What is IRDA?  Its Role & Guidelines in Indian Insurance Sector

Insurance Regulatory & Development Authority of India (IRDAI) is the supreme authority when it comes to governing both Life insurance and General insurance segments. IRDAI works as the regulatory and protects the interests of the policyholders. It makes the rules and regulations so that the insurance sector keeps working at a smooth and constant pace. The authority helps the insurance companies to efficiently conduct their business and to set their insurance premium rates and other charges related to insurance policies.

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    Here, you will get to know about its history, how it functions, guidelines, etc. So, read along!

    History of IRDAI

    IRDAI was established in 2000 as a standalone body that can regulate the insurance sector in India. This happened after the Malhotra Committee Report in 1999. In August 2000, the insurance companies started sending their applications to get registered with IRDAI and then allowed companies from different countries to invest up to 26% in the market.

    IRDAI made certain rules and regulations under the Insurance ACT 1938, Section 114A.  IRDAI makes sure that the insurance companies get registered to operate in the country and protect their policyholder’s interests.

    Objectives of IRDAI

    The main objective of IRDAI is to make sure that the provisions under the Insurance Act are being followed. IRDAI has some mission statements and they are as follows:

    • Protection of the policyholder’s interest and fair treatment
    • To ensure financial solidity and regulate the insurance industry impartially
    • To make regular changes to ensure that the industry operated without any obscurity

    IRDAI Role in Insurance Sector

    India has a deep-rooted history of insurance as it has been mentioned in the writings of Manusmrithi, Arthashastra and Dharmashastra.  It reads in terms of collecting the resources that can be distributed at the time of any calamity.

    However, the origin of the insurance industry goes back to the 1800s. The industry has grown up with a tie and got better and transparent that focuses on protecting the policyholder's interest. IRDAI plays a crucial and most important role in highlighting the policyholder’s importance and their interests while shaping the rules and regulations. Some important rules of IRDAI are as follows:

    • Protect the policyholder’s interests
    • For the benefit of the policyholder, to make sure that the insurance industry is growing properly
    • In order to speed up the nation’s economy, to provide long-term funds to the people
    • To make sure that the claims get settled fast and without any injustice
    • Setting up a grievance redress forum to register and resolve the complaints
    • To make sure no insurance provider practices any kind of fraud or malpractice
    • To ensure that insurance companies stay transparent and fair with their customers and practice systematic conduct of insurance in the market
    • To encourage the insurance companies to practice a high standard of financial stability
    • To take action against an insurance company in case of violation of any mentioned rules

    What are the Functions of IRDAI?

    Here are the functions of IRDAI in the insurance industry of India:

    • Grant registration certificates to the insurance company, modify it, renew it and if need be cancel, suspend or withdraw it.
    • IRDA makes sure that the policies are being granted to the buyer properly, their claim settlements are going smoothly, they are getting insurance interest, as well as they, get the surrender value of the policy and the rest of the terms and conditions.
    • Make sure that insurance agents follow the code of conduct and are qualified enough for the job.
    • IRDAI inspects, investigates audits of insurance companies, calls for information and other businesses related to insurance.
    • IRDAI keeps on regulating the insurance rates, advantages that should be offered as well as the terms and conditions of a policy.

    There are several other functions of IRDAI that make sure to protect the interest of the policyholders.

    What are the Types of Insurance Regulated by IRDAI

    The following are the basic types of insurance regulated by IRDAI:

    Life Insurance

    • Term Insurance
    • Whole Life Insurance
    • Unit linked insurance Policies
    • Endowment Policies
    • Retirement Policies
    • Money-back Policies

    General Insurance

    Differentiation Between IRDAI & SEBI

    IRDAI functions as a regulator of the insurance industry in India and makes sure that the industry runs smoothly so that the policyholder's interest stays protected. SEBI stands for Security Exchange Board of India. SEBI works as the regulatory for the security and commodity sector of India.



    Regulation of the Insurance industry

    Regulation of security and commodity sectors

    Estalishment: 1999

    Establishment: 1992

    Protects policyholder’s interests

    Protects investor’s security interests

    Grant Registration Certificates to the new insurance companies

    Grant Registration Certificate to the stockbrokers, sub-brokers, bankers to issue deeds.

    Shaping of rules & regulations under IRDAI Act of India

    Shaping of rules & regulations under SEBI Act of India

    IRDAI Guidelines for Health & Mediclaim Insurance

    IRDAI has issued new rules and guidelines for health & mediclaim insurance in 2020 and they are as follows:

    Claim Rejection

    If the policyholder has renewed the policy for 8 years without any lapse or break then the insurance provider cannot reject the claim. The period is known as the Moratorium period. Expect in case of fraud or malfunction, the insurer cannot reach out to IRDAI for the rejection or in case the policyholder has raised a claim for any excluded cover.

    Telemedicine Inclusions

    With digitalization and advanced technology, the policyholder can consult with a doctor online. The insurance providers are asked to include this feature in their health insurance policies after the IRDAI order.

    Claim Settlement

    If the insurance company does not pay for the claim within the specified time then they will have to pay interest on the amount of the claim. The insurance company should make sure that the claim gets settled within 30-40 days from the date of submission of the final documents in support of a claim.

    Wrapping it Up!

    As mentioned above the ain objection of setting this apex body is to regulate the insurance industry in India and to protect the policyholders’ interest. It also ensures that the insurance companies are working in an orderly manner and follow the rules and regulations set by IRDAI.

    Written By: PolicyBazaar - Updated: 13 July 2021

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