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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.
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.