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What is IRDA?
The Insurance Regulatory and Development Authority is the main regulatory organization or agency that supervises the country's insurance industry. It lays down rules and regulations for the operation of the insurance industry. Its sole purpose is to protect the interests of policyholders and promote the development of the entire industry.
IRDA regularly notifies insurance companies when rules and regulations change. Regulators guide the insurance industry to improve the efficiency of insurance business operations while controlling premium rates and other insurance-related expenses.
IRDA Establishment
The Indian government has been the regulator of the insurance industry until 2000. However, to establish an independent supreme institution, IRDA was established in 2000 following the recommendations of the 1999 report of the Malhotra Commission. In August 2000, IRDA began accepting applications for registration by invitation and allowed companies from other countries to invest up to 26% in the market.
IRDA describes a series of rules and regulations based on section 114A of the Insurance Act of 1938. Regulations range from registering insurance companies operating in the country to protecting the interests of policyholders. As of September 2020, 31 general insurance companies and 24 family life insurance companies have registered with IRDA.
What is the Importance of IRDA in the Insurance Sector?
The Indian insurance industry dates back to the early 1800s and has grown over the years, focusing on better transparency and protection of policyholder interests. IRDA composes rules and regulations and plays an important role in emphasizing the interests of policyholders.
Below are some important role of IRDA in insurance sector:
- Promote, establish, implement and monitor high standards of honesty, fair dealing, financial soundness and competence of insurance companies.
- To ensure genuine claims are resolved quickly and efficiently.
- To protect the interests of policyholders.
- Provides long-term funding to speed up the country's economy.
- To combat fraud, IRDA has established the Complaints Relief Forum to protect policyholders.
- To help promote the growth of the insurance industry in an orderly manner for the benefit of the common people.
- Promote transparency, fairness and systematic implementation of insurance in financial markets.
- Establishing a reliable management system ensures that insurance companies are guarding a high level of financial stability.
- Take appropriate action if such high standards are not maintained.
- Ensures the optimal amount of self-regulation in the industry.
What is the Aim of IRDA?
The main objective of the Insurance Regulatory and Development Authority of India is to implement the provisions of the Insurance Law. IRDA's mission statement is:
- To protect the interests and fair treatment of the insured.
- Supervise the insurance industry with equity to ensure the financial stability of the industry.
- Regularly formulate regulations to ensure clear industry operations.
What are the IRDA Functions and Importance?
The following are the important functions of IRDA in the Indian insurance industry:
- Grant, renew, modify, suspend, cancel or revoke insurance company registration certificates.
- Protects the insured's interests in matters related to the granting of policies, settlement of claims, the nomination of the insured, insurable benefits, policy surrender value, and other policy terms and conditions.
- Code of conduct, qualifications and training for designated intermediaries or insurance agents. Designated code of conduct for assessors and experts.
- Fees charged to comply with legal regulations.
- Conduct inspections, inquiries and investigations, including audits, of insurance companies, intermediaries and other organizations related to the insurance business.
- Oversees and controls insurance rates, terms and conditions and the benefits that insurance providers can provide.
How Does IRDA Work?
The most important institution in the insurance industry, IRDA ensures that its rules and regulations will not create any ambiguity for any particular insurance company. To ensure the fairness and financial stability of the industry, IRDA's main work revolves around the interests of the policyholders. The IRDA importance stands true in the are the following tasks:
- Issue registration certificates to new insurance companies.
- Formulate rules and regulations to ensure that the interests of the insured are served.
- Monitors claims are resolved fairly, and no insurance company will voluntarily deny any claim.
- Regulates insurance companies, insurance intermediaries and other codes of conduct related to the insurance industry through IRDA inspectors to provide solutions in the event of disputes.
- Control and adjust insurance premium rates to avoid unexpected premium price increases.
- The supreme entity is responsible for setting the minimum percentage limits for general and life insurance companies to develop the urban and rural sectors.
You can say that IRDA is a regulator of the insurance industry that protects the insured's interests to benefit the industry. The Supreme Authority formulated the rules and regulations followed by IRDA as per Section 114A of the Insurance Act of 1938. According to the Insurance Act, IRDA is responsible for issuing registration certificates entrusted to new insurance companies operating in India. It also has to oversee the activities of the insurance industry to ensure the continued development of insurance companies and policyholders.
Disclaimer: The information above is for reference purpose only. Do refer to IRDA guidelines for more information.
