IRDAI

The Insurance Regulatory and Development Authority of India (IRDAI) is a regulatory body under the jurisdiction of Ministry of Finance, Government of India and is tasked with regulating and licensing the insurance and re-insurance industries in India. It was constituted by the Insurance Regulatory and Development Authority Act, 1999, an Act of Parliament passed by the Government of India. The agency’s headquarters are in Hyderabad, Telangana, where it moved from Delhi in 2001.

IRDAI is a 10-member body including the chairman, five full-time and four part-time members appointed by the government of India.

Insurance repository

The prime minister of India announced an insurance repository system, helping policyholders buy and maintain insurance policies in electronic form rather than on paper. Insurance repositories, like share depositories or mutual fund transfer agencies, will hold electronic records of insurance policies issued to individuals as electronic policies or e-policies.

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.

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 organisations 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.

Recent reforms

Insurance Laws (Amendment) Act, 2015

The Insurance Laws (Amendment) Bill, 2015 was passed by the Lok Sabha on 4th March, 2015 and by the Rajya Sabha on 12th March, 2015, thus paving the way for major reform related amendments in the Insurance Act, 1938, the General Insurance Business (Nationalization) Act, 1972 and the Insurance Regulatory and Development Authority (IRDA) Act, 1999. The Insurance Laws (Amendment) Act 2015 enacted on 23rd March, 2015 has seamlessly replaced the Insurance Laws(Amendment) Ordinance, 2014, which came into force on 26thDecember 2014.

The amendment Act removed archaic and redundant provisions in the legislations and incorporated certain provisions to provide Insurance Regulatory and Development Authority of India (IRDAI) with the flexibility to discharge its functions more effectively and efficiently. It also provided for enhancement of the foreign investment cap in an Indian Insurance Company from 26% to an explicitly composite limit of 49% with the safeguard of Indian ownership and control.

Rules and Regulation related to Foreign Investments

Government made the Indian Insurance Companies (Foreign Investment) Rules, 2015 regarding manner of holding of equity shares by foreign investors. These Rules incorporated the standing / prevalent Regulations and practices being followed with respect to the treatment of foreign investment in Indian Insurance companies by IRDA and as per the existing FDI policy of Government of India. The said Rules were notified in the Gazette on 19th February, 2015.

Subsequently, Government issued a clarification in respect of rule 2(l) of the Indian Insurance Companies (Foreign Investment) Rules, 2015, defining “Indian Ownership” vide thenotified on 3rd July, 2015.

Further, the Indian Insurance Companies (Foreign Investment) Rules, 2015 were amended vide the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2016 notified on the 16th March, 2016 to enable foreign investment up to 49% in Insurance sector through automatic route instead of going through the Government route for foreign investment beyond 26% and up to 49%.

The manner of computation of Foreign Investments is governed by Regulation 11 of the Insurance Regulatory and Development Authority (Registration of Indian Insurance Companies) (Seventh Amendment) Regulations, 2016 and the Insurance Regulatory and Development Authority of India (Registration of Indian Insurance Companies) (Eighth Amendment) Regulations, 2016.

Gandhinagar International Financial Tech-city (GIFT) as an International Financial Services Centre (IFSC)

International Financial Services Centre (IFSC) is set up in terms of section 18 of the SEZ Act, 2005. Only one IFSC can be set up in a SEZ. Gandhinagar International Financial Tech-city (GIFT) is a global Financial and IT Services hub, a first of its kind in India, designed to be at or above par with globally benchmarked financial centres. GIFT facilitates Multi Services Special Economic Zone with IFSC (International Financial Services Centre) status, Domestic Finance Centre and associated Social infrastructure at Gandhinagar with the prime focus on development of IFSC and allied activities in SEZ. Primary focus of the Multi Services SEZ is on financial services. GIC-Re, the Public Sector Re-insurer and New India Assurance Company Limited (NIACL) have set up their offices in IFSC in GIFT City.

Related Notifications /guidelines are as under:

• Insurance Regulatory and Development Authority of India (Regulation of Insurance Business in Special Economic Zone) Rules,2015 was published on 27th March, 2015 for the purposes of regulating and promoting the insurance business in Special Economic Zone.
• Notification regarding exemption of certain provisions of Insurance Act, 1938 for carrying Insurance Business in SEZ was published on 27th March, 2015.
• Based on the rules notified by the Govt. of India, IRDAI (IFSC) Guidelines, 2015 were issued by IRDAI for IFSC Insurance Office(IIO) to transact Reinsurance and/or specified direct insurance business.

Promoting Reinsurance Business in India:

The Insurance Laws (Amendment) Act, 2015 enabled foreign reinsurers to setup branches in India and also enabled Lloyds and its members to operate in India through setting up of branches for the purpose of reinsurance business or as investors in an Indian Insurance Company within the 49% cap.

Redressal of Public Grievances (Notification of Insurance Ombudsman Rules, 2017):

In exercise of the powers conferred by section 24 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999) and in supersession of the Redressal of Public Grievances Rules, 1998 the Central Government has notified Insurance Ombudsman Rules, 2017 on 27.04.2017.The objects of these Rules is to resolve all complaints of all personal lines of insurance, group insurance policies, policies issued to sole proprietorship and micro enterprises on the part of Insurance companies and their agents and intermediaries in a cost effective and impartial manner.

Convergence of life and accident insurance schemes to PMJJBY and PMSBY:

In view of decisions taken in the meeting of Committee of Secretaries on Convergence of Insurance Schemes held on 9th May, 2017 all Ministries / Departments except Ministry of Labour and Employment (for Aam Aadmi Bima Yojana (AABY)) have converged their life and accident insurance schemes to PMJJBY and PMSBY as on 1st June, 2017.

Listing of Public Sector General Insurance Companies

To promote the objective of achieving higher levels of transparency and accountability, the Cabinet Committee on Economic Affairs, chaired by the Prime Minister Shri Narendra Modi has on 18th January, 2017 given its ‘in principle’ approval for listing the five Government owned General Insurance Companies namely General Insurance Corporation of India, The New India Assurance Company Ltd., United India Insurance Company Ltd., Oriental Insurance Company Ltd. and National Insurance Company Ltd. in the stock exchanges.

The shareholding of these Public Sector General Insurance Companies (PSGICs) will be divested from 100 percent to 75 percent in one or more tranches over a period of time. During the process of disinvestment, existing rules and regulations of Securities and Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority of India (IRDAI) will be followed.