Each and every domain has a statutory body whose function is to supervise the operations in industry and it also acts as an ombudsman to resolve the disputes. For example, in the case of the banking industry, RBI looks at the regulatory framework and it also has a division for Banking Ombudsman.
Talking about Insurance Industry, the name of this statutory body is IRDA. Let us now look into the details about IRDA.
What is IRDA?
IRDA stands for Insurance Regulatory Development and Authority and it was formed under the Insurance Regulatory and Development Authority of India. IRDA was earlier located in Delhi but in the year 2001, IRDA moved to Financial District in Hyderabad. Since the inception, IRDA has been acting as the independent statutory body that is basically governing and supervising the Insurance Sector in India.
The main reason why IRDA was formed is so as to make it easy for private players to enter the Insurance Sector. With time, a lot of private companies including several foreign companies entered the Insurance Industry in India which promoted healthy competition among the players.
What is the Structure of IRDA in terms of membership?
In terms of membership, IRDA has a total of 10 members that are a part of Insurance Regulatory Development and Authority. There are certain segregation in these 10 members and that is listed below
- One member of IRDA is Chairman and the tenure of the chairman is 5 years. The maximum age of this member can’t be over 60 years.
- Then there are 5 full-time members which are also tenured for 5 years. In this case, the maximum age can’t be over 62 years.
- The remaining 4 members are part-time members who are also tenured for 5 years.
It must be noted that the all the 10 members of IRDA are posted by the Government of India.
What are the Objectives, Function and Role of IRDA?
Objectives, Functions and Role of IRDA coincide with each other so we are going to share the details with you about all these things. Let us now look at the main role of IRDA.
Issuing Registration Certificate to Insurance Companies – The first and foremost task of IRDA is to issue the registration certificate to the insurance companies that wish to operate in India. IRDA also has the power to modify, cancel or suspend the registration certificate if required.
Protecting Interest of Policy Holders – In any domain, it is important to protect the interest of customers. In the insurance domain, the policy holders are the customers and hence IRDA also ensures that there is no unfair practice.
Providing License to Intermediaries – Apart from issuing Registration Certificate to Insurance companies, IRDA also issues a license to intermediaries like brokers and agents. IRDA is also responsible for setting up a code of conduct and giving training to agents, surveys and loss accessors.
Overall Regulation and Supervision – IRDA is also responsible for looking into overall regulations in the insurance industry. Apart from this IRDA ensures the smooth functioning of the insurance
Premium Rates – IRDA also regulates the insurance rates, premiums and benefits that are offered by the insurance companies. There is a ceiling and floor level for the premium that is being demanded for the insurance.
Terms and condition – IRDA also looks into the terms and conditions for the policy holders and it ensures that the terms and conditions justifiable.
Regulates the Investment – Insurance companies receive a huge influx of investment and it is also the duty of IRDA to regulate the investment of the funds. This is also related to protecting the interest of the buyer. With help of this, IRDA ensures that the insurance company doesn’t make an investment into volatile holdings.
Decides Solvency margin – IRDA also ensures that the insurance companies are maintaining the solvency margin. This solvency margin is basically the ability of insurance company to pay the claims. This is again related to protecting the interest of the policy holders.
Looking into Disputes – Apart from all the functions mentioned above, IRDA also looks into resolving the disputes between the policy holders, insurance companies and intermediaries.
Tariff Advisory Committee – IRDA also supervises the Tariff Advisory Committee and this is certainly a much-required point in the insurance
Accounting – Accounting is subjected to accounting standards and there can certainly be several manipulations. To ensure that the account books are transparent, IRDA also specifies the Accounting Standard to be followed and in addition to this, it shares the details of the maintenance of account books.
These were all the roles and responsibilities of IRDA however, the scope of the roles are not just limited to what is mentioned above.
There can be many more additions to this. We hope that this information about IRDA helped you in understanding all the details about IRDA.