The Insurance Regulatory and Development Authority Act was introduced to end the monopoly of State-owned companies and to invest in the Insurance Regulatory Authority power to control the insurance sector. Insurance Regulatory And Development Authority Act, 1999 was passed to establish an authority to protect the interests of holders of insurance policies, 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 (Nationalization) Act, 1972. As per the act the Regulatory and Development Authority (The Authority) was constituted on 19th April, 2000.
The Authority is a body corporate named Insurance Regulatory and Development Authority having perpetual succession and a common seal with power. Subject to the provisions of this Act, it can acquire, hold and dispose of property, both movable and immovable, and to contract and shall, by the said name, sue or be sued.
The following are the main objectives of the 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;
- To ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices and put in place effective grievance Redressed machinery:
- To promote fairness, transparency and orderly conduct in financial markets dealing with insurance and build 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.
Composition of Authority
The Authority shall consist of the following member, namely
- A Chairperson;
- Not more than five whole-time members;
- Not more than four part-time members,
All of them are to be appointed by the Central Government 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, be useful to the Authority;
As per the Act the Central Government while appointing8 the Chairperson and the whole-time members must ensure that at least one person each is a person having knowledge or experience in life insurance, general insurance or actuarial science respectively.
Tenure of office of Chairperson and other members
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:
However, no person shall hold office as such Chairperson after he has attained the age of sixty-five years and no person shall hold office as such whole-time member after he has attained the age of sixty-two years. A part-time member shall hold office for a term not exceeding five years from the date on which he enters upon his office. A member can (a) Relinquish his office by giving in writing to the Central Government notice of not less than three months; or be removed from his office in accordance with the following provisions.
Removal from office
The Central Government may remove from office any member who:
- Is, or at any time has been, adjudged as insolvent;
- Has become physically or mentally Incapable of acting as a member;
- Has been convicted of any offense which, in the opinion of the Central Government, involves moral turpitude
- Has acquired such financial or other interest as is likely to affect prejudicially his functions as a member
- Has so abused his position as to render his continuation in office detrimental to the public interest.
- No such member shall be removed under clause (d) or clause
- Unless he has been given a reasonable opportunity of being heard in the matter.
Bar on future employment of members
The Chairperson and the whole-time members shall not, for a period of two years from the date on which they cease to hold office as such, except with the previous approval of the Central Government, accept:
- Any employment either under the Central Government or under any State Government; or
- Any appointment in any company in the Insurance sector.
Administrative powers of Chairperson
The Chairperson shall have the powers of general Superintendence and direction in respect of al administrative matters of the Authority.
Meeting of Authority
The Authority shall meet at such times and places, and shall observe such rules and procedures In regard to transaction of business at its meetings (including quorum at such meetings) as may be determined by regulations. The Chairperson, or if for any reason he is unable to attend a meeting of the Authority, any other member chosen by the members present from amongst themselves at the meeting shall preside at the meeting. All questions which come up before any meeting of the Authority shall be decided by a majority vote of the members present and voting, and in the event of equality of votes, the Chairperson, or in his absence, the person presiding shall have a second or casting vote. The Authority may make regulations for the transaction of business at its meetings.
Officers and employees of Authority
The Authority may appoint officers and such other employees as it considers necessary for the efficient discharge of its functions under this Act. The terms and other conditions of service of officers and other employees of the Authority shall be governed by regulations made under this Act.