Here is an essay on the ‘Insurance Regulatory Authority of India (IRDA)’ for class 11 and 12. Find paragraphs, long and short essays on the ‘Insurance Regulatory Authority of India (IRDA)’ especially written for school and college students.
Essay on IRDA
Essay # 1. Introduction to the Insurance Regulatory Authority of India (IRDA):
In 1993, Govt. of India with a view to examine the structure of the insurance industry and to recommend changes to make it more competitive and efficient, in the light of structural changes in the other segments of the financial system, appointed a committee under the chairmanship of former Governor of RBI, Sh R.N. Malhotra. The committee submitted its report in January 1994. It recommended setting up of an independent Insurance Regulatory Authority on the lines of Securities and Exchange Board of India.
The Govt. accepted the recommendation and in January 1996, established an interim Insurance Regulatory Authority. In 1999, the bill titled as Insurance Regulatory and Development Authority Bill 1999 was introduced in the parliament along with three schemes containing the amendments to the Insurance Act, 1938, LIC Act 1956, General Insurance Business (Nationalisation Act 1972). After discussion and debate the Bill became an Act known as Insurance Regulatory and Development Authority (IRDA) Act, 1999.
The preamble of the Act states that it is “An Act, to provide for the establishment of 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 or incidental thereto”.
Essay # 2. Objectives of the IRDA:
There are three objectives of IRDA:
(i) To protect the interests of holders of insurance policies.
(ii) To regulate, promote and ensure orderly growth of insurance industry.
(iii) To deal with other matters which may be connected with or incidental to the above mentioned purposes.
Composition of the Authority:
The authority shall consist of the following members named as:
(i) A chair-person
(ii) Not more than five whole time members
(iii) Not more than four part time members to be appointed by the Central Government from among persons of ability, integrity and standing.
Insurance Advisory Committee section 25, of the Act, provides that an Insurance Advisory Committee consisting of not more than twenty five members (including ex-officio) will be constituted. The authority in consultation with the committee can make regulations to achieve its objectives. In exercise of this authority the IRDA has framed a number of regulations.
Essay # 3. Salient Features of the IRDA:
The salient features of IRDA are discussed as follows:
1. The Act has amended the Insurance Act 1938, LIC Act 1956 and General Insurance Business Act 1972, ending the exclusive privileges of LIC, GIC and its subsidiaries. IRDA has allowed the entry of private sector into life and non-life insurance.
2. The insurance business has been opened up only for Indian companies. Foreign companies can hold upto 26% of the paid up capital of such Indian Insurance companies and not more than that.
3. Any applicant desirous of carrying on Insurance business in India shall make a requisition for registration application. The applicant shall make a separate requisition for registration application for each class of business of Insurance. The authority on being satisfied may accept the application. In case it rejects the application, the applicant may be given reasonable opportunity to represent his case. Alternatively, he may approach the authority with fresh request for registration after a period of two years from the date of rejection with a new set of promoters.
4. An applicant whose application for registration application has been accepted by the Authority shall make an application for grant of certificate of registration. The Authority will grant a certificate of registration after satisfying itself. It shall, however, give preference to those applicants who propose to carry business of providing health cover to the individuals. An existing insurance company will also require registration under the Act. It shall make an application within 3 months of the commencement of IRDA Act.
5. An insurer who has been granted a certificate shall make application for renewal of certificate before the 31st of December each year and such application shall be accompanied by evidence of payment of fee.
6. Any insurance company carrying the business of life insurance, general insurance or reinsurance shall not be registered unless it has paid up equity capital of Rs. 100 crores in case of a person carrying life insurance or general insurance business and a paid up capital of Rs. 200 crores in case of a company carrying on business exclusively as reinsurer.
7. An insurance company shall in respect of the insurance business carried on by it in India deposits and keep deposited with the Reserve Bank of India either cash or approved securities:
(i) In the case of life insurance business, a sum equivalent to 1% of his total gross premium written in India in any financial year and not exceeding rupees ten crores.
(ii) In the case of general insurance business, a sum equivalent of 3% of his total gross premium written in India in any financial year not exceeding rupees ten crores.
(iii) In case of re-insurance business, a sum of rupees twenty crores.
8. An insurance company shall at the expiry of each financial year prepare a balance sheet, Profit and Loss Account, Revenue Account and a Receipts and Payments Account. Besides, an insurer carrying life insurance or general insurance business shall comply with the requirements of schedule A or schedule B of the IRDA (Preparation of Financial Statements and Auditors report of Insurance Companies), Regulations 2000.
9. The Authority shall in the interest of policy holders, by means of regulations, specify the time, manner and conditions of investments of assets in the infrastructure and social sector. Under the new norms at least 50% of the funds will be parked in the government securities and insurers can invest up to 20% of their funds in corporate debts in addition to 15% in market investment. Infrastructure has been included in the social sector where companies have to mandatorily invest at least 15% of their funds. An insurer shall not directly or indirectly invest outside India, the funds of the policy holders.
10. Every insurance company shall discharge the obligations to provide life insurance or general insurance policies to the persons residing in the rural sectors, workers in the unorganised or informal sector or for economically vulnerable or backward classes of society and other categories of persons as may be specified by regulations made by the authority and such insurance policies shall include insurance for crops.
11. The authority may by an order direct any person to investigate the affairs of the insurer and to report to it. It may take the services of auditor or actuary for the purpose of assisting him in any investigation.
12. The authority has put limitations on the remuneration or commission to be paid to the insurance agents. The commission will range from 2% of premium to 15% of premium depending upon different types of policies.
13. Sec. 42 of Insurance Act 1938 read with the IRDA (Licensing of Insurance Agents) Regulations, 2000 provides that any person desiring to obtain a license to act as an insurance agent or as a composite insurance agent shall make an application to the designated person. The Act has made the provisions relating to qualifications, practical training and examination of insurance agents. These provisions will, however, not apply to the existing agents. Every insurance company shall maintain a register disclosing the name and address of every agent appointed by it, the date of appointment, and date of cessation of appointment.
14. The Authority shall have the power to issue license to other intermediaries in the insurance segments and this license will be valid for a period of three years. The IRDA has framed draft broker regulations.
15. A Tariff Advisory committee will be constituted under the Act, which shall control and regulate the rates, advantages, terms and conditions that may be offered by any insurer in respect of general insurance business.
16. Every person who attempts to act as a surveyor or loss assessor in respect of general insurance shall have to make an application to the authority and license will be issued to him for a period of five years.
17. An insurer shall maintain at all times an excess of assets over its liabilities of not less than the amount in case of an insurer carrying general insurance business, the solvency margin shall be the highest of the following:
(i) Rs. 50 crores (Rs 100 crores in case of reinsurer)
(ii) A sum equivalent to 20% of net premium income or
(iii) A sum equivalent to 30% of net incurred claims
18. Section 114A has been installed by an amendment in the Insurance Act it provides that the authority may make regulations consistent with this Act and rules made here under to carry out the purposes of this Act.
19. Section 14 of the IRDA Act lays down the duties, powers and functions of the authority which are as follows:
(i) Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration.
(ii) To protect the interests of policy holders in matters concerning their insurance policies.
(iii) Specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents.
(iv) Specifying the code of conduct for surveyors and loss assessors.
(v) Promoting efficiency in the conduct of insurance business.
(vi) Promoting and regulating professional organisations connected with the insurance and reinsurance business.
(vii) Levying fees and other charges for carrying out the purposes of this Act
(viii) Calling for information, undertaking inspection of, conducting enquiries of and investigations of insurance companies.
(ix) Control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business if not covered by Tariff Advisory Committee.
(x) Specifying the form and manner in which books of accounts shall be maintained and statements of accounts shall be rendered by insurers and other insurance intermediaries.
(xi) Regulating investment of funds by insurance companies.
(xii) Regulating maintenance of margin of solvency.
(xiii) Adjudication of disputes between insurers and intermediaries or insurance intermediaries.
(xiv) Supervising the functioning of Tariff Advisory Committee.
(xv) Specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations.
(xvi) Specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector and.
(xvii) Exercising such other powers as may be prescribed.