The IRDAI — Insurance Regulatory Development Authority of India - is the regulatory authority of India's insurance companies and intermediaries. The body aims to protect the interests of the policyholders and work for the industry's overall growth.
The advent of insurance in India dates back to the 1800s and began with life insurance plans. Since then, the sector has tremendously evolved, majorly under the influence of other foreign countries like England.
Initially, when insurance was introduced in the country, it was regulated directly under the Government of India. However, due to growing demand and various other factors, a separate regulatory body, the Insurance Regulatory and Development Authority of India or IRDA, was set up.
Read on to learn more about the apex body of insurance providers in India, including the importance, role, and functions of IRDA.
What is IRDA in Insurance?
IRDAI stands for Insurance Regulatory and Development Authority of India, the apex body that regulates and supervises India’s insurance sector.
The regulator of the insurance sector in India was established in 1999 by the IRDAI Act and has set various rules and regulations for the functioning and operation of the insurance industry—Section 114A of the Insurance Act of 1938 lists several rules and laws.
IRDA started taking registration requests in August 2000, allowing companies to invest up to 26% in the market. Insurance providers receive advisories from the IRDA in case of any change in rules and regulations. The Insurance Regulatory Authority of India regulates and supervises life and general insurance companies operating within the country.
Structure of IRDA
IRDA is a ten-member body appointed by the Government of India. The structure and the term of each position are mentioned below:
5 years and a maximum age of 60 years
Five whole-time members
5 years and a maximum age of 62 years
Four part-time members
Not more than 5 years
Role and Importance of IRDA At a Glance
The following are the role of IRDA in the insurance sector in India:
To protect the interest of the policyholder.
To bring overall and speedy industry growth to benefit the public.
To promote and monitor fair dealing, transparency, integrity, and financial soundness of all its participants.
To ensure settlement of genuine claims and prevent frauds and malpractices.
To build a reliable management system to ensure the insurance providers offer high standards of financial stability.
To take necessary action if these standards are not met.
Regularly frame regulations or make changes per evolving market conditions to ensure the industry operates without ambiguity.
Functions of IRDA
As mentioned earlier, the primary function of IRDA is to protect the interest of the policyholders and ensure the sector offers stability, transparency, and efficiency to its policyholders. To achieve these goals, the insurance regulatory authority of India undertakes the following essential functions:
Ensures policyholder protection: It sets norms and rules to protect the interest of the policyholders. The Policyholder's Protection & Grievance Redressal Department of the regulatory body investigates complaints and grievances from policyholders and takes them up with the respective insurer for redressal.
Creates consumer awareness: IRDA conducts various campaigns, publishes educational material and takes several initiatives to create consumer awareness about insurance products.
Imposes regulations and conducts supervision: IRDA sets up, enforces, and supervises guidelines and regulations to govern the insurance sector and all its participants, like the insurance companies, intermediaries, and other parties.
Monitors financial stability: The regulator of the insurance sector in India monitors the financial stability and solvency of the insurance providers and ensures policyholder claims are met.
New product approval: The insurance providers must get their new product or policy approved by the IRDA to launch.
Takes an active role in market development: The body encourages innovation and technological development to promote and expand the insurance sector in the country.
Cooperates with international regulators: To ensure the Indian insurance market is at par with global standards, the regulatory body collaborates with its global counterparts to exchange best practices, knowledge, cross-border challenges, and other aspects.
IRDA is the apex regulatory body responsible for India's insurance sector. The general or life insurance policies offered by various insurance providers come under the purview of IRDA regulations. Hence, the primary mission of IRDA is to protect the rights of policyholders, ensure the overall growth of the sector and promote fair and transparent practices.