What is Insurance Regulatory and Development Authority of India (IRDAI)?

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What is Insurance Regulatory and Development Authority of India (IRDAI)? Blog Image

Overview:

The Insurance Regulatory and Development Authority of India (IRDAI) recently asked the general insurers to talk to transport authorities of 28 states and eight union territories to provide mandatory covers for the uninsured vehicles.

About IRDAI: 

  • It is a statutory body formed under an Act of Parliament, i.e., the Insurance Regulatory and Development Authority Act, 1999 (IRDAI Act 1999), for the overall supervision and development of the insurance sector in India.
  • Objectives:
    • To protect the interests and fair treatment of the policyholder.
    • To regulate the insurance industry in fairness and ensure the financial soundness of the industry.
    • To regularly frame regulations to ensure the industry operates without any ambiguity.
  • Head Office: Hyderabad
  • It is responsible for registering and/or licensing insurance, reinsurance companies, and intermediaries according to the regulations. 
  • It sets the eligibility criteria, qualifications, and capital requirements for obtaining licenses in the insurance business.
  • Entities regulated by IRDAI:
    • Life Insurance Companies: Both public and private sector companies
    • General Insurance Companies: Both public and private sector Companies. Among them, there are some standalone Health Insurance Companies which offer health insurance policies.
      • Re-Insurance Companies
      • Agency Channel
      • Intermediaries, which include the following:
      • Corporate Agents
      • Brokers
      • Third-party Administrators
      • Surveyors and Loss Assessors.
  • Composition: It is a 10-member body- a chairman, five full-time members, and four part-time members appointed by the Government of India.
  • To protect the interests of policyholders, the IRDAI was granted significant responsibilities, including
    • Efficiently conducting the insurance business and protecting the interests of the policyholders in matters concerning assigning of policy, nomination by policyholders, insurable interest, settlement of insurance claims, surrender value of the policy, and other terms and conditions of contracts of insurance.
    • Approving product terms and conditions offered by various insurers.
    • Regulating the investment of fundsby insurance companies and maintaining a margin of solvency.
    • Specifying the financial reporting norms of insurance companies.
    • Specify code of conduct, qualifications, and training for intermediary or insurance agents.
    • Undertaking inspection, calling for information, and investigations, including an audit of insurance companies, intermediaries, and other organizations associated with the insurance business.
    • Ensuring insurance coverage is provided in rural areas and also to the vulnerable sections of society.

Q1: What are reinsurance companies?

Reinsurance companies, or reinsurers, are companies that provide insurance to insurance companies. Reinsurers play a major role for insurance companies as they allow the latter to help transfer risk, reduce capital requirements, and lower claimant payouts. Reinsurers generate revenue by identifying and accepting policies that they believe are less risky and reinvesting the insurance premiums they receive.

Source: Health insurance: IRDAI sets 3-hour time limit for insurers to clear cashless claims. Details here