IRDA | Powers | Duties | Functions
IRDA Act
In order to control private sector insurance companies, the
Government of India passed the IRDA Act (Insurance Regulatory
and Development Authority Act, 1999) which enabled it to
regulate the private sector companies in insurance business. What
was the sole monopoly of the LIC is now thrown open to the
private sector for covering the life and property of individuals.
Now, the IRDA controls the entire insurance business in India.
IRDA Powers Composition Duties and Functions
Powers of IRDA
The following are the powers of IRDA
1. All insurance companies have to register with IRDA
compulsorily.
2. Companies can undertake only insurance business.
3. The capital structure of the companies will be determined by
IRDA.
4. Companies have to deposit with RBI the amount stipulated by
IRDA.
5. Accounts and balance sheets of companies have to be submitted
to IRDA.
6. Insurance companies have to appoint actuaries and they will
value the liabilities of the insurance companies and report the
same to IRDA.
7. Investment of assets will be prescribed by IRDA in the form of
approved securities.
8. The nature of general insurance business will be prescribed by
IRDA.
9. Statements of investment assets to be submitted to IRDA every
financial year.
10. All insurance companies have to devote certain percentage of
their business including insurance for crops. This should cover
unorganized sector including the economically weaker sections.
11. The appointment of chief executive officer requires prior
permission of the IRDA.
12. All insurance agents must obtain license from IRDA.
13. IRDA has powers for levying penalty on companies which fail
to comply with the rules and regulations.
Composition of IRDA
One chairperson and not more than 9 members of whom not
more than 5 would be full time members and they are appointed
by the government. Those who have experience in life and general
insurance, actuarial service, finance, economics etc., are
appointed.
Duties of IRDA
1. Regulates insurance companies
The working of insurance companies will be regulated in the
following aspects
The persons to be employed,
The nature of business,
Covering of risks,
Terms and agreements for covering risks etc., will be
prescribed by IRDA.
2. Promotes insurance companies
Corporate set-up is a must for establishing an insurance company
and they have to submit periodical reports to IRDA. Different
kinds of policies and different types of insurance are also
suggested by IRDA to these insurance companies.
3. Ensures growth of insurance and reinsurance
companies
Here, the promotion of new companies is encouraged. Even banks
are also permitted to promote insurance companies as a
subsidiary.
Functions of IRDA
1. Issuing certificate of registration.
2. Protecting the interest of policy holders.
3. Issuing license to agents.
4. Specifying code of conduct for surveyors and loss assessors.
5. Promoting efficiency in the insurance business.
6. Undertaking inspection, conducting enquiries etc., on
insurance companies.
7. Control and regulations of rates, terms and conditions by
insurance company to policy holders.
8. Adjudication of disputes between insurance company and
others in the insurance business.
9. Fixing the percentage of insurance business to rural and social
sectors.
Insurance Ombudsman by IRDA:
On the lines of Bank ombudsman, an insurance ombudsman was
created by IRDA. The main purpose of the creation of the
ombudsman is to cover disputes arising between the insured and
the insurer. Any complaint made on insurance companies will be
settled by the insurance ombudsman. It is more a watch dog by
which the functioning of the insurance company will be
disciplined.
Insurance Ombudsman is basically a consumer protection
exercise. The insured need not worry about their policy amount as
any complaint lodged with the ombudsman will have legal
sanctity and even criminal action can be initiated against the
erring insurance company.
Thus, enough judiciary powers are given to insurance
ombudsman by which speedy settlement of cases connected with
individual policy holder is possible.
