Discuss the powers, duties and scope of IRDA.
Ans:- Meaning- Insurance regulatory development authority is a statutory body which is formed by the Parliament. So IRDA act 1999 was formed for the purpose of supervision and development in the insurance sector of India.
However, the insurance system of India is governed by the insurance act 1938. Which provides power to IRDA to frame regulations for the insurance sector in India.
- It protects the interest of policyholders.
- It promotes high integrity, fair dealings and financial soundness of the insurance sector.
- To ensure speedy settlement of claims and to prevent insurance frauds in the insurance system.
- To promote fairness and transparency in the financial market of insurance.
- To accelerate the growth of insurance in the insurance sector.
- So every regulation made by IRDA is submitted to the ministry for placing the same before Parliament.
POWERS OF IRDA
The IRDA has been given wide ranging powers in the manners of promoting and regulating the orderly growth of business and exersicing control over the agents and other intermediaries. Some of the powers of IRDA are following.
- It Grants permission for the purpose of establishment of new insurance companies.
- It Protects the interests of policyholders in all matters.
- It Promotes efficiency in the conduct of insurance business.
- It Inspects, investigates and audits the insurers and intermediaries.
- It Prescribes the Principles of maintenance of accounts.
- It regulates and directs the investment of funds by the insurance companies.
- It adjudicates disputes between insurers company and intermediaries.
- It promotes and regulates professional organisations connected with insurance and reinsurance business.
Duties of IRDA
Some of the principal functions suggested for IRDA are as follows:-
- It Set capital adequacy solvency margins and other Prudential norms for entities that transact insurance business.
- Examine, in the light of the prescribed criteria of system , applications for grant of registration for transacting insurance business and to grant for registration where appropriate.
- It ensures compliance with the prescribed ceiling for management expenses of insurance and agency commissions.
- It monitors the performance and quality of reinsurance ceded and accepted.
- It ensures maintenance of adequate technical reserves by the Insurers.
- It reviews insurer assets distribution and management and particularly to monitor compliance with prescribed Prudential norms and pattern of investment.
- It does Where necessary to act as a ‘Dispute resolution forum’ for consumer grievances.
- It Prepare and publish an annual report on the state of the insurance industry.
Scope of IRDA
The various scope of IRDA are as follows whereby they can interfere with issues related to the insurance industry.
- Registration and Licensing:- IRDA issues the certificate of registration to every insurer ( Insurance company ) who wants to carry on the business of insurance and fulfils the conditions as laid down in the act which are as follows
- Insurance companies can be registered to transact either life insurance business or non-life insurance business but not both.
- The fee for registration is ₹ 50,000 for each class of business.
- Management of found:- IRDA provides the rules and regulations for the management of funds by the insurer.
- The insurer is required to prepare separate accounts of all receipts and payments accounts.
- The insurer is required to prepare at the end of each financial year in the prescribed forms -a B/S -a P/L -a Revenue account.
- Control of investment
- IRDA provides the basis for investment of assets.
- All the security is to be held free of all encumbrance, charge and lien.
- IRDA has the authority to make exceptions or to specify new investments.
- Control of management
- IRDA is regulated at the expense of an insurer.
- Insured is not considered to have paid any commission or bonus to or share in surplus or share in profits.
- IRDA prescribed limits on the commission that may be paid to licensed agents.
- IRDA prescribed limits for the expenses of management.
Conclusion:- We can say that IRDA has the powers which can be applied to the insurance industry. It’s scope which can be implemented by the insurance company. Its duties are required to ensure the smooth system of insurance in India.
You can learn these essential questions for studying insurance knowledge.
- Discuss the concept and meaning of insurance and its functions.
- Write a note on the importance of insurance for a developing country like India.
- What is a life insurance contract ? Explain its distinguishing characteristics.
- What is life Insurance? Discuss the features of Life Insurance and General Insurance.
- What is IRDA? Discuss its salient features.
- Discuss the advantages and disadvantages of the private insurance sector.