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Insurance Law- Regulatory and development
Shreyas Vyas (Ph.D. in Law)
Faculty
NISM
IRDA
IRDA - Insurance Regulatory Development and Authority is the statutory,
independent and apex body that governs and supervise the Insurance Industry in
India.
 IRDA Act was passed upon the recommendations
of Malhotra Committee report (7 Jan,1994), headed by Mr
R.N. Malhotra (Retired Governor, RBI)
 Main Recommendations - Entrance of Private
Sector Companies and Foreign promoters & An
independent regulatory authority for Insurance Sector in
India
 In April,2000, it was set up as statutory body, with its
headquarters at New Delhi.
 The headquarters of the agency were shifted to Hyderabad,
Telangana in 2001.
Objectives of IRDA
 To promote the interest and rights of policy holders.
 To promote and ensure the growth of Insurance Industry.
 To ensure speedy settlement of genuine claims and to
prevent frauds and malpractices
 To bring transparency and orderly conduct of in financial
markets dealing with insurance.
Organizational Setup of IRDA
 IRDA is a ten member body consists of :
One Chairman (For 5 Years & Maximum Age - 60 years )
 Five whole-time Members (For 5 Years and Maximum Age-
62 years)
 Four part-time Members (Not more than 5 years)
 The chairman and members of IRDAI are appointed
by Government of India.
Functions And Duties of IRDA
 Section 14 of IRDA Act,1999 lays down the duties and
functions of IRDA:
It issues the registration certificates to insurance companies
and regulates them.
 It protects the interest of policy holders.
 It provides license to insurance intermediaries such as
agents and brokers after specifying the required
qualifications and set norms/code of conduct for them.
 It promotes and regulates the professional organizations related with
insurance business to promote efficiency in insurance sector.
 It regulates and supervise the premium rates and terms of insurance covers.
 It specifies the conditions and manners, according to which the insurance
companies and other intermediaries have to make their financial reports.
 It regulates the investment of policyholder's funds by insurance companies.
 It also ensures the maintenance of solvency margin (company's ability to pay
out claims) by insurance companies.
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.
Offences by Companies
Where any offence under this Act has been committed by a
company, every person who, at the time the offence was
committed, was in charge of, and was responsible to, the
company for the conduct of the business of the company as
well as the company shall be deemed to be guilty of the
offence and shall be liable to be proceeded against and
punished accordingly.
Penalty for failure to comply with section 32B
 If an insurer fails to comply with the provisions of section 32B, he shall be
liable to a penalty not exceeding five lakh rupees for each such failure and
shall be punishable with imprisonment which may extend to three years or
with fine for each such failure.
Penalty for failure to comply with section 32C
 If an insurer fails to comply with the provisions of section 32C, he shall be
liable to a penalty not exceeding twenty-five lakh rupees for each such
failure and in the case of subsequent and continuing failure, the registration
granted to such insurer under section 3 shall be cancelled by the Authority.
Registration of Insurance
Company
Every insurer seeking to carry out the business of insurance in
India is required to obtain a certificate of registration from the
IRDA prior to commencement of business. The pre-conditions
for applying for such registration have been set out under the
Act of 1938, the IRD Act and the various regulations prescribed
by the Authority.
1. General Registration Requirements
The following are some of the important general registration
requirements that an applicant would need to fulfill:
(a) The applicant would need to be a company registered under
the provisions of the Indian Companies Act, 1956.
Consequently, any person intending to carryon insurance
business in India would need to set up a separate entity in
India.
(b) The aggregate equity participation of a foreign company (either by itself or
through its subsidiary companies or its nominees) in the applicant
company cannot not exceed twenty six per cent of the paid up capital of
the insurance company. However, the Insurance Act and the regulations
there under provide for the manner of computation of such twenty-six per
cent.
(c) The applicant can carry on anyone of life insurance business, general
insurance business or reinsurance business. Separate companies would be
needed if the intent were to conduct more than one business.
(d) The name of the applicant needs to contain the words “insurance company”
or “assurance company”.
2. Capital Structure Requirements
The applicant would need to meet with the following capital structure
requirements:
(a) A minimum paid up equity capital of rupees one billion in case of an
applicant which seeks to carry on the business of life insurance or general
insurance.
(b) A minimum paid-up equity capital of rupees two billion, in case of a person
carrying on exclusively the business of reinsurance.
3. Cancellation of certificate of registration
if the insurer fails to comply with the provisions relating to deposits-
 if the insurer fails, at any time, to comply with the provisions relating to the
excess of the value of his assets over the amount of his liabilities
 if the insurer is in liquidation or is adjudged an insolvent
 if the business or a class of the business of the insurer has been transferred
to any person or has been transferred to or amalgamated with the business
of any other insurer
 if the whole of the deposit made in respect of the insurance business has
been returned to the insurer
CONSUMER PROTECTION
There are different ways of looking at a consumer’s grievance – ranging
from a genuine grievance arising out of a deficiency of service, to the
manifestation of one's frustration over an avoidable non-issue. While
the grievances of the second kind can be managed by counselling,
handholding etc., there is a dire need to take a serious look at the
genuine grievances of customers.
Ideally, if both the parties to the contract are totally at agreement with
the reciprocal obligations and their fulfilment, there is hardly any space
for deficiency of service.
In the domain of financial services in general, and insurance in
particular; this is one aspect that is hard to achieve. This compels us to
analyse the various types of grievances, and take stock of the situation
in ensuring that there is discernible progress over a period of time
PROVIDING THE RIGHT PROTECTION

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IRDA role in Insurance sector in India .pptx

  • 1. Insurance Law- Regulatory and development Shreyas Vyas (Ph.D. in Law) Faculty NISM
  • 2. IRDA IRDA - Insurance Regulatory Development and Authority is the statutory, independent and apex body that governs and supervise the Insurance Industry in India.
  • 3.  IRDA Act was passed upon the recommendations of Malhotra Committee report (7 Jan,1994), headed by Mr R.N. Malhotra (Retired Governor, RBI)  Main Recommendations - Entrance of Private Sector Companies and Foreign promoters & An independent regulatory authority for Insurance Sector in India  In April,2000, it was set up as statutory body, with its headquarters at New Delhi.  The headquarters of the agency were shifted to Hyderabad, Telangana in 2001.
  • 4. Objectives of IRDA  To promote the interest and rights of policy holders.  To promote and ensure the growth of Insurance Industry.  To ensure speedy settlement of genuine claims and to prevent frauds and malpractices  To bring transparency and orderly conduct of in financial markets dealing with insurance.
  • 5.
  • 6. Organizational Setup of IRDA  IRDA is a ten member body consists of : One Chairman (For 5 Years & Maximum Age - 60 years )  Five whole-time Members (For 5 Years and Maximum Age- 62 years)  Four part-time Members (Not more than 5 years)  The chairman and members of IRDAI are appointed by Government of India.
  • 7. Functions And Duties of IRDA  Section 14 of IRDA Act,1999 lays down the duties and functions of IRDA: It issues the registration certificates to insurance companies and regulates them.  It protects the interest of policy holders.  It provides license to insurance intermediaries such as agents and brokers after specifying the required qualifications and set norms/code of conduct for them.
  • 8.  It promotes and regulates the professional organizations related with insurance business to promote efficiency in insurance sector.  It regulates and supervise the premium rates and terms of insurance covers.  It specifies the conditions and manners, according to which the insurance companies and other intermediaries have to make their financial reports.  It regulates the investment of policyholder's funds by insurance companies.  It also ensures the maintenance of solvency margin (company's ability to pay out claims) by insurance companies.
  • 9. 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
  • 10.  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.
  • 11. Offences by Companies Where any offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
  • 12. Penalty for failure to comply with section 32B  If an insurer fails to comply with the provisions of section 32B, he shall be liable to a penalty not exceeding five lakh rupees for each such failure and shall be punishable with imprisonment which may extend to three years or with fine for each such failure. Penalty for failure to comply with section 32C  If an insurer fails to comply with the provisions of section 32C, he shall be liable to a penalty not exceeding twenty-five lakh rupees for each such failure and in the case of subsequent and continuing failure, the registration granted to such insurer under section 3 shall be cancelled by the Authority.
  • 13. Registration of Insurance Company Every insurer seeking to carry out the business of insurance in India is required to obtain a certificate of registration from the IRDA prior to commencement of business. The pre-conditions for applying for such registration have been set out under the Act of 1938, the IRD Act and the various regulations prescribed by the Authority. 1. General Registration Requirements The following are some of the important general registration requirements that an applicant would need to fulfill: (a) The applicant would need to be a company registered under the provisions of the Indian Companies Act, 1956. Consequently, any person intending to carryon insurance business in India would need to set up a separate entity in India.
  • 14. (b) The aggregate equity participation of a foreign company (either by itself or through its subsidiary companies or its nominees) in the applicant company cannot not exceed twenty six per cent of the paid up capital of the insurance company. However, the Insurance Act and the regulations there under provide for the manner of computation of such twenty-six per cent. (c) The applicant can carry on anyone of life insurance business, general insurance business or reinsurance business. Separate companies would be needed if the intent were to conduct more than one business. (d) The name of the applicant needs to contain the words “insurance company” or “assurance company”.
  • 15. 2. Capital Structure Requirements The applicant would need to meet with the following capital structure requirements: (a) A minimum paid up equity capital of rupees one billion in case of an applicant which seeks to carry on the business of life insurance or general insurance. (b) A minimum paid-up equity capital of rupees two billion, in case of a person carrying on exclusively the business of reinsurance.
  • 16. 3. Cancellation of certificate of registration if the insurer fails to comply with the provisions relating to deposits-  if the insurer fails, at any time, to comply with the provisions relating to the excess of the value of his assets over the amount of his liabilities  if the insurer is in liquidation or is adjudged an insolvent  if the business or a class of the business of the insurer has been transferred to any person or has been transferred to or amalgamated with the business of any other insurer  if the whole of the deposit made in respect of the insurance business has been returned to the insurer
  • 17. CONSUMER PROTECTION There are different ways of looking at a consumer’s grievance – ranging from a genuine grievance arising out of a deficiency of service, to the manifestation of one's frustration over an avoidable non-issue. While the grievances of the second kind can be managed by counselling, handholding etc., there is a dire need to take a serious look at the genuine grievances of customers. Ideally, if both the parties to the contract are totally at agreement with the reciprocal obligations and their fulfilment, there is hardly any space for deficiency of service. In the domain of financial services in general, and insurance in particular; this is one aspect that is hard to achieve. This compels us to analyse the various types of grievances, and take stock of the situation in ensuring that there is discernible progress over a period of time
  • 18. PROVIDING THE RIGHT PROTECTION