INDEX.

Sr.No. Contents. Page No.

1. Objective of IRDA. 2

2. Research methodology. 4

3. Introduction of IRDA. 5

4. Formation of IRDA. 7

5. Introduction of Insurance. 8

6. History of Insurance in India. 10

7. Types of insurance. 11

8. Malhotra Committee 19

9. Regulators of IRDA. 21

10. Powers & duties of IRDA. 23

11. Feature of IRDA. 25

12. Role of IRDA. 27

13. Functions & Expectations of IRDA. 30

14. Conclusion. 36
15. Bibliography. 37

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 Objective of IRDA:
1) Mission of IRDA.
To protect the interests of the policyholders, to regulate, promote
and ensure orderly growth of the insurance industry and for matters
connected therewith or incidental there to.

2) IRDA obligation under the Act:-

The Insurance Regulatory and Development Authority (IRDA) is a
public authority as defined in the Right to Information Act, 2005.
As such, the Insurance Regulatory and Development Authority are
obliged to provide information to members of public in accordance
with the provisions of the said Act. 

3) Complaint against insurance companies.

IRDA has provided for a separate channel for lodging complaints
against deficiency of services rendered by Insurance Companies. If
you have a complaint/grievance against an insurance company for
poor quality of service rendered by any of its offices/branches,
please approach the Nodal Officer of the Insurance Company
concerned. In case you are not satisfied with the Insurance
Company’s response you may also file a complaint with the
Insurance Ombudsman in your State. The Insurance Ombudsman is
an independent office to provide speedy and cost effective
resolution of grievances to the customers.

4) Composition of IRDA:-
The IRDA consist of a Chair Person & not more than nine
members of whom not more than 5 would be full time member, to
be appointed by the government according to the ability,
Knowledge, & experience of life insurance & general insurance.

5) Objectives of IRDA Act.

 To protect the investor's interest
 To promote orderly growth of insurance industry in the country,
including registration of insurance companies
 To administer the provisions of Insurance Acts
 To devise control activities needed for smooth functioning of the
insurance companies including investment of funds and solvency
requirements to be maintained by insurance companies.
 To lay down the accounting methodology to be adopted
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 To adjudicate on disputes.

6) IRDA Initiatives.
 IRDA's regulation stipulate that the prospectus issued by the
insurer should explicitly state the scope of benefits, conditions,
warranties, entitlements exceptions, and right to participate in
bonus under every plan of insurance
 A decision on the proposal should be made by the insurer within 15
days
 IRDA has framed regulations regarding advertisement by insurance
companies and other intermediaries. They apply to all categories
and media employed
 IRDA can adjudicate disputes between the insurance companies
and intermediaries
 IRDA regulation requires that every insurance company appoint an
actuary
 IRDA regulation has laid down the following stipulations as
regards settlement of claim:

a. All the requirements needed under death claim are to be

sought in one instance
b. Admit or repudiate the claim in 30 days
c. All investigations need to be completed in 6 months
d. Interest at 2 % over bank rate is payable in case of delayed
settlement

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 Research methodology.
a) Type of data Collected:-
It is a Primary data as well as secondary data to collect.

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 Introduction of IRDA:

The Insurance Act, 1938 had provided for setting up of the Controller of
Insurance to act as a strong and powerful supervisory and regulatory
authority for insurance. Post nationalization, the role of Controller of
Insurance diminished considerably in significance since the Government
owned the insurance companies.

But the scenario changed with the private and foreign companies foraying
in to the insurance sector. This necessitated the need for a strong,
independent and autonomous Insurance Regulatory Authority was felt.
As the enacting of legislation would have taken time, the then
Government constituted through a Government resolution an Interim
Insurance Regulatory Authority pending the enactment of a
comprehensive legislation.

The Insurance Regulatory and Development Authority Act, 1999 is an act

to provide for the establishment of 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 to end the monopoly of the Life Insurance
Corporation of India (for life insurance business) and General Insurance
Corporation and its subsidiaries (for general insurance business).

The act extends to the whole of India and will come into force on such
date as the Central Government may, by notification in the Official
Gazette specify. Different dates may be appointed for different provisions
of this Act.

The Insurance Regulatory Development Authority Act, 1999 marked the

end of government monopoly in the insurance business. The IRDA Act
received the assent of the President of India on 29 December 1999. The
IRDA Act has ramifications on The Insurance Act (1938), The Life
Insurance Corporation Act (1956) and The General Insurance Business
(Nationalization) Act (1972).

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The passage of Insurance Regulatory and Development Authority Act in
1999 can be seen a dividing line for insurance business in India. It was an
outcome of the implementation of the recommendations of a high
powered committee, which suggested the setting up of a statutory body
called the Insurance Regulatory Authority in 1996. This body was later
renamed as Insurance regulatory and Development Authority with the
passage of IRDA Act by the parliament.

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 Formation of IRDA.
In the year 1980, the government felt in necessary to reform the insurance
industry, to provide a better coverage to the citizen & to increase the flow
of long term financial resources to finance the infrastructure growth.

In the year 1993, the government of India set up the Malhotra committee
to suggest the reform in the insurance industry. The committee
recommend opening up the insurance sector to provide service &
extending insurance cover to the large section of the society. The
committee also suggest to set up the statutory body called Insurance
Regulatory insurance Authority (IRA).

In the year 1996, IRA was formed & in 1999 the IRDA bill was passed in
the parliament.

The IRDA Act provides for the establishment of an authority to regulate

to promote & to ensure orderly growth the insurance policy in India.

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 Introduction of Insurance.
Introduction:-

Mans life is a full of risk. Even if a man does not have any business or
property, he/she not free from risk. He fall sick, he/she grow old he retire
from services & the problem of maintaining his family become difficult.
His deaths make a serious problem for his family, specially even if he is
only earning hand in the family. He may suffer from serious disability &
may become incapable for doing any work, to money, etc. if he is owner
of the property are also subject to risk of damage by fire, earthquake, etc.

This risk may result in loss & man is not in a position to bear heavy
losses, he may go mad, commit suicide. Therefore, a man needs some
short of protection against the risk to which his life & property are
exposed. This protection is given by insurance.

Meaning:-

Insurance is a device invented by a man to protect him against the risk. It

is the based on the principle of co-operation.

It is a contract between 2 parties where by one party under takes to

compensate the other party against the loss which may arise on the
happing of an event in consideration of a certain payment.

Definition:-

According to Justice Tindall:

“Insurance is a contract in which a sum of money is paid

to the insured as consideration of insurer incurring the
risk of paying a large sum upon a given contingency.”

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PURPOSE OF INSURANCE
Insurance spreads the economic burden of losses by using funds
contributed by members of the group to pay for them. Thus, it is a loss
spreading device.
The fundamental purpose of insurance however is neither the
spread ignore the prevention of losses. Rather, it is reduction of the
uncertainty which is caused by awareness of the possibility of loss.
An insurance scheme provides certainty for the individual members
of the group by averaging loss costs. The contribution made by the
individual to the group is assumed, on the basis of predictions, to be his
share of losses suffered by the group.
In exchange for this contribution, he is assured that the group will
assume any losses that involve him. He transfers his risk to the group and
averages his loss costs, thus substituting certainty for uncertainty. He
pays a certain premium instead of facing the uncertainty of the possibility
of large loss.

Insurance Act

The passage of the Insurance Act, 1938 and its subsequent amendments

in 1950 and 1999 are serious attempts to bring order in the business of
insurance in India. The Act attempted to address various issues relating to
the business. Some of them are:

 Protection of policy holder interest

 Limiting the expenses of insurance organizations
 Establishment of tariff advisory committee
 Solvency levels to be maintained
 Creation of Insurance organization
 Defining the roles and responsibilities of various functionaries
associated with the business

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 History of Insurance in India.
Insurance in India has its history dating back until 1818, when Oriental
Life Insurance Company was started by Anita Bhavsar in Kolkata to cater
to the needs of European community. The pre-independence era in India
saw discrimination between the lives of foreigners (English) and Indians
with higher premiums being charged for the latter. In 1870, Bombay
Mutual Life Assurance Society became the first Indian insurer.
At the dawn of the twentieth century, many insurance companies were
founded. In the year 1912, the Life Insurance Companies Act and the
Provident Fund Act were passed to regulate the insurance business. The
Life Insurance Companies Act, 1912 made it necessary that the premium-
rate tables and periodical valuations of companies should be certified by
an actuary. However, the disparity still existed as discrimination between
Indian and foreign companies. The oldest existing insurance company in
India is the National Insurance Company Ltd., which was founded in
1906. It is in business. Before that, the industry consisted of only two
state insurers: Life Insurers (Life Insurance Corporation of India, LIC)
and General Insurers (General Insurance Corporation of India, GIC). GIC
had four subsidiary companies.
With effect from December 2000, these subsidiaries have been de-linked
from the parent company and were set up as independent insurance
companies: Oriental Insurance Company Limited, New India Assurance
Company Limited, National Insurance Company Limited and United
India Insurance Company Limited.

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 Types of Insurance:
Insurance is a generally a contract of indemnify where the
insurance company. Undertakes the responsibility to indemnify the
insured against the probable loss which the insured may suffer on
the happing of the event.
Basically insurance business is divided in to 2 types.

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A) Life Insurance:-

Life insurance is a contract, whereby, for an agreed payment (premium),

the insuring company agrees to pay the insured, or his beneficiaries, a
fixed sum or an income upon the death of the insured. In addition, life
insurance can be used as a means of investment or savings. There are four
people involved in the contract: 

 1) The insurer - who draws out the contract and pledges to offer a
service to the beneficiary.
2) The policy holder - a person, natural or legal who signs the
contract, pays the premium and selects the nominated beneficiaries .
 3) The insured - the person’s whose death is covered by the policy. 
4) The nominated beneficiaries or next of kin - persons, natural or legal
who will receive the fixed sum or income as agreed by the contract.

1) Why purchase life insurance?

The main purpose of any life insurance policy is to protect your family
and loved ones against the risk of financial uncertainty. Life insurance
can provide for the welfare of your family in face of your death. If you

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have a spouse, three kids, a mortgage, car payments, and credit card bills,
what would happen to them if you were suddenly to die? Would your
family have enough money to keep the house, car, pay off credit card
debt, and send your children to college?

Life insurance can guard your family and loved ones from potential
financial disaster.

2) Basic facts:
Taking out a life insurance policy is a long-term investment and can
be a good way to: build up your savings get additional income for
your retirement get returns on your capital pass on your capital.
Before you sign a life insurance contract, you should give careful
consideration to the following: the contracts’ terms and conditions
beneficiaries setting up trust premium payments cooling-off period
types of life insurance
3) Terms and conditions:
When you buy life insurance, it is always in terms of a contract. The
fact that you are entering a legal contract carries with it a number of
benefits, but it also places a responsibility on you. The main terms of
the contract are: You or your dependants will be paid a benefit in the
event of your death or disability, or at a future date (the maturity date),
in the case of an investment policy you must pay an agreed amount
(premium) on a recurring basis, either monthly, three-monthly
4) Premium payments:
Usually there are two types of premium payments: Regular premium -
these are regular payments (usually monthly) with the minimum
typically being between £10 and £20 paid per month. Single premium
- these products are often called bonds and usually have a minimum
single investment of between £2000 and £5000
5) Charges:
Charges can be complex and it is often unclear to investors how much
of their contributions are being deducted in charges. They can be high
and will vary with the type of investment and policy. Usually they will
be: administration fee - will cover the policy’s setting up costs initial
charge (for unit linked policies) - through the bid/offer spread of 5%
to 6% in the price of units unit allocation (for unit linked policies) -
this can be confusing and you need to understand how it

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6) Withdrawals and loans on life insurance policies:
Life insurance is a long term commitment. Premiums are payable
usually for 10 years or more and the policy is not designed to be
cashed in early. If you need to raise some cash, surrendering a policy
is a last resort. These are the alternatives you might consider: Loan -
your insurance company may be able to grant you a loan against the
surrender value of your policy at a reasonably competitive rate. Paid-
up policy - you may be able to make the policy "paid-up".

7)Life Insurance Proceeds & Taxes:

Many people don't realize that even though life insurance death
benefit proceeds should be paid income tax-free1 to the
beneficiary(ies), there's a chance that such proceeds will be included
in the value of the insured's estate, which may be subject to estate
taxation.

8) Selling or surrendering a policy:

There are two ways to redeem a life insurance policy if you just don’t
want it any more, you can sell or surrender it. You can sell your life
insurance policy via a broker on to a third party who wants to buy an
investment product, at a lower price than they could get from scratch.
The calculation to determine an appropriate price to pay for your
policy by a Market Maker is made independently of the surrender
value. However, if you are selling your policy, the price offered by a
Market

Types of Life Insurance Policy.

 Endowment Product.
 Whole-Life Policy.
 Term Assurance.
 Annuities
 Money Back Policy
 Marriage Endowment / Education Annuity
 Jeevan Sati (Joint Life Policy).
 Komal Jeevan.

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B) General Insurance:-
All Insurance other than ‘Life Insurance’ falls under the category of
General Insurance. General Insurance includes of insurance of
property against fire, burglary etc, personal insurance like Accident
and Health Insurance, and liability insurance which covers legal
liabilities. There are also other kinds of covers such as Errors
and Omissions insurance for professionals, credit insurance etc.
Non-life insurance companies have products that cover property
against Fire and related hazards, flood storm and inundation,
earthquake and so on. There are products that cover property against
robbery, burglary etc. The non-life companies also offer policies
covering machinery against breakdown, there are policies that cover
the hull of ships and so on. A Marine Cargo policy covers goods in
transit including by sea, air and road. Further, insurance of motor
vehicles against damages and theft forms a major portion of non-
life insurance business.

Most general insurance covers are annual contracts. However, there

are few products that are long-term. It is very important for proposers
to read and understand the terms and conditions of a policy before
they enter into an insurance contract. The proposal form needs to be
filled in completely and correctly by a proposer to make sure that the
cover is adequate and the right one.
Insurance is a method in which a large number of people exposed to a
parallel risk make contributions to a common fund out of which the
losses undergone by the unfortunate few, due to accidental events, are
made good. The distribution of risk among large groups of people is
the basis of insurance. The losses of an individual will be distributed
over a group of individuals.

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The risk becomes insurable if the following necessities are complied
with:
·         The insured should suffer financial loss if the risk operates.
·         The loss should be measurable in money,
·         The object of the insurance contract should be legal.
·         The insurer must have sufficient knowledge about the risks he
accepts.

Types of General Insurance.

 Fire Insurance.
 Marine Insurance.
 Accident Insurance.

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 C) Re-Insurance:

It’s a form of insurance where several Insurance Company comes

together to issue on a single risk. It is a similar to underwriting so that
Insurance Company can protect them selves from potential loss. An
insurance company can take Re-insurance from other re- insurance
company .when an insurance company takes re-insurance it has to pay re-
insurance premium.
When an insurance company accepts re-insurance from other insurance
company gets premium from other insurance company. Insurance Act
provide every insurer shall reinsure with reinsurer such percentage of the
sum assured on each policy as may be specified by the authority with the
pervious approval of Central Government. Provided that no percentage so
specified shall exceed 30 % of the sum assured on such policy. The
authority may at any time call upon re-insurance treaties & other
insurance
Contract for examination.

There are two basic methods of reinsurance:

a. Facultative Reinsurance is specific reinsurance covering a single

risk. The reinsurer is reinsuring one insured on a specific policy.
Each facultative risk is submitted by the insurer to the reinsurer.

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b. Treaty Reinsurance is a method of reinsurance requiring
the insurer and the reinsurer to formulate and execute
a reinsurance contract. The reinsurer then covers all the insurance
policies coming within the scope of that contract. There are two
basic methods of treaty reinsurance:
c. Quota Share Treaty Reinsurance, and
d. Excess of Loss Treaty Reinsurance.
e.
1) Function:-
Almost all insurance companies have a reinsurance program. The
ultimate goal of that program is to reduce their exposure to loss by
passing the exposure to loss to a reinsurer or a group of reinsurers.
Therefore, they are 'transferring some of the risk to the reinsurer or a
group of reinsurers'. Insurance, which is regulated at the state level
(in the USA), permits an insurer only to issue policies with a
maximum limit of 10% of their surplus (net worth), unless those
policies are reinsured.

2) Risk Transfer:-
With reinsurance, the insurer can issue policies with higher limits
than it would otherwise be allowed, therefore, being permitted to take
on more risk because some of that risk is now transferred to the
reinsurer. Reinsurance has gone from a relatively unsophisticated
business to a highly sophisticated endeavor. The reason for that is the
number of reinsurers that suffered significant losses and became
financially impaired. From 2000 onward, reinsurers have become
much more reliant on actuarial models and tight review of the
companies they are willing to reinsure. They would review their
financials closely, look at the experience of the proposed business to
be reinsured, review the underwriters that will write that business,
review their rates, and much, much more. Almost all reinsurers now
will visit the insurance company and review underwriting and claim
files and more.

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3) Income Smoothing:-
Reinsurance can help to make an insurance company’s results
more predictable by absorbing larger losses and reducing the
amount of capital needed to provide coverage.Furthermore,the
risk factor is also diversified with the reinsurer bearing some of
the loss incurred.
4) Arbitrage:-
The insurance company may be motivated by arbitrage in
purchasing reinsurance coverage at a lower rate than they charge
the insured for the underlying risk, which can be in the area of risk
associated with any form of the asset that is being issued or loaned
against. It can be a car, a mortgage, an insurance (personal, fire,
business, etc.) and alike.

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 Malhotra Committee.

In 1993, Malhotra Committee- headed by former Finance Secretary

and RBI Governor R.N. Malhotra- was formed to evaluate the Indian
insurance industry and recommend its future direction. The Malhotra
committee was setup with the objective of complementing the reforms
initiated in the financial sector. The reforms were aimed at creating a
more efficient and competitive financial system suitable for the
requirements of the economy keeping in mind the structural changes
currently underway and recognizing that insurance is an important part
of the overall financial
System where it was necessary to address the need for similar reforms.
In1994, the committee submitted the report and some of the key
recommendations included:
i) Structure
Government should take over the holdings of GIC and its subsidiaries
so that these subsidiaries can act as independent corporations. All the
insurance companies should be given greater freedom to operate.
ii) Competition
Private Companies with a minimum paid up capital of Rs.1bn should
be allowed to enter the sector. No Company should deal in both Life
and General Insurance through a single entity. Foreign companies may
be allowed to enter the industry in collaboration with the domestic
companies.
Postal Life Insurance should be allowed to operate in the rural market.
Only one State Level Life Insurance Company should be allowed to
operate in each state.
iii) 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
iv) 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 than5% in any company (there current holdings to be brought
down to this level over a period of time)
v) Customer Service
LIC should pay interest on delays in payments beyond 30 days.
Insurance companies must be encouraged to set up unit linked pension
plans. Computerization of operations and updating of technology to be
carried out in the insurance industry

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The committee emphasized that in order to improve the customer
services and increase the coverage of insurance policies, industry
should be opened up to competition. But at the same time, the
committee felt the need to exercise caution as any failure on the part
of new players could ruin the public confidence in the industry.
The committee felt the need to provide greater autonomy to insurance
companies in order to improve their performance and enable them to
act as independent companies with economic motives. For this
purpose, it had proposed setting up an independent regulatory body-
The Insurance Regulatory and Development Authority.
Reforms in the Insurance sector were initiated with the passage of the
IRDA Bill in Parliament in December 1999. The IRDA since its
incorporation as a statutory body in April 2000 has fastidiously stuck
to its schedule of framing regulations and registering the private sector
insurance companies. Since being set up as an independent statutory
body the IRDA has put in a framework of globally compatible
regulations. The other decision taken simultaneously to provide the
supporting systems to the insurance sector and in particular the life
insurance companies was the launch of the IRDA online service for
issue and renewal of licenses to agents. The approval of institutions
for imparting training to agents has also ensured that the insurance
companies would have a trained workforce of insurance agents in
place to sell their products.

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 Regulators of IRDA.

IRDA was constituted by an act of parliament. The Authority is a ten

member team consisting of:

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

(1) Subject to the provisions of Section 14 of IRDA Act, 1999 and any
other law for the time being in force, the Authority shall have the duty to
regulate, promote and ensure orderly growth of the insurance business
and re-insurance business. 

(2) Without prejudice to the generality of the provisions contained in sub-

section (1), the powers and functions of the Authority shall include, - 

(a) issue to the applicant a certificate of registration, renew, modify,

withdraw, suspend or cancel such registration; 

(b) protection of the interests of the policy holders in matters concerning

assigning of policy, nomination by policy holders, insurable interest,
settlement of insurance claim, surrender value of policy and other terms
and conditions of contracts of insurance; 

(c) specifying requisite qualifications, code of conduct and practical

training for intermediary or insurance intermediaries and agents;

(d) specifying the code of conduct for surveyors and loss assessors; 

(e) promoting efficiency in the conduct of insurance business; 

(f) promoting and regulating professional organizations connected with

the insurance and re-insurance business; 

(g) levying fees and other charges for carrying out the purposes of this
Act; 

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(h) calling for information from, undertaking inspection of, conducting
enquiries and investigations including audit of the insurers,
intermediaries, insurance intermediaries and other organizations
connected with the insurance business; 

(i) control and regulation of the rates, advantages, terms and conditions
that may be offered by insurers in respect of general insurance business
not so controlled and regulated by the Tariff Advisory Committee under
section 64U of the Insurance Act, 1938 (4 of 1938)

j) specifying the form and manner in which books of account shall

be maintained and statement of accounts shall be rendered by
insurers and other insurance intermediaries; 

(k) regulating investment of funds by insurance companies; 

(l) regulating maintenance of margin of solvency;

(m) adjudication of disputes between insurers and intermediaries or

insurance intermediaries; 

(n) supervising the functioning of the Tariff Advisory Committee;

(o) specifying the percentage of premium income of the insurer to
finance schemes for promoting and regulating professional
organizations referred to in clause (f); 

(p) specifying the percentage of life insurance business and general

insurance business to be undertaken by the insurer in the rural or
social sector; and 

(q) exercising such other powers as may be prescribed

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 Powers & Duties of IRDA.
Powers:
 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.
 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.
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Duties:

Sections 14 of the IRDA Act 1999 provide that the authority shall have
the following duties to regulate & promote & ensure orderly growth of
insurance business:

The duties of IRDA are as under:

1) Issue to applicant a certificate of the registration, renew, modify

with draw suspend or cancel such registration.
2) Protection of the interest of the Policyholder in a matter consulting
as signing of policyholder insurable interest, settlement of
insurance claim, surrender value of policy & other term &
condition of contract of insurance.
3) Specifying qualification, code of conduct & practical training for
insurance intermediaries & agent.
4) Encourage efficiency in the conduct of insurance business.
5) Inspection of various activities of insurance business.
6) Control & regulation of the rates, advantages terms & condition
that may be offered by insurance in respect of General Insurance
Business.
7) Specifying the firm a manner in which books of accounts shall be
maintain & settlement of account shall be render by insurer.
8) Regulating investment of fund by insurance company.
9) Regulating maintains of margin of solvency.
10) Solve the disputes’ (problem) between insurer & agent or
public.
11) Supervising the functioning of the tariff (taxes) advisory
committee.
12) Specify the percentage of premium of the insurer.
13) Specify the percentage of the life insurance business &
general insurance business to be undertaking by the insurer in the
rural & social sector.
14) To insured those insurance customer receives their claim &
they should have clear & correct information about product &
service which are maintained by insurance company.
15) To make the insured aware of their responsibilities & duties.

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 Feature of IRDA.
1. The insurance sector in India has been thrown open to the private
sector. The second and third schedules of the Act provide for
removal of existing corporations (or companies) to carry out the
business of life and general (non-life) insurance in India.
2. An Indian insurance company is a company registered under the
Companies Act, 1956, in which foreign equity does not exceed 26
per cent of the total equity shareholding, including the equity
shareholding of NRIs, FIIs and OCBs.
3. After commencement of an insurance company, the Indian
promoters can hold more than 26 per cent of the total equity
holding for a period of ten years, the balance shares being held by
non-promoter Indian shareholders who will not include the equity
of the foreign promoters, and the shareholding of NRIs, FIIs and
OCBs.
4. After the permissible period of ten years, excess equity above the
prescribed level of 26 per cent will be disinvested as per a phased
programmed to be indicated by IRDA. The Central Government is
empowered to extend the period of ten years in individual cases
and also to provide for higher ceiling on share holding of Indian
promoters in excess of which disinvestment will be required.
5. On foreign promoters, the maximum of 26 per cent will always be
operational. They will thus be unable to hold any equity beyond
this ceiling at any stage.
6. The Act gives statutory status for the Interim Insurance Regulatory
Authority (IRA) set up by the Central Government through a
Resolution passed in January 1996.
7. All the powers presently exercised under the Insurance Act, 1938,
by the Controller of Insurance will be transferred to the IRDA.
8. The IRDA Act also provides for the appointment of Controller of
Insurance by the Central Government when the Regulatory
Authority is superseded.
9. The minimum amount of paid-up equity capital is Rs.100 crore in
case of life insurance as well as general insurance, and Rs.200
crore in the case of re-insurance.
10.Solvency margin (excess of assets over liabilities) is fixed at not
less than Rs.50 crore for life as well as general insurance; for
reinsurance solvency margin is stipulated at not less than Rs.100
crore in each case.
11.Insurance companies will deposit Rs.10 crore as security deposit
before starting their business.

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12.In the non-life sector, IRDA would give preference to companies
providing health insurance.
13.Safeguards for policy holders’ funds include specific provision
prohibiting investment of policy holders’ funds outside India and
provision for investment of funds in accordance with policy
directions of IRDA, including social and infrastructure
investments.
14.Every insurer shall provide life insurance or general insurance
policies (including insurance for crops) to the persons residing in
the rural sector, workers in the unorganized or informal sector or
for economically vulnerable or backward classes of the society and
other categories of persons as may be specified by regulations
made by IRDA.
15.Failure to fulfill the social obligations would attract a fine of Rs.25
lakh; in case the obligations are still not fulfilled, license would be
cancelled.

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 Role of IRDA.
There is a three type of role is as follow:

1) Life Insurance.
2) General Insurance.
3) Pension Scheme.

1) Life Insurance:

Life insurance or life assurance is a contract between the policy owner

and the insurer, where the insurer agrees to pay a designated beneficiary a
sum of money upon the occurrence of the insured individual's or
individuals' death or other event, such as terminal illness or critical
illness. In return, the policy owner agrees to pay a stipulated amount at
regular intervals or in lump sums. There may be designs in some
countries where bills and death expenses plus catering for after funeral
expenses should be included in Policy Premium. In the United States, the
predominant form simply specifies a lump sum to be paid on the insured's
demise.

As with most insurance policies, life insurance is a contract between the

insurer and the policy owner whereby a benefit is paid to the designated 
beneficiaries if an insured event occurs which is covered by the policy.

The value for the policyholder is derived, not from an actual claim event,
rather it is the value derived from the 'peace of mind' experienced by the
policyholder, due to the negating of adverse financial consequences
caused by the death of the Life Assured.

To be a life policy the insured event must be based upon the lives of the

people named in the policy.

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2) General Insurance.

All Insurance other than ‘Life Insurance’ falls under the category of

General Insurance. General Insurance includes of
insurance of property against fire, burglary etc, personal insurance like
Accident and Health Insurance, and liability insurance which covers legal
liabilities. There are also other kinds of covers such as Errors and
Omissions insurance for professionals, credit insurance etc.

Non-life insurance companies have products that cover property against

Fire and related hazards, flood storm and inundation, earthquake and so
on. There are products that cover property against robbery, burglary etc.
The non-life companies also offer policies covering machinery against
breakdown, there are policies that cover the hull of ships and so on. A
Marine Cargo policy covers goods in transit including by sea, air and
road. Further, insurance of motor vehicles against damages and theft
forms a major portion of non-life insurance business. There are
general insurance products that are in the nature of package policies
offering a mixture of the covers mentioned above. For example, there are
package policies available for householders, shop keepers and also for
professionals such as doctors, lawyers, chartered accountants etc. Apart
from offering standard covers, insurers also offer customized and tailor-
made ones. Appropriate general Insurance covers are necessary for every
family. It is significant to protect one’s property, which one might have
acquired from one’s hard earned income. A loss or damage to
one’s property can leave one shattered. Losses created by disasters such
as the tsunami, earthquakes, cyclones etc have left many homeless and
insolvent. Such losses can be overwhelming but insurance could help to
lessen them. Property can be covered, so also the people
against Personal Accident. Most general insurance covers are annual
contracts. However, there are few products that are long-term. It is very
important for proposers to read and understand the terms and conditions
of a policy before they enter into an insurance contract. The proposal
form needs to be filled in completely and correctly by a proposer to make
sure that the cover is adequate and the right one.

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3) Pension Scheme.

In general, a pension is an arrangement to provide people with an income

when they are no longer earning a regular income from
employment. Pensions should not be confused with severance pay; the
former is paid in regular installments, while the latter is paid in one lump
sum.

The terms retirement plan or superannuation refer to a pension granted

upon retirement. A pension created by an employer for the benefit of an
employee is commonly referred to as an occupational or employer
pension. Labor union, the government, or other organizations may also
fund pensions. Occupational pensions are a form of deferred
compensation, usually advantageous to employee and employer
for tax reasons. Many pensions also contain an
additional insurance aspect, since they often will pay benefits to survivors
or disabled beneficiaries. Other vehicles (certain lottery payouts, for
example, or annuity) may provide a similar stream of payments.

The common use of the term pension is to describe the payments a person

receives upon retirement, usually under pre-determined legal and/or
contractual terms. A recipient of a retirement pension is known as
a pensioner or retiree.

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 Functions & Expectation of IRDA.
Function:

As defined by the IRDA Act, 1999, the broad functions of IRDA are as
follows:

Ensure orderly growth of the Insurance industry

Protection of policyholder's interest
Issue consumer protection guidelines to insurance companies
Grant, modify, and suspend license for insurance companies
Lay down procedure for accounting policies to be adopted by the
insurance companies
Inspect and audit of insurance companies and other related
agencies
Regulation of capital adequacy, solvency, and prudential
requirements of insurance business
Regulation of product development and their pricing including free
pricing of products
Promote and regulate Self Regulating organizations in the
insurance industry
Re-insurance limit monitoring
Monitor investments
Vetting of accounting standards, transparency requirements in
reporting
Ensure the health of the industry by preventing sickness through
appropriate action
Publish information about the industry
Prescribe qualification and training needs of agents
Monitor the charges for various services provided by insurance
companies

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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.
 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.

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 Conclusion.
IRDA is important to keep a check on private insurance companies and
growth of Insurance sector. It has been successful in monitoring,
nurturing and grooming insurance sector in India.

If we want the company to work in a proper manner without any problem

then we have to obey the rules of IRDA.

For Example: Without IRDA all companies are like a car without a driver
who can make to run their Companies without any guidance. So a driver
is there to control a car to show car the right direction and run without
harming others. Like driver IRDA also shows all directions and rules to
companies by which they have to run.

IRDA is successful in opening the insurance market for private and

foreign
Companies after liberalization, insuring the orderly growth of insurance
sector and protecting the interest of policyholders.

The effectiveness of IRDA depends substantially on the ability of its

human Resources. Till now IRDA is successful in keeping a check on
fraud companies entering into the insurance market.

IRDA in these years is successful in earning the respect of a regulator in

the hearts of managers of insurance companies.

After the formation of ombudsmen committee by IRDA is successful in

reducing the grievances of the policyholders.

Indian insurance sector in spite being opened at the same time as of china
is behind but it has big opportunity in future and IRDA is working
positively towards that opportunity.

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Statistical & Graphical Data:

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Graphical Data:

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 Bibliography.

www.irdagov.com

www.scribd.com

www.googal.com

www.investopedia.com

IRDA Journals.

Books on:

Insurance (Fund) Management.

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