Important Institutions: IRDAI
Insurance in India: A Brief History:
- Insurance has a long history in India. It is mentioned in the literature of Manu (Manusmrithi), Yagnavalkya (Dharmasastra), and Kautilya (Arthasastra) and is most likely a forerunner of contemporary insurance.
- The Oriental Life Insurance Company was founded in Calcutta in 1818. Later that year, in 1870, the British Insurance Act was passed. In the last three decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874), and Empire of India (1897) insurance companies were established in the Bombay Residency.
- The Indian Life Assurance Companies Act of 1912 was the first regulatory move to govern the life industry, with the publication of insurance company returns in India beginning in 1914.
- In 1928, the Indian Insurance Companies Act was established, allowing the Government to gather statistical data on life and non-life insurance transactions undertaken in India by Indian and international insurers, including provident insurance societies.
- To protect the interests of the insurance public, the preceding law was consolidated and revised by the Insurance Act of 1938, which included extensive measures for adequate supervision of insurers' operations.
- The Life Insurance Corporation (LIC) was founded the following year after an Ordinance was approved to nationalize the life insurance sector. For 245 Indian and international insurers, the LIC acquired 154 Indian and 16 non-Indian insurers and 75 provident societies.
- The general insurance business was nationalized on January 1, 1973, after the passage of the General Insurance Business (Nationalisation) Act in 1972 and the establishment of the General Insurance Corporation of India in 1971.
- In 1999, the Insurance Regulatory and Development Authority of India (IRDAI) was established as an autonomous agency to regulate and promote the insurance business in response to the recommendations of the Malhotra Committee Report.
India's Insurance Regulatory and Development Authority (IRDAI):
- The Insurance Regulatory Development Authority Act of 1999 established the Insurance Regulatory Development Authority as a legislative entity.
- The IRDAI was established as an autonomous organization with its headquarters in New Delhi.
- Its headquarters were transferred to Hyderabad, Telangana, in 2001.
- The Indian Government appoints the Chairman and other Insurance Regulatory Development Authority members.
- The Authority's authorities and activities are outlined in the IRDAI Act of 1999 and the Insurance Act of 1938.
- The Insurance Act of 1938 is the fundamental law that governs India's insurance business, and it empowers the IRDAI to issue rules that provide the regulatory framework for the sector's organizations to follow.
- Other Acts, such as the Marine Insurance Act of 1963 and the Public Liability Insurance Act of 1991, govern certain regions and duties of the insurance industry.
The mission of IRDAI:
- To protect policyholders' interests and guarantee that they are appropriately handled.
- The major aims of the IRDAI are to foster competition in the insurance business to improve customer satisfaction through more consumer choice and fair pricing while also ensuring the market's financial stability.
- To encourage the speedy and orderly expansion of the insurance industry (including annuity and superannuation payments) for the benefit of the general public, as well as to provide long-term funds to accelerate the economy's growth.
- The establishment, promotion, monitoring, and enforcement of high standards of honesty, financial soundness, fair dealing, and competence among people under its supervision.
- To guarantee that legitimate claims are rapidly resolved, to avoid insurance fraud and other malpractices, and to establish an effective grievance redressal mechanism.
- To develop trust by promoting fairness, openness, and orderly behaviour in insurance-related financial markets.
Supervisory Role at IRDAI:
- The purpose of oversight, according to the preamble to the IRDAI Act, is to "protect the interests of holders of Insurance policies, to regulate, promote, and assure the orderly evolution of the Insurance business," which encompasses both insurance and reinsurance.
- Section 25 of the IRDAI Act 1999 calls for forming an Insurance Advisory Committee comprised of members from the insurance sector's trade, industry, transportation, agriculture, consumer forums, employee groups, and so on.
- All applicable industry laws, regulations, and recommendations may be found on the supervisor's website, which is open to the public.
- Section 14 of the IRDAI Act, 1999, defines the Authority's duties, powers, and functions. Some examples are as follows:
- Insurance intermediaries and (re)insurance businesses will be granted licenses.
- To protect the interests of policyholders.
- To get information from, inspect, inquire about, and investigate businesses involved in the insurance industry.
- To define the necessary credentials, behaviour code, and practical training for intermezzos.
- To specify the form and manner in which insurers and other insurance intermediaries must keep books of account and prepare financial statements.
Composition of IRDAI:
According to Section 4 of the IRDAI Act of 1999, the Authority is made up of the following members:
- Five full-time members
- Four part-time members
Companies that provide life insurance
- Companies from both the public and private sectors
Companies that provide general insurance
- Companies from both the public and private sectors. Some standalone Health Insurance Companies provide health insurance coverage among them.
- Companies that provide reinsurance.
- Agency Channel
Intermediaries such as the following:
- Corporate Agents
- Third-party administrators
- Loss Assessors and Surveyors
- IRDAI has adopted several rules and regulations to assist it in carrying out its tasks in the insurance sector.
- It has required initiatives such as forming an investment council for all insurers to encourage new companies such as health insurance, which is increasing in breadth and coverage.
- The IRDAI has encouraged third-party evaluators, assessors, and surveyors. It has promoted effective insurance employee training, including insurance agents, brokers, and other intermediaries.
- It has pushed for introducing and distributing new sorts of products, which are currently being spread to rural and non-traditional locations.
- It has loosened current investment requirements to allow The Life Insurance Corporation of India (LIC) to buy 51 per cent of IDBI Bank. This is a shift from current regulations, which ban insurance companies from owning more than 15% of any listed financial institutions.
The performance of the Indian insurance sector has risen since the establishment of the Insurance Regulatory and Development Authority of India (IRDAI), which monitors and governs the entire insurance market. It plays a vital role in the Indian insurance sector, as evidenced by an increase in the number of insurers, both life and non-life, as well as an increase in insurance penetration and density, an increase in the number of policies issued, and an increase in the speed with which claims are settled, among other things.