The Insurance Regulatory and Development Authority of India (IRDAI) is a major player in the Indian insurance sector as it is the regulatory body overseeing the activities of life and general insurance companies. IRDAI has been put in place to protect policyholders’ interests as well as regulate the industry, thus playing a crucial role in ensuring that the insurance market is not only smooth but also fair and transparent. In this article, we will delve into various functions and the role of IRDAI as regards the Indian insurance sector.
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What is the Insurance Regulatory and Development Authority (IRDAI)?
The primary function of IRDAI is to provide standards for all insurance companies operating within its jurisdiction. The main goal of IRDAI is to safeguard the interest of policyholders while enabling the development and growth of the insurance industry.
Moreover, it helps maintain efficiency among insurers through issuance advisories from time to time along with updating regulations which set rates borne by customers purchasing different kinds of policies.
Establishment Of IRDAI
Before 2000, regulation was done by the government; however, following recommendations from the Malhotra committee in 1999 for the establishment of a dedicated regulatory authority, IRDAI was founded in 2000.
This allowed foreign direct investment (FDI) of up to 26% in the Indian Insurance Market. Ever since its inception, it has issued guidelines under Section 114A of the Insurance Act, of 1938 which regulates the functioning of insurance companies to protect policyholders.
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What Are The Objectives Of IRDAI?
The Insurance Regulatory and Development Authority (IRDAI) objectives are:
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To guard against abuse by policyholders.
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To manage solvency aspects fairly within the business environment.
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To create clear regulations that eliminate ambiguity within the industry.
Important Role Of IRDAI In The Insurance Sector In India
The insurance industry has a long history dating back to the early 1800s in India. Over time it has evolved into a more transparent one focused on safeguarding policyholders’ interests. This role played by IRDAI ensures that the interest of the policyholder is taken care of by framing rules and regulations. The following are some major functions of IRDAI:
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Protection of Policyholders’ Interests: Ensuring that insurance companies treat policyholders fairly and settle genuine claims promptly.
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Promotion of Industry Growth: Towards growth of this sector in an organised manner that benefits the public at large.
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Provision Of Long-Term Funds: Making long-term funds available to support the economy for Indian citizens.
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Ensuring High Standards: Setting high standards through monitoring fairness, integrity and stability among insurers.
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Curbing Malpractices: Establishing a grievance redressal forum to deter fraud and increase transparency in the insurance industry.
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Functions Of IRDAI
Functions performed by IRDAI include but are not limited to
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Granting, renewal, variation or cancellation of registration certificates for insurance companies in India.
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Protection of interests Ensures policies issued, other terms related to policies as well as claim payment suit the best interests of policyholders.
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Prescribing qualifications and training requirements for insurance agents/intermediaries.
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Regulation of loss assessors & surveyors' performance levels including their conduct towards customers
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Charging fee/levying penalties as per the provisions under the Insurance Act 1938.
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Carrying out inspections, and audit-deficient investigations into entities related to these activities to recommend appropriate action where necessary
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The regulation sets out reasonable prices that will enable customers to obtain any kind of insurance plan without exploitation.
How Does IRDAI Work?
It is a regulatory body that mainly looks at the policyholders’ interests. It ensures that there is fairness and financial soundness in the insurance industry. Some of its key activities are:
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Issuance of registration certificates: New insurance companies get certificates to operate in India.
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Claims Monitoring: Ensuring both fair settlement of all claims and no insurance company denies claims unjustly.
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Conduct Regulation: Directing insurance companies, and middlemen, among other stakeholders.
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Dispute Resolution: There are solutions for disputes available through the IRDAI ombudsman.
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Insurance Rate Control: Insurance premiums are regulated by it to prevent unnecessary price hikes.
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Features & Benefits Of IRDAI
Major features and benefits of the Insurance Regulatory and Development Authority include:
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Acts as a Regulator: It acts as a regulator over the Indian insurance industry.
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Protects Policyholders: This organisation ensures that policies always protect the interests of policyholders.
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Frames Regulations: Section 114A under the Insurance Act, of 1938 gives rules and guidelines here by this regulatory body.
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Oversees Industry Activities: Insurance firms need to be watched so they can keep on growing well into future lifetimes by this organization
Types of Insurance Regulated by IRDAI
The IRDAI regulates two main categories which are:
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Life Insurance: These include term plans, endowment policies, unit-linked insurance policies, retirement policies, and money-back policies.
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General Insurance: Health insurance, car (motor), property (house), travel as well and electronic gadget covers come under this category
Difference between functions of I.R.D.A.I and S.E.B.I
While being regulatory bodies with different regulations to oversee I.R.D.A.I primarily safeguard its policyholders while S.E.B.I protects investors within securities and commodities markets. Both entities play important roles in their respective trade sectors through stipulation or formulation; regulation or oversight; ensuring equity within their fields and beyond these lines all constitute key components.
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New Rules and Guidelines for Health and Mediclaim Insurance by IRDAI
In 2020, the guidelines to follow regarding health insurance were changed by I.R.D.A with regards to medical insurance which includes:
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Claims Rejections: If a policyholder has renewed his/her policy without any interruptions for eight years then insurers cannot reject a claim.
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Telemedicine Inclusion: Insurers must cover telemedicine consultations in their policies.
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Claims Settlement: Insurers have to settle claims within 30-45 days of receiving the final document from the policyholder. In case there is undue delay, the insurer will pay interest on the claim amount.
Conclusion
The Insurance Regulatory Development Authority of India (IRDAI) is pivotal in regulating the insurance sector thereby ensuring that the interests of those insured are protected and articulated while operating on fairness grounds and transparency. The integrity and financial soundness of the Indian insurance market are upheld through setting and enforcing high standards by IRDAI.
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