Much like the financial services offered in India, Insurance sector in India has been a victim of incompetence. The products are not very flexible, the insurance sector hasn’t been able to penetrate smaller cities and there has been high propensity of scams. Under these circumstances, Insurance Regulatory and Development Authority, IRDAI, plays a great role in regulating the functioning of the insurance sector.
Call for IRDAI
Insurance is an agreement wherean insurance company undertakes to provide compensation for stated loss, damage, illness or death in return for payment of a specified amount (premium).
In the past, the insurers have failed to keep up their promises and the customers were at a big loss and had to adhere to some of the officer’s naggings too. This gave the need to develop a regulatory body to keep an eye on companies and policyholders too. This regulatory body, constituted by Government of India supervises, suggests, advises and also resolves the issues between the insurer and the policyholder.
Under the Insurance Regulatory and DevelopmentAuthority Act of 1999, IRDAI (Insurance Regulatory and Development Authority of India) was constituted as an autonomousagency to regulate and promote insurance and re-insurance industries in India.
Motive of IRDAI
The purpose of the body is to safeguard the policyholders ‘stake. It thereby regulates, promotes and ensures that both the parties dwell well.
Characteristics of IRDAI
IRDAI, an autonomous body,has a common seal with the ability to affix a stamp on the agreed documents. Besides, in case a member of the committee resigns or dies, the body still continues to work.
IRDAI’s controller of insurance committee comprises of ten-members; chairman, full- time members and part-time members.
Functions of IRDAI
- IRDAI Issues, renews, modifies, withdrawals, suspends or cancels registrations.
- It regulates the qualifications, code of conduct for surveyors and loss assessors.
- Levying fees and other charges.
- Promoting and regulation professional organizations connected with the insurance and re-insurance industry.
- Regulation of company investment of funds, the margin of financial competence, rates, advantages, terms and conditions to be levied by the insurers not covered by the Tariff Advisory committee.
- Promoting efficiency and formally judging disputes between insurers and intermediaries
- To state the ratio of life and general insurance business undertaken in the rural or social part.
Duty of IRDAI
- Protection of policyholder’s interests and grievances.
- Ensuring the policyholder receives fair dealing, correct information of the policies.
- Ensure there is an orderly conduct in the fiscal market dealing with insurance.
- To bring in quick settlement of claims and prevention of hoax.
- To build a trustworthy management information system.
- To bring in self-regulation in daily activities of the market.
- Toenforce high standards of financial soundness in the market.
- To bring in faster growth in the insurance sector of India.
- To provide benefits for lay man and mobilize funds to enhance the economic growth.
Effect of IRDAI overall
Effect on policyholders
Since the IRDAI is working towards the interests and grievances of the policyholders, more population is taking the advantage of insurances.Besides, the sense of savings and investments (ULIP) has developed in Indians.
Effect on Insurance sector in India
The set rules and regulations made it strict, which makes all the insurance companies adhere to the rules and regulations. Many private sector undertakings have taken interests too. A sense of competition has arisen, thus making it suitable for customers to grab the right choice of plan.
Effect on Indian economy
With new plans coming up and inviting private sector undertakings, investors are keen in investing in various types of insurance plans. It creates mobilizing of funds, and all over a great platform to carry on various development plans for the country.
Today customers find it easy to take up insurance plans and are aware that they can approach the grievance redressal cell for any kind of grievances. The country’s economy has shown its upward rising graphs too. In the past decade, IRDAI has made a commendable effort in creating awareness of insurance in life as well as well-drafted plans for laymen too.
Read more on Insurance Sector in India at https://www.acko.com/insurance-sector-india/