The concept of insurance dates back to the 18th century B.C. when people back then also sought some kind of safety net. Realizing this need for security, the concept of insurance came into existence.
Initially, insurance in India was regulated by the Government. But looking at the growth of the insurance sector, there was a need for an independent regulatory body that could oversee the functioning of the insurance industry. And, that gave birth to the IRDAI. IRDAI full form is Insurance Regulatory and Development Authority of India. It is an autonomous and statutory body owned by the India Government. Today, the insurance companies in India are supervised by IRDAI.
This article will help you understand more about IRDAI, its purpose, functions and duties.
What Is IRDAI?
IRDAI is the apex body that supervises the insurance sector and oversees the development of the insurance industry in India. It regulates and controls the insurance industry to safeguard the interests of the policyholders and works towards promoting the growth of the insurance sector. It is empowered to oversee life insurance as well as general insurance companies operating within the country.
It manages and regulates the insurance and reinsurance industry in India. Furthermore, it is also responsible for registering and licensing insurance companies, reinsurance companies and intermediaries as per the regulations.
IRDAI was constituted under an Act of Parliament in 1999 and is headquartered in Hyderabad. The statutory body derives its powers and functions from the IRDAI Act, 1999 and Insurance Act, 1938. It comprises of a 10 member body that includes 1 chairman, 5 full-time members and 4 part-time members.
Role And Importance Of IRDAI In The Insurance Sector
The insurance sector in India is witnessing a huge growth year on year. As per reports, the life insurance companies in India witnessed 11.36% growth in collective premium income amounting to Rs. 48.26 trillion ($684.64 billion) during the financial year ended March 2020.
This means the role of IRDAI is significant in protecting the interest of insurance policyholders and ensuring that their rights are duly safeguarded.
Ever since the concept of insurance is formalised, there have been positive improvements in the process but with the incorporation of an autonomous body i.e. IRDAI various laws have been streamlined and necessary amendments have taken place keeping in mind the interest of the policyholders.
Functions And Duties Of IRDAI
Section 14 of the IRDA Act, 1999 lays down the duties, powers and functions of IRDA, some of which are as follows:
- Protect the interest of the policyholders in matters concerning assigning of policy, nomination by policyholders, surrender value of the policy, settlement of insurance claim, insurable interest and other terms and conditions of contracts of insurance
- Regulate and escalate the growth of the insurance and reinsurance industry in an organized manner to benefit the common man
- Ensure a fair regulation of the insurance industry
- Ensure that the provisions of the Insurance Act are properly implemented
- Ensure a speedy and hassle-free claim settlement process
- Prevent insurance related frauds and other malpractices
- Address the grievances of the policyholder through a proper channel
- To promote fair and transparent operations among insurance companies
- Frame policies and regulations periodically to avoid ambiguity in the insurance industry
- Register and supervise insurance companies
- Facilitate licensing and establish norms for insurance intermediaries
- Specify financial reporting norms of insurance companies
- Enhance the standards of insurance markets
- Enforce actions when the established standards are ineffective
- Form a reliable management system with high standards of financial stability
- Approve product terms and conditions offered by various insurers
- Regulate and oversee premium rates and terms of non-life insurance covers
- Regulate and control investments made by insurance companies from policyholders’ funds
- Ensure that insurance companies maintain a solvency margin
- Ensure rural areas and vulnerable sections of society have sufficient insurance coverage
- Lay down the code of ethics, credentials and skills required for insurance agents and intermediaries
- Adjudicate the conflicts among insurers and intermediaries of insurance
- Step in and provide resolution in case of any dispute between the insurer and the policyholder
- Call for audit, conduct investigation and call for any information required from insurance companies or intermediaries to prevent any misdeed
India is the fastest-growing economy in the world based on the GDP projections for FY 2022 by the International Monetary Fund (IMF). It has projected a fairly robust growth of 8.2% for India in 2022. The growth of the Indian economy further paves way for the new insurance players in the market. And, to facilitate this growth, IRDAI will continue to play a vital role in maintaining standards of quality and strengthening the financial capacity of the country as a whole.
Hope the above article has got you a walkthrough of what IRDA means, its objectives and the origination of IRDAI full form.