Insurance Regulatory and Development Authority

Insurance Regulatory and Development Authority of India
(बीमा विनियामक और विकास प्राधिकरण)
IRDAI Logo
Abbreviation IRDA
Headquarters Parisrama Bhavan, Basheer Bagh, Hyderabad, Telangana
Location
Coordinates 17°23′06″N 78°29′10″E / 17.385°N 78.486°E / 17.385; 78.486Coordinates: 17°23′06″N 78°29′10″E / 17.385°N 78.486°E / 17.385; 78.486
Chairman, IRDA
 T.S. Vijayan[1]
Website irda.gov.in

The Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous, statutory agency tasked with regulating and promoting the insurance and re-insurance industries in India.[2] It was constituted by the Insurance Regulatory and Development Authority Act, 1999,[3] an act of Parliament passed by the government of India.[4] The agency's headquarters are in Hyderabad, Telangana, where it moved from Delhi in 2001.[5]

The IRDAI attempted to raise the foreign direct investment (FDI) limit in the insurance sector to 49 percent from its current 26 percent.[6] The FDI limit in the sector was raised to 100 percent in June 2016.[7]

Insurance in India

Multi-coloured organisational chart
The IRDAI and its linked organisations

In India insurance was mentioned in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmasastra) and Kautilya (Arthasastra), which examined the pooling of resources for redistribution after fire, floods, epidemics and famine. The life-insurance business began in 1818[8] with the establishment of the Oriental Life Insurance Company in Calcutta; the company failed in 1834. In 1829, Madras Equitable began conducting life-insurance business in the Madras Presidency. The British Insurance Act was enacted in 1870, and Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were founded in the Bombay Presidency. The era was dominated by British companies.

In 1914, the government of India began publishing insurance-company returns. The Indian Life Assurance Companies Act, 1912 was the first statute regulating life insurance. In 1928 the Indian Insurance Companies Act was enacted to enable the government to collect statistical information about life- and non-life-insurance business conducted in India by Indian and foreign insurers, including provident insurance societies. In 1938 the legislation was consolidated and amended by the Insurance Act, 1938, with comprehensive provisions to control the activities of insurers.

The Insurance Amendment Act of 1950 abolished principal agencies, but the level of competition was high and there were allegations of unfair trade practices. The Government of India decided to nationalise the insurance industry.

An ordinance was issued on 19 January 1956, nationalising the life-insurance sector, and the Life Insurance Corporation was established that year. The LIC absorbed 154 Indian and 16 non-Indian insurers and 75 provident societies . The LIC had a monopoly until the late 1990s, when the insurance industry was reopened to the private sector.

General insurance in India began during the Industrial Revolution in the West and the growth of sea-faring commerce during the 17th century. It arrived as a legacy of British occupation, with its roots in the 1850 establishment of the Triton Insurance Company in Calcutta. In 1907 the Indian Mercantile Insurance was established, the first company to underwrite all classes of general insurance. In 1957 the General Insurance Council (a wing of the Insurance Association of India) was formed, framing a code of conduct for fairness and sound business practice.

Eleven years later, the Insurance Act was amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee was established. In 1972, with the passage of the General Insurance Business (Nationalisation) Act, the insurance industry was nationalized on 1 January 1973. One hundred seven insurers were amalgamated and grouped into four companies: National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. The General Insurance Corporation of India was incorporated in 1971, effective on 1 January 1973.

The re-opening of the insurance sector began during the early 1990s. In 1993, the government set up a committee chaired by former Reserve Bank of India governor R. N. Malhotra to propose recommendations for insurance reform complementing those initiated in the financial sector. The committee submitted its report in 1994, recommending that the private sector be permitted to enter the insurance industry. Foreign companies should enter by floating Indian companies, preferably as joint ventures with Indian partners.

Following the recommendations of the Malhotra Committee, in 1999 the Insurance Regulatory and Development Authority (IRDA) was constituted to regulate and develop the insurance industry and was incorporated in April 2000. Objectives of the IRDA include promoting competition to enhance customer satisfaction with increased consumer choice and lower premiums while ensuring the financial security of the insurance market.

The IRDA opened up the market in August 2000 with an invitation for registration applications; foreign companies were allowed ownership up to 26 percent. The authority, with the power to frame regulations under Section 114A of the Insurance Act, 1938, has framed regulations ranging from company registrations to the protection of policyholder interests since 2000.

In December 2000, the subsidiaries of the General Insurance Corporation of India were restructured as independent companies and the GIC was converted into a national re-insurer. Parliament passed a bill de-linking the four subsidiaries from the GIC in July 2002. There are 28 general insurance companies, including the Export Credit Guarantee Corporation of India and the Agriculture Insurance Corporation of India, and 24 life-insurance companies operating in the country. With banking services, insurance services add about seven percent to India’s GDP.

Structure

Section 4 of the IRDAI Act 1999 specifies the authority's composition. It is a ten-member body consisting of a chairman, five full-time and four part-time members appointed by the government of India.[9] In September 2016, the authority was chaired by T. S. Vijayan[10] and its full-time members[11] were P. J. Joseph, Nilesh Sathe, V. R. Iyer, Pournima Gupte and D. D. Singh.

Functions

The functions of the IRDAI are defined in Section 14 of the IRDAI Act, 1999,[2] and include:

Insurance repository

The Finance Minister of India announced an insurance repository system, helping policyholders buy and maintain insurance policies in electronic form rather than on paper. Insurance repositories, like share depositories or mutual fund transfer agencies, will hold electronic records of insurance policies issued to individuals as electronic or e-policies.[12]

See also

References

  1. ↑ "Press Release". IRDA. 21 February 2013.
  2. 1 2 "Duties, powers and functions of IRDAI". IRDAI. Retrieved 18 September 2016.
  3. ↑ GOI. "IRDA ACT 1999" (PDF). Department of Financial Services, GOI. Retrieved 19 June 2012.
  4. ↑ "Lok Sabha passes insurance bill with 4 amendments". 02/12/1999. Rediff News. Retrieved 19 June 2012.
  5. ↑ PTI (Nov 21, 2001). "IRDA to shift HQ to Hyderabad by Feb". The Times of India.
  6. ↑ "IRDA chief bats for 49 per cent FDI". The Hindu. 4 October 2012. Retrieved 14 December 2013.
  7. ↑ "Govt allows 100% FDI in telecom, hikes insurance cap to 49%". Times of India. 16 July 2013. Retrieved 14 December 2013.
  8. ↑ https://www.irda.gov.in/ADMINCMS/cms/NormalData_Layout.aspx?page=PageNo4&mid=2
  9. ↑ "Composition of Authority". Insurance Regulatory and Development Authority. Retrieved 18 December 2012.
  10. ↑ "PROFILES OF TOP MANAGEMENT". IRDAI. Retrieved 18 September 2016.
  11. ↑ "Profiles of Top Management". IRDAI. Retrieved 18 September 2016.
  12. ↑ "CDSL Insurance Repository Limited (CDSL IR)". Retrieved 26 November 2016.

External links

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