IRDA ( Insurance Regulatory & Development Authority )

Amit Rathod 79Hema Raghani 76Gaurav Sawant 88Guruprasad Shetti 96Vishal Pol 72

PRESENTED BY MMM- BATCH -II

ContentsWhat is IRDA ?Evolution/History of IRDA ?Mission of IRDA & Composition of Authority.Expectation of IRDAInsurance HistoryDuties, Powers & Functions of IRDAImpact Of IRDA On Indian Insurance Sector  Conclusion

What is IRDA?Insurance Regulatory & Development Authority

(IRDA) is regulatory and development authority under Government of India in order to protect the interests of the policyholders and to regulate, promote and ensure orderly growth of the insurance industry.

It is basically a ten members' team comprising of a Chairman, five full time members and four part-time members, all appointed by Government of India.

Came into being in 1999 after the bill of IRDA was passed in the Indian parliament. 

Mission of IRDATo protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto.

Composition of Authority under IRDA Act, 1999

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)    a Chairman;     (b)    five whole-time members;     (c)    four part-time members,

(all appointed by the Government of India)

Expectations The law of India has following expectations from 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 that insurance customers receive precise, clear and correct information about products and services and make them aware of their responsibilities and duties in this regard;

Contd.. 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.

Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss.

Insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium.

Insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage

Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice

What is INSURANCE?

1818 - Oriental Life Insurance Company – 1st Insurance Company.

1870 - Bombay Mutual Life Assurance Society – 1st Life Insurance Company.

1912 - The Indian Life Assurance Companies Act enacted the 1st Law to Regulate the Life Insurance Business.

1928 - The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life & non-life insurance businesses.

Evolution/History of IRDA and insurance

1938: Earlier legislation consolidated & amended the Insurance Act with the objective of protecting the interests of the insuring public.

1956: 245 Indian & foreign insurers & provident societies are taken over by the central government & nationalized.

LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.

The first General Insurance Company established in the year 1850 in Calcutta by the British.

Contd…..

Duties, Powers & Functions of IRDA It issues the applicants in insurance arena, a certificate of registration

as well as renewal, modification, withdrawal, suspension or cancellation of such registrations.

It protects the interests of the policy holders in any insurance company in the matters related to the assignment of policy, nomination by policy holders, insurable interest, and resolution of insurance claim, submission value of policy and other terms and proposals in the contract.

It also specifies obligatory credentials, code of conduct and practical instructions for mediator as well as the insurance company. Apart from this, it also defines the code of conduct for the surveyors and loss assessors involved with the insurance business.

One of the major functions of IRDA includes endorsing competence in the insurance business. Apart from this, upholding and regulating professional organizations in insurance and re-insurance business is also a major duty of IRDA.

IRDA is also entitled to for asking information, undertaking inspection and investigating the audit of the insurers, mediators, insurance intermediaries and other organizations related to the insurance sector.

It is also concerned with the regulation of the rates, profits, provisions and conditions that may be offered by insurers in respect of general insurance business if it is not controlled or regulated by the Tariff Advisory Committee.

Contd..

It is also entitled to supervise the functioning of the Tariff Advisory Committee.

IRDA specifies the terms and pattern in which books of accounts are to be maintained and statement of accounts shall be provided by insurers and other insurance mediators.

It also regulates investment of funds by insurance companies as well as the maintenance of margin of solvency.

It is also empowered to be involved in the arbitration of disagreements between insurers and intermediaries or insurance intermediaries.

It is meant to specify the proportion of premium income of the insurer to finance policies.

IRDA also specifies the share of life insurance business and general insurance business to be accepted by the insurer in the rural or social sector.

Types of Insurance

Life insurance

Non - Life Insurance

(general insurance)

Property (eg.Builders risk insurance)

Aviation (eg.Private aircraft insurance)

Marine (eg. Marine hull insurance)

Miscellaneous (eg.Purchase insurance)

Regulatory Body:

• The insurance act should be changed.

• An insurance regulatory body should be set up.

• Controller of insurance-a part of the Finance Ministry – should be made independent.

Investments :

• Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50%.

• GIC and its subsidiaries are not to hold more than 5% in any company.

Customer Service:

• LIC should pay interest on delay on payment beyond 30 days.

• Insurance companies must be encouraged to set up unit link pension plans.

INDIAN SCENARIO OF INSURANCE

Life insurance industry - 49 % growth in new businesses,

General insurance players - 16 % increase in April,

Life Insurance Corporation, ICICI Prudential and SBI Life & 16 other players

Rs 2,982 crore in April’07 ------- with Rs 1,996 crore in April’06

Country’s largest life insurer – LIC saw new premiums grow 57 % to Rs 2,134 crore in April by selling 15,89,684 policies against Rs 1,355 crore last year. It had a market share of 71.56 % in April.

Life insurers - Bajaj Allianz, ING Vysya Life & Reliance Life saw a decline in premium collections.

Life insurance industry grows 49% New Delhi June 14, 2007

The potential of the Indian insurance industry is huge. HOW???

….. It has an annual growth rate of 15-20% &…..the largest number of life insurance policies in force.

Total value of the Indian insurance market (2004-05) is at Rs. 450 billion (US$10 billion).

Insurance & Banking Services’ contribution to the country's gross domestic product (GDP) is 7%

The funds available with the state-owned Life Insurance Corporation (LIC) for investments are 8% of GDP.

“Indian Insurance Industry: New Avenues for Growth 2012”,

The year 1999 saw a revolution in the Indian insurance sector------the ending of government monopoly -----the passage of the Insurance Regulatory and Development Authority (IRDA) Bill

“A foreign partner can hold 26% equity in an insurance company, but there was a proposal to increase this limit to 49%.

Foreign investments of Rs. 8.7 billion have poured into the Indian market & 21 private companies have been granted licenses.

LIC PRIVATE PLAYERS

Growth – 21.87% Growth – 129%

Earned – Rs.197.86 billion[04-05]

Sold – 2.4 billion policies

Earned – Rs.55.57 billion[04-05]Against Rs.24.29 billion [03-04]

Market share – 87.04% 78.07% 75%

Market share – 13% 22% 24%

Source: www.rncos.com

Insurance study

India's insurance sector - 500 % growth over the next three years - 60 billion-dollar industry by 2010

India's more than one billion people are uninsured, the study by the Associated Chambers of Commerce and Industry (Assocham) said.

'A large part of rural India is still untapped due to poor distribution, large distances & high costs relative to returns,‘ said Assocham president Anil K Agarwal

He said the study had revealed that rural & semi-urban India would contribute 35 billion dollars to the Indian insurance industry by 2010.

The study added that the urban sector insurance was estimated to reach 25 billion dollars by 2010, life insurance 15 billion and non- life insurance 10 billion dollars.

Source: Business News

Study : India's insurance sector to see 500 per cent growth by 2010

Insurance can be summed up as “Praying for the best …

…being PREPARED for the WORST”.

Conclusion