The concept of insurance dates back 6,000 years where individuals back then also sought some kind of safety net. This need was realised and gave birth to the concept of insurance. The dictionary meaning of insurance states “an arrangement by which an organisation undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium”.
With the growing need of this concept of security, it gave rise to life insurance at first followed by general insurance. Insurance when introduced in India was under the government regulation. However, to institute a standalone body to oversee the functioning of the growing insurance industry, a separate regulatory body was set up known as the Insurance Regulatory and Development Authority of India or IRDA.
What is IRDA?
IRDA or Insurance Regulatory and Development Authority of India is the apex body that supervises and regulates the insurance sector in India. The primary purpose of IRDA is to safeguard the interest of the policyholders and ensure the growth of insurance in the country. When it comes to regulating the insurance industry, IRDA not only looks over the life insurance, but also general insurance
companies operating within the country.
What are the functions of IRDA?
As discussed above, the primary objective of the Insurance Regulatory and Development Authority of India is to ensure the implementation of provisions as mentioned in the Insurance Act. This can be further understood by its mission statement which is as follows-
- To safeguard the policyholder’s interest while ensuring a fair and just treatment.
- To have a fair regulation of the insurance industry while ensuring financial soundness of the applicable laws and regulations.
- To frame regulations periodically so that there is no ambiguity in the insurance industry.
What is the role and importance of IRDA in the insurance sector?
India began to witness the concept of insurance through a formal channel back in the 1800s and has seen a positive improvement ever since. This was further supported by the regulatory body that streamlined various laws and brought about the necessary amendment in the interest of the policyholders. Below mentioned are the important roles of IRDA -
- First and foremost is safeguarding the policyholder’s interest.
- Improve the rate at which the insurance industry is growing in an organised manner to benefit the common man.
- To ensure the dealing are carried on in a fair, integral manner along with financial soundness keeping in mind the competence of the insurance company.
- To ensure faster and a hassle-free settlement of genuine insurance claims.
- To address the grievances of the policyholder through a proper channel.
- To avoid malpractices and prevent fraud.
- To promote fairness, transparency and oversee the conduct of insurance companies in the financial markets.
- To form a reliable management system with high standards of financial stability.
What are the types of insurance policies regulated by IRDA?
The broad classification of the insurance sector is in two parts - life and non-life which is also known as general insurance. For life insurance, as the name suggests, it governs the policies that ensure the safety of your life. But what is general insurance? General insurance covers everything other than life which includes health insurance
, car insurance
, two wheeler insurance, home insurance, commercial insurance, travel insurance and more.
These are some of the critical roles that IRDA oversees. While they are not limited to the above-mentioned roles, they also include granting registration to insurance companies to conduct their business in the country. It also settles the disputes that arise between the insurer and the policyholders and many such other functions.