Insurance Regulatory and Development Authority

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. 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."

In 2010, the Government of India ruled that the Unit Linked Insurance Plans (ULIPs) will be governed by IRDA, and not the market regulator Securities and Exchange Board of India.^[1]

Expectations

The law of India has following expectations from IRDA:

1. To protect the interest of and secure fair treatment to policyholders.
2. 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.
3. To set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of those it regulates.
4. 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.
5. To ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices and put in place effective grievance redressal machinery.
6. 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.
7. To take action where such standards are inadequate or ineffectively enforced.
8. To bring about optimum amount of Self-regulation in day to day working of the industry consistent with the requirements of prudential regulation.

Duties,Powers and Functions of IRDA

Section 14 of IRDA Act, 1999 laysdown the duties,powers and functions of IRDA:

1. Subject to the provisions of this Act and any other law for the time being in force, the Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business.
2. Without prejudice to the generality of the provisions contained in sub-section (1), the powers and functions of the Authority shall include,
   1. issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration;
   2. protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of Insurance claim, surrender value of policy and other terms and conditions of contracts of insurance;
   3. specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents;
   4. specifying the code of conduct for surveyors and loss assessors;
   5. promoting efficiency in the conduct of insurance business;
   6. promoting and regulating professional organisations connected with the insurance and re-insurance business;
   7. levying fees and other charges for carrying out the purposes of this Act;
   8. calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organisations connected with the insurance business;
   9. control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938);
   10. specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries;
   11. regulating investment of funds by insurance companies;
   12. regulating maintenance of margin of solvency;
   13. adjudication of disputes between insurers and intermediaries or insurance intermediaries;
   14. supervising the functioning of the Tariff Advisory Committee;
   15. specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f);
   16. specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; and
   17. exercising such other powers as may be prescribed from time to time,

Advisory committee

IRDA consists of a Chairman and some permanent as well as part time members. The regulations, however, are enacted under the guidance of a statutory advisory committee. The advisory committee consists of following individuals and ex-officio authorities:

• Chairman: Hari Narayan J. is the current Chairman of IRDA.
• Full-time Members: Currently, they are Mr M. Ramaprasad (Nonlife Member), Sri G Prabhakara (Life Member), Dr R Kannan(Member, Actuary) and Sri R.K. Nair (Member, F & I). There is provision for a panel of other members and part time members. IRDA formed a high powered Insurance Law Reforms Committee known as KPN Committee with important insurance advisors like Mr N Govardhan and Dr K C Mishra as its members. There were also a few non-advisory committee members like Mr Liaquat Khan and Mr T Viswanathan etc.

Full force and utility of various institutions like Advisory Committee and self-regulatory organizations are not yet realized as the regulator seems to be in a long learning mode. Due to over delegations, Individual incumbents decide the pace and extent of utilization of prudential and statutory bodies. Research is limited to opinion seeking through legacy channels. Market waits for revision of insurance act and establishment meaningfully functioning regulatory organs devoid of excess delegation and subjective localization of development agencies.

IRDA Journal is available as soft copy in its website.^[2] Unlike other Indian administrative Regulatory Agencies IRDA is perceived as a silent regulator with activities confined to its local existence.

Chairman selection process

Government of India has circulated to broadbase IRDA chairman selection process. It is felt in the market that placing of retired civil servants as IRDA Chairman has served the purpose of administrative fiefdom of the regulator. Mostly, the regulator has become passive to market realities and most of the original public policy intentions have been systematically replaced by personal preferences. There seems to be no oversight of public policy erosions. Taking advantage of the completion of term of current incumbent, there seem to be an attempt to correct the future course but people do not perceive any outcome to result as the market does not seem to throw up candidates of the stature of Howard Davies for Indian market. But a right leadership is the solution to the requirement of this booming market.

References

1. ^ "Irda wins Ulip battle". Business Standard. 20 June 2010. http://www.business-standard.com/india/storypage.php?autono=398840. Retrieved 2010-06-20. 
2. ^ IRDA Journal.

External links

• IRDA official website
• The IRDA Act'1999