Prof. S.D. Bhosale

“Law Master’s” Publication “Regulation of Insurance Bunisess”

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Regulation of Insurance Business

QUESTION BANK

1. What are the salient features of the Insurance Regulatory and Development Authority

Act of 1999?

2. Write a detailed note on the role of IRDA as the chief regulator of the insurance business.

3. Write a detailed note on the grievance redressal mechanism in case of disputes between

the Insurance and the Insured.

4. The insurance ombudsman is an effective mechanism to resolve the grievances between

insurance companies and customers. What are the powers and functions of the insurance

ombudsman?

Short Notes

1. Insurance ombudsman.

2. Insurance Regulatory Development Authority.

3. Premium.

4. IRDA

Premium.

Insurance Regulatory and Development Authority Act, 1999.

I. Introduction:-

The Insurance Regulatory and Development Authority Act, 1999 (for the sake of

brevity, called the “IRDA Act”) is an Act of the Indian Parliament that was enacted to

establish an Authority to protect the interests of insurance holders1policies, to regulate,

promote, and ensure orderly growth of the insurance industry and for matters connected

therewith or incidental thereto and further to amend the Insurance Act, 1938, the Life

Insurance Corporation Act, 1956 and the General Insurance Business (Nationalisation)

Act, 1972 1.

II. Salient features of the Act:-

The Insurance Regulatory and Development Authority Act, 1999 (IRDA Act) is a

significant legislation in India that established the Insurance Regulatory and Development

Authority (IRDA) as a statutory body to regulate and promote the insurance sector in the

country. The IRDA Act was enacted to oversee and supervise the functioning of insurance

companies, protect the interests of policyholders, and ensure the orderly growth of the

insurance industry in India.

Important features of the Act are as follows:-

1. Establishment of IRDA (S. 3):

Prof. S.D. Bhosale

“Law Master’s” Publication “Regulation of Insurance Bunisess”

The IRDA Act established the Insurance Regulatory and Development Authority

(IRDA) as an autonomous and independent regulatory body to regulate and develop the

insurance industry in India (S. 3 of the Act). The authority is tasked with issuing licenses

to insurance companies, setting guidelines and regulations, and ensuring compliance with

statutory requirements.

2. Composition of IRDA (S. 4)-

The IRDAI is a ten-member body consisting of-

(i) A Chairman

(ii) Five full-time members

(iii) Four part-time members

All of the above appointments are made by the Government of India. They are

appointed from amongst persons of ability, integrity, and standing who have knowledge or

experience in life insurance, general insurance, actuarial science, finance, economics,

law, accountancy, administration or any other discipline which would, in the opinion of the

Central

Government,

useful

the

Authority:

Provided that the Central Government shall, while appointing the Chairperson and the

whole time members, ensure that at least one person each has knowledge or experience in

life insurance, general insurance, or actuarial science respectively.

The Chairperson shall have the powers of general superintendence and direction over all

administrative matters of the Authority (S. 9).

3. Tenure of office of Chairperson and other members (S. 5)-

1) The Chairperson and every other whole-time member shall hold office for a term of

five years from the date on which he enters upon his office and shall be eligible for

reappointment:

Provided that no person shall hold office as a Chairperson after he has attained the age of

sixty-five years:

Provided further, no person shall hold office as a whole-time member after he has

attained the age of sixty-two years.

(2) A part-time member shall hold office for a term not exceeding five years from the

date on which he enters upon his office.

(3) Notwithstanding anything contained in sub-section (1) or sub-section (2), a member

may—

(a) relinquish his office by giving in writing to the Central Government notice of not less

than three months or

(b) be removed from his office in accordance with the provisions of section 6.

The Central Government may revoke any member from office on his insolvency, a

Prof. S.D. Bhosale

“Law Master’s” Publication “Regulation of Insurance Bunisess”

conviction for moral turpitude, affecting his impartiality or abusing his position (S. 6).

4. Regulatory Functions:

The primary function of IRDA is to regulate the insurance sector in India. This

includes overseeing insurance companies' operations and ensuring compliance with

regulations related to solvency, investments, premiums, and claims settlement.

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 the orderly growth of the

insurance and re-insurance businesses.

(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;

intermediary or insurance intermediaries and agents;

(d) specifying the code of conduct for surveyors and loss assessors;

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

(f) promoting and regulating professional organisations connected with the insurance and

re-insurance business;

(g) levying fees and other charges for carrying out the purposes of this Act;

(h) calling for information from, undertaking an inspection of, conducting enquiries, and

investigations, including audit of the insurers, intermediaries, insurance intermediaries

and other organisations connected with the insurance business;

(i) control and regulation of the rates, advantages, terms and conditions that may be

offered by insurers in respect of general insurance business not so controlled and

regulated by the Tariff Advisory Committee under section 64U of the Insurance Act,

1938 (4 of 1938);

(j) specifying the form and manner in which books of account shall be maintained and

statement of accounts shall be rendered by insurers and other insurance intermediaries;

(k) regulating investment of funds by insurance companies;

(l) regulating the maintenance of margin of solvency;

(m) adjudication of disputes between insurers and intermediaries or insurance

intermediaries;

(n) supervising the functioning of the Tariff Advisory Committee;

Prof. S.D. Bhosale

“Law Master’s” Publication “Regulation of Insurance Bunisess”

(o) specifying the percentage of premium income of the insurer to finance schemes for

promoting and regulating professional organisations referred to in clause (f);

(p) specifying the percentage of life insurance business and general insurance business to

be undertaken by the insurer in the rural or social sector and

(q) exercising such other powers as may be prescribed.

5. Promotion of the Insurance Industry:

The IRDA Act aims to promote the growth and development of the insurance

industry in India by fostering competition, innovation, and consumer protection. The

authority is responsible for creating a conducive environment for insurance companies'

growth while safeguarding policyholders' interests.

6. Protection of Policyholders:

One key objective of the IRDA Act is to protect the interests of policyholders. IRDA

ensures that insurance companies adhere to fair practices, provide transparent information

to policyholders, and settle claims promptly and fairly.

7. Licensing and Registration:

The IRDA Act empowers IRDA to grant licenses to insurance companies,

intermediaries, and other entities operating in the insurance sector. It lays down the

eligibility criteria, terms, and conditions for obtaining licenses and registrations.

8. Penalties and Enforcement:

The IRDA Act provides for penalties and sanctions against insurance companies

and intermediaries that violate regulatory provisions. IRDA has the authority to conduct

investigations, impose fines, suspend licenses, and take other enforcement actions to ensure

compliance with the law.

9. Amendments and Updates:

Over the years, the IRDA Act has been amended to address emerging challenges

and developments in the insurance sector. These amendments aim to enhance regulatory

effectiveness, promote financial stability, and strengthen consumer protection measures.

In conclusion, the Insurance Regulatory and Development Authority Act of 1999 plays a

crucial role in regulating and promoting the insurance industry in India. It aims to ensure

the insurance market's stability, integrity, and efficiency while safeguarding policyholders'

interests and promoting the sector's growth.

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