About regulator (IRDAI) and how it functions
IRDAI – What they do, functions, and features
IRDAI or IRDA is one acronym that most of us have heard in our lives. The Insurance Regulatory and Development Authority of India (IRDAI) is a regulatory body responsible for overseeing the country’s general and life insurance businesses.
The Insurance Regulatory and Development Authority (IRDA) Act, 1999 defines its mission as to regulate, promote, and ensure the insurance industry’s orderly growth and protect the interest of its shareholders. The act also bestows handling matters connected with or incidental to insurance to the regulatory body.
When was IRDA established?
The first insurance company was established in India back in 1818 in Kolkata (then Calcutta). With time we saw more and more companies trying their hands in this business. But there were no proper regulations for many years, which led to mismanagement and lack of trust.
An act of parliament established IRDA in the year 2000 after the recommendation of the Malhotra Committee report in 1999. Before that, the central government was the regulator of the insurance industry. In August 2000, IRDA began accepting applications for new company registration, allowing foreign holders to hold up to 26% stake in the insurance market.
IRDAI Board composition
The board of IRDA comprises ten members appointed by the GOI (Government of India). It includes –
- A chairman
- Five whole-time members, and
- Four part-time members.
Functions of IRDA
Section 14 of the IRDA Act, 1999 has laid down several functions for the regulatory body. It includes –
- To protect the interest of the shareholders throughout the policy period and regarding claims
- Overseeing and regulating the prevalent premium rates and other terms of non-life insurance plans
- To register and monitor insurance companies
- To establish the requisite norms and licensing requirements for insurance intermediaries
- To specify financial reporting norms of insurance companies
- To ensure that the insurance companies maintain solvency margin requirements
- To regulate and oversee the investment of policyholders’ funds by insurance companies
- To promote the growth of professionalism amongst insurance organizations
- To ensure improved coverage of insurance policies across rural India and other vulnerable sections
What are the insurances covered?
The IRDAI manages both life and general insurance. Here is a detailed chart showcasing the areas covered –
- Life Insurance
- Term Plan
- Endowment policy
- Money-Back policy
- Retirement plan
- Unit-linked insurance policy
- General Insurance
- Health insurance policy
- Car insurance
- Bike insurance
- Travel insurance
- Gadget insurance
- Property insurance
Features of IRDA
Here are the features of the Insurance Regulatory and Development Authority of India –
- It acts as the regulator and manages the insurance industry
- It protects the interest of the policyholder
- It ensures the growth of the industry
- It oversees the registration of new companies
- It regulates the rates and terms offered by the insurance companies to its customers
Introducing IRDAI has brought about sanity in the insurance companies. Before its arrival, the insurance companies would reject policies to their policyholders for no apparent reason. Its inculcation has helped improve claims redressal and made the entire process seamless for all the parties.