Updated October 25, 2023
We all know what insurance is and its role in our nation’s economic development. By now, everyone must be familiar with the insurance business. It is a contract between individuals or groups or businessmen & insurance companies. The extent of the insurance contracts differs i.e. some contracts are for one year, and some are for twenty years or more, and the size of such contracts is also very large. Insurance contracts are assurances or promises made by insurance companies to reimburse the insured person in case of an accident or mishappening. Therefore, the Government of India established an agency called the Insurance Regulatory and Development Authority (IRDA) to supervise & resolve the issues arising in the insurance sector and even look after the development of this sector.
Still, these promises are not tangible, and insurance companies deal with many contracts, giving rise to industrial disputes. To settle such disputes, each nation’s government appoints a regulator who looks after the activities & tries to resolve the problems. So, this article will throw light upon the Insurance Regulatory and Development Authority (IRDA) features, role, impact, duties, powers, policies, etc.
Insurance Regulatory and Development Authority (IRDA) Act
The IRDA Act was passed by parliament in December’1999 and received presidential approval in January 2000. The main aim of the authority is “to protect the interest of holders of Insurance policies to regulate, promote and ensure orderly growth of Insurance industry & for matters connected therewith or incidental thereto.” Under this Act, the Controller of Insurance under the Insurance Act 1398 was replaced by a newly established authority called the Insurance Regulatory and Development Authority (IRDA).
Features of Authority
- The authority will consist of a Chairman, whole-time members & part-time members, and they will act as a group of members and will work jointly, not individually, like the Controller of Insurance.
- If any member resigns or dies, the authority will continue to work.
- A common seal with the power to enter into a contract by affixing a stamp on the documents.
- Sue or being sued means the Authority can file a case against any person or organization and vice versa.
Duties, Powers & Functions of Authority (Section 14)
The authority’s duty is to control, promote, and safeguard the orderly growth of the insurance industry and reinsurance business subject to any other provisions of the act.
Powers & Functions to:-
(1) To protect the policyholders’ interest related to the policy’s surrender value, settlement of insurance claims, insurable interest, nomination by policyholders, and other terms & conditions of the insurance contract.
(2) In the case of General Insurance, who assesses the policyholder’s loss should state the code of conduct.
(3) Promoting proficiency in the conduct of insurance business;
(4) Promoting and regulating professional organizations connected with the insurance and re-insurance business;
(5) Calling for information from, undertaking an inspection of, and conducting inquiries, including audit of the insurers, intermediaries, insurance intermediaries, and other organizations connected with the Insurance business;
(6) Stating the form and manner in which books of account shall be kept, and insurers and other insurance intermediaries shall render a statement of accounts;
(7) Regulating investment of funds by insurance companies;
(8) Regulating maintenance of margin of solvency i.e., having sufficient funds to pay insurance claim amount;
(9) To settle the disputes between insurers and intermediaries or insurance intermediaries
(10) Stating the percentage of life insurance business and general insurance business to be accepted by the insurer in the rural or social sector and
(11) Exercising such other powers as may be prescribed.
Role of the Insurance Regulatory and Development Authority (IRDA)
- Safeguard the interest of and secure fair treatment to insurance policyholders
- Bring quick and systematic growth of the insurance industry or sector to benefit the common man and provide long-term funds for accelerating the economy’s growth.
- Set, promote, monitor, and apply high standards of integrity, fair dealing, financial viability, and capability of those it regulates.
- Ensure that insurance policyholder receives precise, accurate, clear & correct information about the products & services provided by insurance companies & also make customers aware of their duties & responsibilities in this regard.
- Ensure quick settlement of genuine claims, prevent insurance frauds, scams & other malpractices, and put operative grievance redressal machinery in place.
- Boost transparency, fairness, and orderly conduct in financial markets dealing with insurance & build a trustworthy management information system to enforce high standards of financial soundness amongst market players.
- Take appropriate actions where such standards do not prevail or are inadequate & ineffectively enforced.
- Bring an optimal amount of self-regulation in day-to-day activities of the industry, reliable with the requirements of prudential regulation.
Impact of the Insurance Regulatory and Development Authority (IRDA)
1. Impact Over Regulation of the Insurance Sector
IRDA greatly impacts the overall regulation of the Indian Insurance Sector. To keep the proper protection of the policyholder’s interests, the Insurance Regulatory and Development Authority (IRDA) has a close observation of the different activities of the insurance sector in India.
2. Impact on Policyholders’ Interests Protection
The core objective or purpose of the Insurance Regulatory and Development Authority is to protect the interests of policyholders. IRDA is trying its level best in this context.
3. Impact on Awareness of Insurance
To increase the awareness of insurance in society, IRDA is trying to take different steps in making the activities of the insurance sector transparent.
4. Impact on Insurance Market
There is a great transformation in the insurance market due to the impact of the Insurance Regulatory and Development Authority, be it with respect to marketing, insurance products, competition & customer awareness.
5. Impact on the Development of Insurance Product
The Insurance Regulatory and Development Authority (IRDA) has revolutionized the development of insurance products. The development of ULIPs (Unit-Linked Insurance Plans) results from the insurance sector’s privatization.
6. Impact on Competition in the Insurance Sector
Earlier, there was no competition in the insurance sector. Still, the privatization of the insurance sector & inviting of private players in the insurance sector has given rise to competition in the insurance sector.
7. Impact on Saving and Investment of Individuals
Insurance Regulatory and Development Authority has made insurance a popular & profitable mode of investment and a permanent place for saving amongst individuals in society.
8. Impact on Government Responsibility
The Insurance Regulatory and Development Authority (IRDA) is making the government responsible & accountable for bringing uniformity in the insurance sector due to the constant increase in the number of insurers, increasing competition, number of diversified products, and diversified activities of the insurers.
9. Impact on Banks and Post Offices
Insurance has resulted in giving security against any kind of uncertainties or risks, so the insurance sector has become a popular medium for savings & investments and thus has diverted the flow of funds from banks & post offices to the insurance industry.
10. Impact on Individual Life
Insurance Regulatory and Development Authority has developed an understanding of insurance by putting a great impression on the life of the common man of society.
11. Impact on Share Market
Private insurers or players have developed ULIPs (Unit-Linked Insurance plans) to attract more customers, and ULIPs result from the modern insurance market. Therefore, insurance products have made it simple to raise funds for companies and have also attached many individuals in society indirectly to the activities of the share market.
12. Impact on the Indian Economy
Insurance Regulatory and Development Authority has an impact on the economic development of the country because money invested by investors or individuals in various types of insurance products has channelized the funds of a country from a non-economic activity to economic activity & has made available to the governments of a country to implement the various developmental activities in the country.
Complaint Redressal by the Insurance Regulatory and Development Authority (IRDA)
- Give your complaint in writing along with the necessary support documents
- Take a written acknowledgment of your complaint with the date.
The insurance company should deal with your complaint within 15 days. If that does not happen or if an individual is unhappy with their solution, then one can approach the Grievance Redressal Officer of its branch or any other office you deal with.
- Approach the Grievance Redressal Cell of the Consumer Affairs Department of IRDA: Send an e-mail to [email protected]
- Make use of the Integrated Grievance Management System: Register and monitor your complaint at www.igms.irda.gov.in
- Send a letter or fax to IRDA with your complaint.
In the last 10 years, the Insurance Regulatory and Development Authority has significantly changed the Insurance sector. Thus, the insurance sector has seen tremendous growth due to its measures. Before the Insurance Regulatory and Development Authority, only Life Insurance Corporations (LIC) and General Insurance Companies (GIC) were the players in the Insurance sector. However, due to the establishment of IRDA, 23 new players emerged in the insurance field. Also, Insurance Regulatory and Development Authority deals with any kind of discrepancy or difference in the insurance sector.
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Insurance Regulatory and Development Authority Infographic
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