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IRDA( Insurance Regulatory &Development Authority )

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C

ontentsWhat is IRDA ?

Mission of IRDA & Composition of Authority.

Expectation of IRDAEvolution/History of IRDA

Insurance History

Duties, Powers & Functions of IRDA

Impact Of IRDA On Indian Insurance Sector

Conclusion

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y Insurance, in law and economics, is a form of risk management

primarily used to hedge against the risk of a contingent loss.

y Insurance is defined as the equitable transfer of the risk of a potentialloss, from one entity to another, in exchange for a premium.

y Insurance rate is a factor used to determine the amount, called the

premium, to be charged for a certain amount of insurance coverage

y Risk management, the practice of appraising and controlling risk, has

evolved as a discrete field of study and practice

What is INSURANCE?

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What is IRDA?Mission:

Insurance Regulatory & Development Authority (IRDA) isregulatory and development authority under Government ofIndia in order to protect the interests of the policyholders

and to regulate, promote and ensure orderly growth of theinsurance industry.

Came into being in 1999 after the bill of IRDA was passed inthe Indian parliament.

It is a national agency.

It seeks to open up insurance sector for private companies.

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Composition of Authority under IRDA Act, 1999

As per the section 4 of IRDA Act' 1999, Insurance Regulatory and Development Authority

(IRDA, which was constituted by an act of parliament) specify the composition of

Authority

The Authority is a ten member team consisting of

(a) a Chairman;

(b) five whole-time members;

(c) four part-time members,

(all appointed by the Government of India)

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ExpectationsThe law of India has following expectations from IRDA

To protect the interest of and secure fair treatment to policyholders;

To bring about speedy and orderly growth of the insurance industry(including annuity and superannuation payments), for the benefit of the

common man, and to provide long term funds for accelerating growth of theeconomy;

To set, promote, monitor and enforce high standards of integrity, financialsoundness, fair dealing and competence of those it regulates;

To ensure that insurance customers receive precise, clear and correctinformation about products and services and make them aware of theirresponsibilities and duties in this regard;

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Contd.. To ensure speedy settlement of genuine claims, to prevent insurance frauds

and other malpractices and put in place effective grievance redressalmachinery;

To promote fairness, transparency and orderly conduct in financial marketsdealing with insurance and build a reliable management information systemto enforce high standards of financial soundness amongst market players;

To take action where such standards are inadequate or ineffectively enforced;

To bring about optimum amount of self-regulation in day to day working ofthe industry consistent with the requirements of prudential regulation.

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1818 - Oriental Life Insurance Company 1st Insurance Company.

1870 - Bombay Mutual Life Assurance Society 1st Life Insurance

Company.

1912 - The Indian Life Assurance Companies Act enacted the 1st Law

to Regulate the Life Insurance Business.

1928 - The Indian Insurance Companies Act enacted to enable the

government to collect statistical information about both life & non-

life insurance businesses.

Evolution/History of IRDA andinsurance

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1938: Earlier legislation consolidated & amended the Insurance Act with the

objective ofprotecting the interests of the insuring public.

1956:245 Indian & foreign insurers & provident societies are taken overby the central government & nationalized.

LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capitalcontribution of Rs. 5 crore from the Government of India.

The first General Insurance Company established in the year1850 inCalcutta by the British.

Contd..

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Duties, Powers & Functions of IRDA

It issues the applicants in insurance arena, a certificate of registration as wellas renewal, modification, withdrawal, suspension or cancellation of suchregistrations.

It protects the interests of the policy holders in any insurance company in thematters related to the assignment of policy, nomination by policy holders,insurable interest, and resolution of insurance claim, submission value ofpolicy and other terms and proposals in the contract.

It also specifies obligatory credentials, code of conduct and practicalinstructions for mediator as well as the insurance company. Apart from this, italso defines the code of conduct for the surveyors and loss assessors involved

with the insurance business. One of the major functions of IRDA includes endorsing competence in the

insurance business. Apart from this, upholding and regulating professional

organizations in insurance and re-insurance business is also a major duty ofIRDA. IRDA is also entitled to for asking information, undertaking inspection and

investigating the audit of the insurers, mediators, insurance intermediariesand other organizations related to the insurance sector.

It is also concerned with the regulation of the rates, profits, provisions andconditions that may be offered by insurers in respect of general insurancebusiness if it is not controlled or regulated by the Tariff Advisory Committee.

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Types of Insurance

Life insurance

Non - Life Insurance

(general insurance)

Property (eg.Builders risk insurance)

Aviation (eg.Private aircraft insurance)

Marine (eg. Marine hull insurance)

Miscellaneous (eg.Purchase insurance)

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Regulatory Body:

The insurance act should be changed.

An insurance regulatory body should be set up.

Controller of insurance-a part of the Finance Ministry should be made

independent.

Investments :

Mandatory Investments of LIC Life Fund in government securities to be

reduced from 75% to 50%.

GIC and its subsidiaries are not to hold more than5%

in any company.

Customer Service:

LIC should pay interest on delay on payment beyond 30 days.

Insurance companies must be encouraged to set up unit link pension plans.

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INDIAN SCENARIOOF INSURANCE

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y The potential of the Indian insurance industry is huge.

y It has an annual growth rate of 15-20% & the largest number of life

insurance policies in force.

y Insurance & Banking Services contribution to the country's gross

domestic product (GDP) is 7%

y The funds available with the state-owned Life Insurance Corporation

(LIC) for investments are 8% of GDP.

Indian Insurance Industry: New Avenues forGrowth 2012,

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y Theyear 1999 saw a revolution in the Indian insurance sector------the

ending of government monopoly -----the passage of the Insurance Regulatory and

Development Authority (IRDA) Bill

y A foreign partner can hold 26% equityin an insurance company, butthere was a proposal to increase this limit to 49%.

y Foreign investments ofRs. 8.7 billion have poured into the Indianmarket & 21 private companies have been granted licenses.

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INSURANCE OMBUDSMANy Created by a Government of India

y Quick disposal of the grievances of the insured

customers and to mitigate their problems involved inredressal of those grievances.

y This institution is of great importance and relevancefor the protection of interests of policy holders and

also in building their confidence in the system.y The institution has helped to generate and sustain the

faith and confidence amongst the consumers andinsurers.

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Its Powery Two types of functions to perform (1) conciliation, (2) Award making.

y The insurance Ombudsman is empowered to receive and consider complaints in

respect of personal lines of insurance from any person who has any grievance

against an insurer for complaints related toy any grievance against the insurer i.e.

y (a) any partial or total repudiation of claims by the insurance companies,

y (b) dispute with regard to premium paid or payable in terms of the policy,

y (c) dispute on the legal construction of the policy wordings in case such dispute

relates to claims;

y (d) delay in settlement of claims and

y (e) non-issuance of any insurance document to customers after receipt of premium.

Ombudsman's powers are restricted to insurance contracts of value not exceeding

Rs. 20 lakhs. The insurance companies are required to honour the awards passed by

an Insurance Ombudsman within three months

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Insurance can be summed up asPraying for the best

being PREPARED for theWORST.

Conclusion

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