What is IRDA (Insurance Regulatory and Development Authority)?

IRDA is the regulatory body in India that governs both Life insurance and General insurance companies. India is a vast country that offers great opportunities to varied segments one of which is the insurance sector.

Let us understand the concept of insurance regulator in a simple way. India witnesses the concept of a joint family where the head, most commonly the grandparents, acts as the guardian of each member. The head takes care of everyone’s needs and maintains a balance for fair practices to keep the family united. He treats everyone equal and helps the family in crisis guiding them on how to steer out of it. Now, Similar to how the head of the family plays, IRDA runs the Indian insurance industry as per its set rules and guidelines.

Team Digit

History and Objectives of IRDAI
What is the IRDAI ACT?
Structure of IRDAI
How Does IRDAI Work?
Functions of IRDAI
Importance and Role of IRDA
Powers of IRDAI?
Types of Insurance Regulated by the IRDAI
New Rule of IRDAI
Difference between IRDAI and SEBi
Frequently Asked Question

When Was IRDAI Established?

India’s Insurance Regulatory and Development Authority (IRDA) was established in 1999, and it functions as an autonomous statutory body. The IRDA acts as the supervising and developing authority of insurance in India.

The setting up of IRDAI was made obligatory under the Insurance Regulatory and Development Authority Act, 1999, passed by the Parliament of India.

What is the History & Objectives of IRDAI?

The Insurance Regulatory and Development Authority of India, also known as IRDAI, was set up in 1999 to supervise the insurance business in India. It was set up after the Malhotra committee's recommendation to support market liberalisation policy, policyholder protection and the growth of the sector.

IRDAI was established in Hyderabad and has continued to play a key role in determining the current trends within India's insurance sector. One of the major milestones of the IRDAI includes the liberalisation of the sector to accommodate the private players in the early 2000s.

Objectives of IRDAI

To serve the interest of policyholders.
Consider regulation and supervision of the insurance industry.
Promote competition among the insurers so that they can be in a position to bring the best to the market.
Improve standards within the insurance industry.
Establish a framework for handling consumer complaints.
Advise the government on insurance matters, policies and laws.

What is the IRDAI Act?

The Insurance Regulatory and Development Authority Act of 1999 serves as the foundation for establishing the Insurance Regulatory and Development Authority of India (IRDAI). This act aims to accomplish several important goals, including regulating and facilitating the systematic growth of the insurance industry, protecting policyholders' interests, and amending legislation related to insurance.

What is the Structure of IRDAI?

The structure of IRDAI includes the Chairman, five full-time members, and four part-time members, all appointed by the Government of India.

Chairperson: This post is occupied by an individual appointed by the Government of India who serves as the head of IRDAI.
Members: Full-time members- The IRDAI consists of full-time members. This also includes the Chairperson.
Members: Part-time members: The part-time members are also appointed by the government of India. They should not exceed four in number.

Currently, the positions are held by the individuals listed below:

Name	Position	Role
Mr Debasish Panda	Chairman	Leads the Authority
Mr Thomas Devasia	Whole-Time Member	Member (Non-Life)
Mr B.C. Patnaik	Whole-Time Member	Member (Life)
Mr Parmod Kumar Arora	Whole-Time Member	Member (Actuary)
Mr Satyajit Tripathy	Whole-Time Member	Member (Distribution)
Mr Rajay Kumar Sinha	Whole-Time Member	Member (Finance & Investments)
Dr M.P. Tangirala	Part-Time Member	Additional Secretary, Department of Financial Services, Ministry of Finance
CA Ranjeet Kumar Agarwal	Part-Time Member	President, Institute of Chartered Accountants of India

How Does IRDAI Work?

Consider that maintaining decorum is very important to running any professional setup or otherwise. And so, the one who breaks the rule and disturbs the peace needs to be checked immediately. Similarly, IRDA works and acts as mentioned below in different situations.

IRDA is an autonomous body with the only mission of regulating fair practices in the insurance market to prevent the loss of customers. The industry is expected to reach US$280 billion by 2020. It poses a long way to go, and hence, a dire need for IRDA actions arises. To keep up the growth, here is how IRDA works:

The ultimate motive is to protect the interests of policyholders during claims, policy issuance, and policy cancellation. Hence, it monitors that no insurance company can deny a claim of its own free will unless it falls beyond the scope of the cover.
There is a need to tame the market to a single tune that brings the players together and then compete simply based on the discounts. And so, IRDA clearly states the code of conduct for all insurance companies, surveyors, and loss assessors.
To prevent any misdeed, it calls for an annual or need-based audit, investigation, and request of information from either insurance companies or intermediaries.
Regulate the rates and terms offered by the insurance companies to bring equality for the customers.
If a dispute arises between the insurer and the policyholder, IRDA will step in to provide a resolution.
To prevent different insurers from quoting rates according to their convenience, they bound the major risks to the Tariff Advisory Committee. After this, the insurers consider the percentage of premium income they would need to fund the professional organizations.
Considering the development of both the urban and rural sectors, IRDA binds insurers to a minimum percentage of both life and non-life business.

The scope of work is wide, and IRDA, as a body, works within its limits without favouring any single insurance company.

What are the Functions of IRDAI?

The IRDAI is crucial in maintaining a transparent and efficient insurance market in India. It carries out the following functions:

Regulatory Functions

The IRDAI issues various certificates of registration to insurance companies and agents.
It develops conduct and professional ethics for intermediaries.
An important role of IRDAI is to protect policyholders’ rights.

Developmental Functions

Insurance companies play a significant role in educating the public or creating awareness about the need for insurance.
It fosters the growth and advancement of the insurance industry by developing and offering new products and services.
It fosters competition among the insurers so that they adopt useful methods of serving policyholders.
It improves the standard of services rendered by the industry in a way that promotes the development of insurance personnel.

Supervisory Functions

It performs routine reviews of insurance industries and other organisations to check compliance with the set regulations.
It tracks the level of insurance firms' compliance with the standards set, such as financial health and customer service provision.
It has mechanisms for penalising any firm that breaches the set regulatory ethics and advisories.

Advisory Functions

The IRDAI offers advice to the government on insurance regulatory policies.
It develops policies and guidelines necessary to strengthen and stabilise the insurance market.
It ensures that various stakeholders involved in the country's insurance sector have minimal harm done to their interests.

Importance & Role of IRDAI in the Insurance Sector in India

Some insurance companies used to deny coverage to their policyholders. The basis for the denial was either their choice of business to underwrite or their understanding of good risk and bad risk. The IRDA was established to regulate the market and minimize any sort of partial acts.

The banking system in India is regulated according to RBI guidelines. This restricts bankers from being unruly with account holders. The banking institutes can offer loans and interest at RBI's pre-defined rates.

It leaves no room for the monopoly to take over, which works best for the masses. Financial Institutes like banks and insurance companies will be successful in our democracy until market practices are for the majority and not just for a fraction of people.

IRDA, on the same lines as industrial practice, plays a vital role in the following:

Ensures and encourages the systematic growth of the insurance industry to benefit the common people who invest in policies to look for safety.
Protects the interest of the policyholders so that they trust the system.
Promote high standards of integrity and fair dealings in the market.
Resolve disputes of all kinds and speed up claim settlement.
Set standards and conduct vigilance to check for scams or frauds.

The Indian economy is growing, further promoting the entrance of new insurance players into the market. To keep the pace of growth even, IRDA needs to maintain quality standards. This will further contribute to strengthening the financial capacity of a country as a whole.

What are the Powers of IRDAI?

SNo	Powers of IRDAI
1	Regulate insurance companies and intermediaries, including issuing licenses
2	Assess the firms that offer insurance services through inspections and investigations
3	Support the confirmation of appointments of CEOs and other key personnel in insurance companies
4	Strictly control the chosen premium rates and terms of insurance products
5	Take disciplinary actions against violators

Types of Insurance Regulated by the IRDAI

Life Insurance	These include term life, whole life, etc.
General Insurance	Non-life policies such as motor, health, home, and travel insurance fall under this category
Health Insurance	These policies cover medical expenses and health-related risks
Reinsurance	These include insurance purchased by insurance companies to mitigate risk

What is the New Rule of IRDAI?

In 2024, the Insurance Regulatory and Development Authority of India (IRDAI) has rolled out new rules concerning corporate governance, health insurance, and motor insurance:

Corporate Governance

Insurance companies are now asked to seek prior permission before any action on the appointment of the chairperson of the board.
An employee should not perform both business and control responsibilities. Also, it is prohibited for a person to serve in more than one control post.

Health Insurance

IRDAI has introduced standard grace periods for health insurance policies with multiple instalments: 15 days for monthly and 30 days for quarterly, half-yearly, or annual instalments.
The maximum waiting period for covering pre-existing diseases has been reduced to three years from four.
The companies must develop unique medical insurance schemes for categories like children, elders, students, and pregnant women.

Motor Insurance

Starting from January 1, 2023, all the motor insurance segments, including automobile insurance, must follow the KYC norms.
IRDAI recognises the following forms of KYC: Traditional KYC, Digital KYC, Aadhaar-linked KYC, New KYC, CKYC and Video KYC.

You may also like to read more about insurance:

What is the Difference Between IRDAI and SEBI?

Term	IRDAI	SEBI
Full Form	Insurance Regulatory and Development Authority of India	Securities and Exchange Board of India
Sector Regulated	Insurance	Securities and capital markets
Primary Objective	Protect policyholders' interests and regulate the insurance industry	Protect investors' interests and regulate the securities market
Key Functions	Licensing, regulation of premium rates, monitoring solvency	Regulating stock exchanges, approving IPOs, monitoring insider trading
Headquarters	Hyderabad, India	Mumbai, India

FAQs about Role of IRDAI in Insurance Sector

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What is the Regulation of insurance in India?

The Insurance Regulatory and Development Authority of India (IRDAI), established under the IRDAI Act, operates insurance in India. The IRDAI regulates insurance companies' operations and ensures that they adhere to the regulations.

How many types of insurance are there in India?

There are mainly two types of insurance in India:

Life Insurance includes term life, whole life, endowment, and unit-linked insurance plans. General Insurance includes health, travel, motor, home, and commercial insurance policies.

How many insurance companies are under the IRDA?

There are 57 insurance companies regulated by IRDAI, including 24 life insurers and 33 general insurers.

What is the new name of IRDA?

The new name of IRDA is the Insurance Regulatory and Development Authority of India (IRDAI).

Which act is insurance under?

Insurance is primarily governed under the Insurance Act of 1938 and the Insurance Regulatory and Development Authority Act of 1999.

What is the mission of IRDAI?

The mission of IRDAI is to protect the interests of policyholders, promote, regulate, and ensure orderly growth of the insurance industry, as well as maintain fair practices in the insurance sector.

Who controls IRDAI?

IRDAI is an autonomous body controlled by a Chairman and members appointed by the Government of India.

What are the powers of IRDAI?

IRDAI's powers include issuing licenses, conducting inspections, regulating premium rates, imposing penalties, and framing regulations for the insurance industry.

What is an insurance ombudsman?

An insurance ombudsman is an official appointed to address and resolve complaints by policyholders against insurance companies fairly.

How do I complain to the insurance ombudsman?

You can complain to the insurance ombudsman by submitting a written complaint along with relevant documents, either by visiting the ombudsman's office or online through the ombudsman’s website.

What is an insurance repository?

An insurance repository is a facility to hold insurance policies electronically, allowing policyholders to access and manage their policies digitally.

Does the IRDAI grant licenses for insurance agents?

Yes, the IRDAI grants licenses to individuals and entities to act as insurance agents after they meet the necessary qualifications and undergo required training.

How to approach the IRDAI for grievances?

IRDAI can address grievances through its Integrated Grievance Management System (IGMS) by contacting the Consumer Affairs Department or via email.

What is IRDAI, and to which country does it belong?

The Insurance Regulatory and Development Authority (IRDA) is the regulatory body for insurance in India.

What is Regulation 31 of IRDA?

Regulation 31 of IRDA pertains to the manner of settlement of insurance claims, including procedures and timelines that insurance companies must adhere to for prompt and efficient claims settlement.