INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

INSURANCE REGULATORY &

DEVELOPMENT AUTHORITY OF
INDIA

INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

DETAILS OF THE PROJECT

PRESENTER
2

INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

NAME
MOHITE

MASTER. ROHAN W.

CLASS/ DIV. -

S.Y.B.M.S. / B

YEAR

2012 - 13

ROLL NO.

87

SEMESTER

III

TOPIC

INSURANCE REGULATORY &

DEVELOPMENT AUTHORITY

OF
INDIA
PROJECT GUIDE

SUBJECT

PROF.MRUNMAYI THATTE.

- BUSINESS ASPECTS IN
BANKING & INSURANCE

COLLEGE

K.G.

JOSHI COLLEGE
ARTS

OF

&

N.G. BEDEKAR COLLEGE OF

COMMERCE.

INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

ACKNOWLEDGEMENT
This project INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA
is a result of co-operation, hard work and good wishes of many
people. I would like to thank our project guide Prof.
MRUNMAYI THATTE for her involvement in the project
work and timely assessment that provided me inspiration and
valued guidance throughout my study.
I am highly indebted to Dr. Mrs. Shakuntala A. Singh,
Principal K.G. Joshi College of Arts & N.G. Bedekar College
of Commerce, for giving us an opportunity to do a project. I
would like to thank Prof. Mr.D.M. Murdeshwar , course
co-ordinator, for his friendly guidance and constant
encouragement.
I would like to express gratitude towards my parents,
teachers of K.G. Joshi College of Arts & N.G. Bedekar
College of Commerce, the library staff and college friends
whose co-operation, encouragement and efforts have helped me
in giving the final shape and structure to the project.
My thanks and appreciations also go to my college mates
and to all those people who have willingly helped me out with
their abilities.

INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

INDEX
TOPIC

SR.
NO

PAGE
NO.

1.

INTRODUCTION OF IRDA

2.

ESTABLISHMENT

3.

MISSION STATEMENT

4.

DUTIES, POWERS & FUNCTIONS

5.

STRUCTURE

6.

PRESIDENTS SPEECH

11 - 13

7.

COMPARISON

14 - 15

8.

FINDINGS

16

9.

QUESTIONNAIRE TO COMPANIES

17

10.

18

11.

CHINA FORWARD IN INSURANCE

SECTOR COMPARED TO INDIA
CONCLUSION

12.

WEBLIOGRAPHY

20

7-8
9 - 10

19

REMARKS

INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

INTRODUCTION
Insurance Regulatory and Development Authority (IRDA) is
an autonomous apex statutory body which regulates and develops
the insuranceindustry in India. It was constituted by a Parliament of India act
called Insurance Regulatory and Development Authority Act, 1999 and duly
passed by the Government of India.
Head
Office :

Insurance Regulatory and Development Authority,

3rd Floor, Parisrama Bhavan, Basheer Bagh, HYDERABAD 500
004, Andhra Pradesh (INDIA ).

In India, insurance has a deep-rooted history. It finds mention in the writings

of Manu ( Manusmrithi ), Yagnavalkya (Dharmasastra ) and Kautilya
( Arthasastra ). 1818 saw the advent of life insurance business in India with the
establishment of the Oriental Life Insurance Company in Calcutta. The Bombay
Mutual (1871), Oriental (1874) and Empire of India (1897) were started in the
Bombay Residency. This era, however, was dominated by foreign insurance offices
which did good business in India. The Indian Life Assurance Companies Act, 1912
was the first statutory measure to regulate life business. In 1928, the Indian
Insurance Companies Act was enacted to enable the Government to collect
statistical information about both life and non-life business transacted in India by
Indian and foreign insurers including provident insurance societies. The Insurance
Amendment Act of 1950 abolished Principal Agencies. An Ordinance was issued
on 19th January, 1956 nationalizing the Life Insurance sector and Life Insurance
Corporation came into existence in the same year. The LIC absorbed 154 Indian,
16 non-Indian insurers as also 75 provident societies245 Indian and foreign
insurers in all. The LIC had monopoly till the late 90s when the Insurance sector
was reopened to the private sector. This were the stages before IRDA existed i.e.
the journey of Insurance in India before IRDA came into existence.
They stated that foreign companies be allowed to enter by floating Indian
companies, preferably a joint venture with Indian partners. In 1993, the
Government set up a committee under the chairmanship of RN Malhotra, former
Governor of RBI, to propose recommendations for reforms in the insurance sector.

INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

ESTABLISHMENT OF IRDA
Following the recommendations of the Malhotra Committee report, in 1999,
the Insurance Regulatory and Development Authority (IRDA) was constituted as
an autonomous body to regulate and develop the insurance industry. The IRDA
was incorporated as a statutory body in April, 2000. The key objectives of the
IRDA include promotion of competition so as to enhance customer satisfaction
through increased consumer choice and lower premiums, while ensuring the
financial security of the insurance market.
The IRDA opened up the market in August 2000 with the invitation for application
for registrations. Foreign companies were allowed ownership of up to 26%. The
Authority has the power to frame regulations under Section 114A of the Insurance
Act, 1938 and has from 2000 onwards framed various regulations 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 1520%. Together with banking services, insurance services add about 7% to the
countrys 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.

INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

MISSION STATEMENT OF 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.

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 subsection (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;
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INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

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;
Promoting and regulating professional organizations connected with
the insurance and re-insurance business;
Levying fees and other charges for carrying out the purposes of this
Act;
Calling for information from, undertaking inspection of, conducting
enquiries and investigations including audit of the insurers,
intermediaries, insurance intermediaries and other organizations
connected with the insurance business;
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);
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;
Regulating investment of funds by insurance companies;
Regulating maintenance of margin of solvency;
Adjudication of disputes between insurers and intermediaries or
insurance intermediaries;
Supervising the functioning of the Tariff Advisory Committee;
Specifying the percentage of premium income of the insurer to
finance schemes for promoting and regulating professional
organizations referred to in clause (f);
Specifying the percentage of life insurance business and general
insurance business to be undertaken by the insurer in the rural or
social sector; and
Exercising such other powers as may be prescribed

INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

STRUCTURE OF IRDA
As per the section 4 of IRDA Act' 1999, Insurance Regulatory and
Development Authority (IRDA, which was constituted by an act of
parliament) specify the composition of Authority
The Authority is a ten member team consisting of
(a) Chairman;
(b) five whole-time members;
(c) four part-time members,
all appointed by the Government of India.

The present structure is same as above with the following

10

INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

This been structure of the committee, IRDA has been excelling in its
management of the whole Insurance market. IRDA has been modifying its
rules, regulations and policies for better development of Insurance in the Indian
market. It publishes its changes reports in official gazettes and its own websites.
Its websites arewww.irdaindia.org,
www.irdaonline.org.

http://www.policyholder.gov.in,

www.irda.gov.in,

Through this websites they combine all their activities in a readable

version. The IRDA performs various functions; legislates or imposes rules,
regulations(laws); penalties; changes policies; this is showcased in above sites
with A Z details. Not only this but it also showcases reports of all Insurance
companies in a statistical data form, warnings to insurance companies, public
disclosures and the meetings/arrangements on various Insurance topics.
The main part comes with its Journal which showcases Insurance issue
topics, thinkings by various personalities on the topics, key areas where the
Insurance companies should develop, research work, statistical data of the
companies, points on the events organized by IRDA every month.
Through this Journal, IRDA has been trying to develop Insurance in India. A
good example will be It tried to aware companies to insure persons suffering
from AIDS, other topics include grievance management, policy serving as a Fine
Art, Policyholder Service Strategy, Need for Innovation(G V Rao argues that while
there is a great deal of enthusiasm for filing products, it may not be backed by a
sufficient market research), consumer orientation, need of simplicity (Joydeep Roy
emphasizes that the biggest innovation waiting to happen will be to render
insurance policies more comprehensible to the lay person. He further says that the
industry is in need of innovation in insurance products which will offer consumers
simple and easy-to-understand choices.), the concept IBNR, undoing uncertainty,
vital points for success, concept of Nuclear Insurance.

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INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

The Presidents speech on IRDA as during Finance Minister

Mr. PRANAB MUKHERJEE
It gives me great pleasure to be here today for the board meeting of Insurance
Regulatory Development Authority (IRDA). It is a matter of pride that the financial
regulatory framework in India is evolving in a manner which is conducive to
development of a robust financial sector, ensures the independence of the
regulators and enables the sector to grow in a healthy manner in line with the
requirements
of
a
growing
economy.
We have travelled a long distance since the time Insurance was nationalized in
1956. As we look back from the time the IRDA Act, 1999 was enacted by the
Parliament, it is heartening to note that the objectives for which the IRDA was
created, have been largely achieved; and that the industry has been making steady
progress. The growth in premium underwriting has witnessed strong CAGR of
22.3% during the decade 2001-2011. Insurance penetration and density at 5.1% in
2010 is a marked improvement from 2.71% in 2001.The public confidence in the
industry has improved and is positive. The future looks bright for the insurance
sector.
Asia excluding Japan will contribute nearly a quarter of global growth in next 5
years and within Asia, India will be the fastest growing general insurance market,
with an average expected growth of 15%. A welcome feature is that the share of
life insurance premium in the gross domestic savings with the household is about
18% and is increasing over the years. There are strong underwriting growth
drivers. The demand for insurance products is likely to increase due to growth of
household
savings
and
purchasing
power.
The insurance sector has been an important contributor to the infrastructure
development of the country. The total investments of the insurance industry in
infrastructure (as on 31st March, 2011) were to the tune of Rs 198,369 crore, of
which 78% has come from public sector insurance companies.
I am happy to note that the Planning Commission and IRDA are working together
to develop necessary framework for infrastructure financing. I am sure that IRDA
will ensure all whats required to ensure that the growth potential of the insurance
sector
is
fully
realized.

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INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

There are a few concerns that need to be addressed. Notwithstanding Indias rapid
growth in recent decades, it has largely remained an underinsured market with
financial vulnerability across most of the income segments. The protection level, as
measured by level of sum insured to Gross Domestic Product, at 55% is still low,
pointing to the need for promoting long term savings and protection. Further, the
insurance market is structurally challenged in terms of profitability. The industry
profitability is driven by the investment income, with continued deterioration in the
core business economies. No Company in India has yet achieved a sustainable
balance
between
growth
and
profitability.
The IRDA, through its regulations, has been ensuring policy holders protection.
Initiatives such as dematerialized accounts, declining risk pool for third party
motor pool, promotion of rural and social sector obligations, micro insurance
policies, Institution of ombudsman and Integrated Grievance Redressal
Mechanism, to name a few have strengthened the insurance sector tremendously.
These efforts have to continue in the near future. IRDA, I feel has a crucial role at
this moment to see that the sector develops in a healthy manner and the reach of
insurance
is
maximized.
There are two potential scenarios for the market profitability (i) more holistic
competition with new business models (ii) aggressive price based competition. It is
the first option rather than aggressive competition in premium underwriting, that
has been the case so far. While de-tariffing has resulted in significant lowering of
premiums for the consumers, the adverse impact is being felt on the insurance
companys balance sheet. Underwriting performance is the biggest driver of
superior returns and is the key differentiator between the top performers and the
rest. To ensure prudent underwriting and curbing unhealthy and suicidal
competition among the companies through undercutting premiums is something
that
the
Regulator
will
need
to
address
suitably.
The focus area for an insurance company should be to strive towards a proper
business mix, distribution mix along with underwriting excellence, operation
excellence and claims excellence. It is imperative that (i) companies adopt the
granular growth approach and realign resources differentially by channel, product
and geography, (ii) strengthen core distribution capabilities (iii) deeper retention
through Customers lifecycle management, (iv) invest in technical excellence and
(v) driving comprehensive expenses management. It is time for the IRDA to
examine promotion of Digital channels and incentivize E-Governance and EPolicy so as to extend insurance coverage especially among the youth.

13

INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

IRDA has made progress in ensuring policyholders protection. In continuing this

work, IRDA should be expressively punitive to companies who resort to misselling or violate the initially agreed terms and conditions. I feel there is a case for
moving to a use and file system for approving products or mix it with the existing
file and use policy, in order to speed up the product approval process which has
been the concern in the sector for some time. The regulatory environment should
be conducive to changes with regulator seeking broad guidelines as opposed to
micro
management.
Indian market, despite newer models of distribution is still largely dependent on
the agents and agency model of insurance. Can we think of a system where in the
mass market/OTC vanilla products with low ticket size are incentivized by having
a second level of agents with lesser entry restrictions? This will ensure widening
the reach of Insurance especially in semi-urban and rural areas. The low
penetration in general insurance is primarily because of low penetration in retail
insurance
product
segment.
The efforts of IRDA in promoting rural and social sector insurance are steps in the
right direction. In this regard I have instructed the LIC as well as four Public
Sector Insurance Companies to have their presence in all district headquarters and
upto the Tier IV cities as classified by Census. In addition, IRDA may think of
setting up a pool which should be specifically meant to take up insurance literacy
and awareness. This is one area I am concerned and concerted efforts are needed to
make people realize the importance of insurance especially as old-age security.
IRDA should have a clear vision in insurance sector in India in this changing social
economic scenario and have a consistent long term policy framework so that the
industry
can
flourish.
To conclude, I would emphasize that though the journey has begun well, it is only
half-complete. It is now up-to both the Department of Financial Services and
IRDA to work in a manner that insurance becomes an effective tool for
transforming the lives of individuals and the society at large.

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INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

IRDA AS A COMPARISON WITH CHINAS

INSURANCE REGULATORY DEVELOPMENT
AUTHORITY
INDIAS

IRDAis an autonomous body formed under Indian

parliament act
All the documents and financial statements are kept in
IRDA
I R D A i s a n
a u t o n o m o u s b o d y
Thereis no such help given
by IRDA
There is no compulsory insurance operation in India
Main aim of IRDAis to protect the Interest of
policyholder.

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INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

CHINAS
China Insurance Regulatory
C o m m i s s i o n exercises vertically management
of all the agent offices stationed in various localities.
I ts main aim is to manage the insurance market and
maintains the legal and stable operation of insurance
operations in the country.
I t a l s o u n d e r t a k e s
o t h e r j o b s d e l e g a t e d
b y the State Council
It examines and approves
t h e s e t u p o f representative offices of
overseas insurance institutions in China.
It supervises policy-oriented insurance and compulsory
insurance operations.
The financial statements and documents that are collected
by the regulator are deposited in peoples bank of china.
China Insurance Regulatory Commission is a ministerial
institution directly under the State Council.

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INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

FINDINGS ON THE BASES OF COMPARISONS

1. Despite opening up at roughly the same time in the late nineties, the
insurancesector in China has raced ahead of India.
2. Standard & Poor's latest
Asia Insurance
review
puts
the Chinese market ahead of India due to more positive regulatory
environment, higher asset quality and better performing companies. There are 79
insurance companies in China, compared to the 30 odd firms in India.
3. Connie Wong, senior analyst, S&P, said, "Compared to China, although regulations
have been proactive, they have been less effective in India, especially on issues like
solvencyrequirements. As a result, insurance companies in China have
better underwriting and capitalization than India.
4. Low levels of market sophistication in the life industry and the impending detariffing in general insurance are the reasons for placing India in the
high-risk category. Compared to this, though China is placed as high
in terms of economic risk, it is placed at moderately high in terms of industry risk.
5. Wong said apart from favorable norms on foreign investment, other positive
factor for China was that it had progressed towards risk-based solvency requirement.
6. While all the life insurance companies made losses in fiscal 2005, two companies
inChina have reported profits. Indian sector reported much better investment yields
ataround 6%.

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INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

QUESTIONNAIRE
ASKED TO COMPANIES
1. Does IRDA interfere in the adjudication of disputes in your company?
Yes
2. If yes are you satisfied with the solution/suggestions provided by IRDA?
Yes
3. Are you satisfied with the working of IRDA as a regulator of insurance sector in
India?
Yes
4. Are you satisfied with the working of tariff advisory committee?
Yes
5. is IRDA providing proper training for intermediaries and agents?
Yes
6. Is IRDA successful in insuring orderly growth of insurance sector India?
Yes

The answers found were satisfactory, then what led to backing of

Insurance in India was answered by some experts. They suggested the
following

1.IRDA

should intervene in the commission system of insurance

companies and agents should be given salaries with commission.
2. IRDA official should also visit local branches of companies.
3. IRDA should make strong regulations for the documentation of the policy.

18

INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

It was found that

1. In china there is policy oriented insurance and compulsory insurance
operations. So that there is more insurance awareness in china than
in India. In India IRDA can make such operation for insurance awareness.
2. China Insurance Regulatory Commission exercises vertically management
of all the agent offices stationed in various localities.
3. C h i n a I n s u r a n c e R e g u l a t o r y C o m m i s s i o n a p p r o v e s t h e s e
t u p o f r e p r e s e n t a t i v e offices of overseas insurance institutions in China. It can
also apply to India.
4. IRDA staff needs training and skills upgrading. Because the insurance
industry has been Government monopoly in the past, most of the staff, despite their
background
in
the insurance industry or Government agencies, lacks sufficient
supervision and regulatory experience and skills.

19

INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

CONCLUSION
IRDA is important to keep a check on private insurance companies and growth of insurance sector.
It has been successful in monitoring, nurturing and grooming insurance sector in India.
If we want the company to work in a proper manner without any problem then we have to obey the
rules of IRDA.
Without IRDA all companies are like a car without a driver who can make to
run their Companies without any guidance. So a driver is there to control a car to show car the
right direction and run without harming others. Like driver
I R D A a l s o s h o w s a l l directions and rules to companies by which they have to run.
A.

IRDA is successful in opening the insurance

m a r k e t f o r p r i v a t e a n d f o r e i g n companies after liberalization,
insuring the orderly growth of insurance sector and protecting the interest of
policyholders.

B.

The effectiveness of IRDA depends substantia

l l y o n t h e a b i l i t y o f i t s h u m a n resources.

C. Till now IRDA is successful in keeping a check on fraud companies entering

into the insurance market.
D. IRDA in these years is successful in earning the respect of a regulator in the hearts
of managers of insurance companies.
E. After the formation of ombudsmen committee by IRDA is
successful in reducing the grievances of the policyholders.
F. Indian insurance sector in spite being opened at the same time as of china is
behind
but it has big opportunity in future and IRDA is working
p o s i t i v e l y t o w a r d s t h a t opportunity.

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INSURANCE REGULATORY & DEVELOPMENT AUTHORITY OF INDIA

WEBLIOGRAPHY
1. 1011.http://www.sebi.gov.in
2. www.nasscom.in
3. www.ibai.org
4. www.thehindu.com
5. www.irdaindia.org
6. . http://www.policyholder.gov.in
7. www.irda.gov.in
8. www.irdaonline.org

21