Page 106 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 8: Insurance Sector

the management of the companies. Bearing this objective in mind, the Life Insurance Corporation Notes
st
(LIC) of India was created on 1 September, 1956 which has grown in leaps and bounds henceforth,
to become the largest insurance company in India.
The General Insurance Business (Nationalization) Act of 1972 was formulated with the objective
of nationalizing nearly 100 general insurance companies and subsequently amalgamating them
into four basic companies namely National Insurance, New India Assurance, Oriental Insurance
and United India Insurance which have their headquarters in four metropolitan cities.

The Insurance Regulatory and Development Authority (IRDA) Act of 1999 deregulated the
insurance sector in India and allowed the entry of private companies into the insurance sector.
Moreover, the flow of Foreign Direct Investment (FDI) was also restricted to 26 % of the total
capital held by the Indian Insurance Companies.
While LIC is the sole operator in the public sector, the following are a few examples of private
companies in India are as under:

Examples: 1. ICICI Prudential Life Insurance

2. HDFC Standard Life
3. SBI Life Insurance
4. Metlife India.

8.2 Insurance Regulatory and Development Authority (IRDA)

The mission of IRDA is to protect the interests of the insurance policyholders and to regulate,
promote and ensure orderly growth of the insurance industry. This required effective legislation.
Therefore, in 1999, the governing legal framework was significantly strengthened with the
enactment of the Insurance Regulatory and Development Authority (IRDA) Act.

8.2.1 Functions

Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of IRDA.
1. Subject to the provisions of this Act and any other law for the time being in force, the
Authority shall have the duty to regulate, promote and ensure orderly growth of the
insurance business and re-insurance business.
2. Without prejudice to the generality of the provisions contained in sub-section (1), the
powers and functions of the Authority shall include:
(a) issue to the applicant a certificate of registration, renew, modify, withdraw, suspend
or cancel such registration;
(b) protection 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;

(c) specifying requisite qualifications, code of conduct and practical training for
intermediary or insurance intermediaries and agents;
(d) specifying the code of conduct for surveyors and loss assessors;

(e) promoting efficiency in the conduct of insurance business;

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