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Unit 14: Regulatory Environment

Section 114A of the Insurance Act, 1938 and has from 2000 onwards framed various regulations Notes
ranging from registration of companies for carrying on insurance business to protection of
policyholders’ interests. In December, 2000, the subsidiaries of the General Insurance Corporation
of India were restructured as independent companies and at the same time GIC was converted
into a national re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in
July, 2002. Today there are 24 general insurance companies including the ECGC and Agriculture
Insurance Corporation of India and 23 life insurance companies operating in the country. The
insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together with
banking services, insurance services add about 7% to the country’s GDP. A well-developed and
evolved insurance sector is a boon for economic development as it provides long- term funds
for infrastructure development at the same time strengthening the risk taking ability of the
country.

14.4.2 Mission Statement of the 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 the economy;
To set, promote, monitor and enforce high standards of integrity, financial soundness, fair
dealing and competence of those it regulates;

To ensure speedy settlement of genuine claims, to prevent insurance frauds and other
malpractices and put in place effective grievance redressal machinery;

To promote fairness, transparency and orderly conduct in financial markets dealing with
insurance and build a reliable management information system to 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 of the industry
consistent with the requirements of prudential regulation.

14.4.3 Duties, Powers and Functions of IRDA

Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of IRDA. 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. Without prejudice to the generality of the provisions contained in sub-section (1), the
powers and functions of the Authority shall include-

Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or
cancel such registration;

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;
Specifying requisite qualifications, code of conduct and practical training for intermediary
or insurance intermediaries and agents;

Specifying the code of conduct for surveyors and loss assessors;
Promoting efficiency in the conduct of insurance business;

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