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ORIGINS-INDIAThe earliest known mentions of the word insurance were in MANUSMRITI, DHARMASASTRA, ARTHASASTRA. While the precise definition was not established, but when compared to the present day context, it correlates to insurance. The first insurance company to set up in India was the Oriental Life Insurance Company in Calcutta in 1818 but unfortunately had to wind up in 1834 due to poor performance. In 1870, the British Insurance Act was enacted in England and from then foreign insurance firms dominated the Indian markets for a quite a time.To name a few are Royal Insurance Company, London Globe Insurance Company, Albert Life Insurance company. In 1912, the first insurance act was passed in India known as The Indian Life Assurance Companies Act. In 1928 the Indian Insurance Companies Act was passed subsequently followed by amendments in it in 1938 and 1950 respectively. The year 1956 is significant in the insurance business, as this year marks the Nationalisation of the insurance sector. Even the Life Insurance Corporation of India was set up on 19th January 1956.At the start, India relied heavily on the British Acts to frame the Indian Acts, but gradually transitions are done as per the prerequisites of the economy.From this, we get a backdrop on the origins of the regulatory framework in the insurance sector of India.The insurance sector is one of the core sectors of the financial world and contributes around 7% towards the GDP of the country.IRDA: INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY ACT – AN OVERVIEWThe IRDA is the apex body of regulatory in the sector of insurance (Life insurance and general insurance). Established in 1999, under the Act of Parliament as IRDA Act 1999, the act was later amended in 2010, 2012, 2013 and 2015. These amendments were made to accommodate multiple domains that were not under the gamut of the act earlier.The headquarters of IRDA is in Hyderabad, Telangana, India. The act applies to the whole of the country. The Authority Panel comprises of a ten-member team:A Chairman Not more than five whole-time members Not more than four part-time members.The tenure of all the members is 5 years or attaining 65 years of age, whichever is the earliest.All the members are appointed by the Central Government of India.DEFINITIONS:Before understanding the core aspects of the Act it is recommended to get familiar with the frequently used terms in insurance sector. The following list presents the frequently used terms along with their definitions.(a) “Appointed day” means the date on which the Authority is established under sub-section (1) of section 3.(b) “Authority” means the Insurance Regulatory and Development Authority of India established under sub-section (1) of section 3.(c) “Chairperson” means the Chairperson of the Authority.
(d) “Fund” means the Insurance Regulatory and Development Authority of India Fund constituted under sub-section (1) of section 16.(e) “Interim Insurance Regulatory Authority” means the Insurance Regulatory Authority set up by the Central Government through Resolution No.17(2)/94-Ins-V, dated the 23rd January, 1996.(f) “intermediary or insurance intermediary” includes insurance brokers, reinsurance brokers, insurance consultants, surveyors and loss assessors.(g) “Member” means a whole time or a part time member of the Authority and includes the Chairperson.(h) “Notification” means a notification published in the Official Gazette.(i) “Prescribed” means prescribed by rules made under this Act.(j) “Regulations” means the regulations made by the Authority.MISSION:The mission of IRDA is threefold:The mission secures to expand the insurance industry in India by incorporating every individual under its wing, at the same time ensuring to guard the interests of them in a substantial way.FRAMEWORK DESIGNThe Act is fragmented as multiple chapters to accommodate all the points in a lucid style.CHAPTER 1: PRELIMINARYThe chapter gives a basic overview and understanding of the Act. The definitions are also described. CHAPTER 2: IRDAChapter two speaks on the administration authority of the department. All the features relating to the composition, tenure, salary allowances of the authority are given here.CHAPTER 3: TRANSFER OF ASSETS, LIABILITIES, ETC., OF INTERIM INSURANCE REGULATORY AUTHORITYAll the articles relating to the matters of transfer of assets and interim insurance authority are presented here.CHAPTER 4: DUTIES, POWERS AND FUNCTIONS OF AUTHORITYSection 14 is explained in a thorough way. The functions and powers constitute the core values of the Act, hence require a comprehensive explanation. CHAPTER 5: FINANCE, ACCOUNTS AND AUDITMaintenance of accounts, funds and government grants are all covered under this chapter. Provisions relating to proper utilisation of the funds granted are also explained.CHAPTER 6: MISCELLANEOUSThis is again a significant chapter as the stipulations relating to the powers and duties of the Central government are drawn. Powers of the Central government to issue directions in technical and administration matters, the furnishing of returns, appointment of the committee members, delegation of the powers to them are all presented in this chapter.Apart from all the chapters, the Act also gives three schedules in relation to the preceding Insurance Acts.THE FIRST SCHEDULEAmendments to the Insurance Act, 1938THE SECOND SCHEDULEAmendments to the Life Insurance Corporation Act, 1956THE THIRD SCHEDULEAmendment to the General Insurance Business (Nationalisation) Act, 1972POWERS, FUNCTIONS AND DUTIES OF IRDASection 14 of the Act lays down the functions, duties and Powers.Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registrationProtection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insuranceSpecifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents.Specifying the code of conduct for surveyors and loss assessorsPromoting efficiency in the conduct of insurance businessPromoting and regulating professional organisations connected with the insurance and re-insurance business. Calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organisations connected with the insurance business.Control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938) Specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries. Regulating investment of funds by insurance companies. Regulating maintenance of margin of solvency. Adjudication of disputes between insurers and intermediaries or insurance intermediaries.Supervising the functioning of the Tariff Advisory Committee. Levying fees and other charges for carrying out the purposes of this Act.Specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f).Specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; and exercising such other powers as may be prescribedCONCEPT OF OMBUDSMANThe concept of ombudsman came to light after massive complaints being launched by the customers. Before the creation of the ombudsman, customers had a tough time in the clearing of their policies and cases. The lead time or the waiting time to obtain the final claim was too long. Thus, in order to service an efficient response and a solution the IRDA set up an exclusive committee called the Ombudsman.