Role of irda

Role of IRDA

1. In Insurance Services in India ROLE OF IRDA Pranavkumar Jain 1 st PGDM

2. Abstract Insurance Regulatory and Development Authority  (IRDA) is an autonomous apex statutory body which regulates and develops the insurance industry in India. It was constituted by a Parliament of India act called  Insurance Regulatory and Development Authority Act, 1999 and duly passed by the Government of India. The agency operates from its headquarters at Hyderabad,  Telangana  where it shifted from Delhi in 2001.  It serves as an Authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith. IRDA role is to protect rights of policy holders & they provide registration certification to life insurance companies & responsible for renewal, modification, cancellation & suspension of this registered certificate. It plays a prominent role in regulating investment of funds by insurance companies. Further, regulating maintenance of margin of solvency, adjudication of disputes between insurers and intermediaries or insurance intermediaries.

3. Introduction The  IRDA Act, 1999  was passed as per the major recommendation of the  Malhotra Committee  report (7 Jan, 1994) which recommended establishment of an independent regulatory authority for insurance sector in India As stated in the act mission of IRDA is " to protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. “ As per current guidelines issued by IRDA, Insurance Companies are not permitted to invest in Indian Depository Receipts (IDR), while they are permitted to invest in Equity shares/ Bonds/ Debentures.

4. Composition of IRDA Section 4 of IRDA Act 1999; specify the composition of the Authority as follows; The ten member team should consist of, A Chairman; Five whole time members; Four part time members, (All appointed by Government of India).

5. Main Functions Of IRDA The duties, powers and functions of IRDA are laid down in Section 14 of IRDA Act 1999 are: Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration P rotection 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 insurance

6. S pecifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents S pecifying the code of conduct for surveyors and loss assessors P romoting efficiency in the conduct of insurance business Promoting and regulating professional organizations connected with the insurance and re-insurance business L evying fees and other charges for carrying out the purposes of this Act Calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organizations connected with the insurance business

7. C ontrol 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 S pecifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organizations 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 R egulating investment of funds by insurance companies

8. Insurers Under IRDA Type of Business Public Sector Private Sector Total Life Insurance 1 23 24 General Insurance 6 21 27 Re-insurance 1 1 Total 8 44 52

9. Financial Facts The total premium for the life insurance sector remained flat at Rs.2.87 lakhs crore in 2012-13. The total non-life insurance premium increased to Rs. 62,973 crore in 2012-13 as compared to 52,876 crore in 2011-12. The growth rate of premium of non-life insurance sector declined to 19.10 percent in 2012-13 as compared to 24.19 percent in 2011-12.

10. Market Share ( total life insurance collected)

11. Parameters to assess Insurance Penetration Premium GDP Insurance Density Premium Population

12. Trends IRDA should focus more Multi-distribution i.e. increasing penetration through new modes of distribution such as the internet, direct and telemarketing and NGOs Product innovation i.e. increased levels of customization through product innovation Claims management i.e. timely and efficient management of claims to prevent delays which can increase claims cost Profitable growth i.e. expanding product range, developing innovative products and expanding distribution channels

13. Major Reasons for downfall Some possible major reasons for downfall in 2012: Products strategy and design Cost Taxation Distribution Prospects and challenges of various channels Compensation Customer service Governance and regulatory issues

14. Factors impacting growth of non-life insurance The non-life insurance industry has been growing in excess of 20% over the last two years however the penetration was as low as 0.7% of the GDP in FY10.The key factors for the growth include: Product pricing, innovation and simplicity Distribution Compensation Micro-insurance in non-life widening reach Governance and regulatory changes Health insurance Innovative products to counter the competition Improved fraud control mechanisms Standardization to reduce claim loss Reducing inefficiencies by revisiting third party administrator (TPA) agreements

15. Way Forward The Indian insurance market is poised for strong growth in the long run. It stands at the threshold of moving towards a stable position, delivering “stable profitable growth”. Significant latent market Channelizing industry focus

16. Conclusion There is huge potential to tap the rural segments which are still untouched in the industry. The success and growth of the insurance sector depends on the efforts being made by the insurance companies, on cost effectiveness and strong distribution network, integrated training and development programs for staff and agents, customized solutions and most advanced technology providing quick services, and financial stability. Competitiveness and smart marketing strategies will add new dimensions to the insurance business in the coming years.

17. Take Away IRDA needs to remove this disparity to open up investment opportunity by Insurance Companies and thereby also enhance the liquidity of IDRs. Insurance Sector has power to penetrate provided innovative methods are tried keeping customer demand in mind and he is provided hassle free services