurance Act was passed in 1870, and Bombay Mutual (1871), Oriental (1874), and Empire of India (1897) were all created under the Bombay Presidency. The period was dominated by British businesses.
• In 1914, the Indian government started releasing results from insurance companies. The Indian Life Assurance Companies Act of 1912 was the first legislation that regulated life insurance. The Indian Insurance Companies Act, adopted in 1928, allows the government to gather statistical data on life and non-life insurance business undertaken in India by Indian and international insurers, including provident insurance societies. The Insurance Act of 1938 unified and updated the law, including extensive rules to regulate insurers’ operations.
• Although the Insurance Amendment Act of 1950 removed key agencies, competition remained strong, and there were complaints of unfair trading practices. The Government of India has decided to nationalize the insurance business.
• On January 19, 1956, an ordinance was adopted to nationalize the life-insurance business, and the Life Insurance Corporation was founded the same year. The LIC acquired 154 Indian, 16 non-Indian insurers, and 75 provident societies. The LIC maintained its monopoly until the late 1990s, when the insurance business was reopened to the private sector.
• General insurance in India originated with the West’s Industrial Revolution and the expansion of seafaring trade in the 17th century. It came as a British occupation legacy, having origins in Calcutta’s Triton Insurance Company, founded in 1850. The Indian Mercantile Insurance Company was founded in 1907, becoming the first to insure all types of general insurance. The General Insurance Council (a section of the Insurance Association of India) was established in 1957 with the goal of developing a code of conduct for fairness and solid business practice.
• Eleven years later, the Insurance Act was revised to control investments and provide minimum solvency margins, and the Tariff Advisory Committee was formed. On January 1, 1973, the insurance business was nationalized by the General Insurance Business (Nationalisation) Act, which was passed in 1972. One hundred and seven insurers were combined and divided into four companies: National Insurance Company, New India Assurance Company, Oriental Insurance Company, and United India Insurance Company. The General Insurance Corporation of India was established in 1971 with effect on January 1, 1973.
• The reopening of the insurance industry started in the early 1990s. In 1993, the government formed a committee led by former Reserve Bank of India governor R. N. Malhotra to provide proposals for insurance reform to supplement those begun in the banking sector. The committee issued its findings in 1994, suggesting that the private sector be allowed to join the insurance market. Foreign corporations should enter via establishing Indian subsidiaries, ideally through joint ventures with Indian partners.
• Following the Malhotra Committee’s recommendations, the Insurance Regulatory and Development Authority (IRDA) was established in 1999 to regulate and grow the insurance business. It was incorporated in April 2000. The IRDA’s objectives include fostering competition to improve customer satisfaction via expanded consumer choice and reduced rates, as well as guaranteeing the financial stability of the insurance sector.
• The IRDA opened the market in August 2000 with a request for registration applications; foreign corporations might own up to 26 percent. Since 2000, the authority, which has the ability to make rules under Section 114A of the Insurance Act of 1938, has issued regulations ranging from business registrations to the protection of policyholder interests.
• In December 2000, the General Insurance Corporation of India’s subsidiaries were reformed as separate corporations, and the GIC became a national re-insurer. In July 2002, Parliament enacted a measure delinking the four companies from the GIC. India has 28 general insurance firms, including the Export Credit Guarantee Corporation of India and the Agriculture Insurance Corporation of India, as well as 24 life insurance companies. Insurance services, like banking services, contribute around 7% to India’s GDP.
• In 2013, the IRDAI tried to boost the insurance sector’s foreign direct investment (FDI) restriction to 49 percent from the existing 26 percent. The FDI ceiling in the insurance industry has been increased to 100%, according to the 2019 budget.
• Objectives of the IRDA
• To advance the interests and rights of insurance holders.
• To promote and safeguard the development of the insurance industry.
• To guarantee timely payment of valid claims and to avoid frauds and malpractices.
• To increase transparency and order in financial markets dealing with insurance.
• Functions and Duties of the IRDA
• Section 14 of the IRDAI Act, 1999 defines the IRDAI’s duties as follows:
• Registrations may be issued, renewed, modified, withdrawn, suspended, or cancelled.
• Protecting policyholder interests.
• Specifying credentials, codes of behavior, and training for intermediaries and agents.
• Specifying the Code of Conduct for Surveyors and Loss Assessors
• Promoting efficiency in the operation of insurance firms
• Promoting and regulating professional organizations associated with the insurance and reinsurance industries.
• Levying fees and other levies.
• Inspecting and examining insurance companies, middlemen, and other related entities.
• Section 64U of the Insurance Act, 1938 (4 of 1938) regulates rates, advantages, terms, and conditions that insurers may provide that are not covered by the Tariff Advisory Committee.
• Specify how books should be preserved.
• Regulating corporation investment in funds
• regulating a margin of solvency
• Arbitrating conflicts between insurers and intermediaries, or insurance middlemen.
• Supervising the Tariff Advisory Committee
• Specifying the proportion of premium revenue to pay initiatives for developing and regulating professional organisations.
• Specifying the proportion of life and general insurance business in rural or social sectors. Specifying how insurers and intermediaries should keep books of accounts and provide statements of accounts.