INTRODUCTION

The Insurance Regulatory & Development Authority of India Act 1999

was passed by the parliament of India in December 1999, and it
received the presidential assent in January 2000. The Act has been
divided into various Chapters and further into multiple sections. Under
the IRDA Act 1999, regulatory authority was established called IRDA,
which replaced the Controller of Insurance under the Insurance Act of
1938.
 Brief history of IRDA

• In 1991 the government of India began economic reform programme and financial

sector reform. After that, the committee on reforms in the insurance sector under the
leadership of Shri R.N Malhotra (Former RBI Governor) was set up to recommend
reforms in the insurance sector.
• In 1994 Malhotra Committee recommends reforms after going through the insurance
sector and getting inputs from the stakeholders. The key recommendations of this
committee were that private sector companies should be permitted to promote
insurance companies, and foreign promoters should also be permitted.
• After that, in 1996, an interim body called the Insurance Regulatory Authority was set
up, and finally, in 1999, the IRDA Act 1999 was enacted. The formation of the
insurance regulatory and development authority as an autonomous regulatory body
was done on 19th April 2000.
 Establishment and Incorporation of the Authority

• The IRDA Act 1999 provides for the establishment and incorporation of
an authority called the “Insurance Regulatory and Development
Authority”. Some main features are:
 Establishment of IRDA

The Insurance Regulatory and Development Authority of India was

established on the recommendations made by the Malhotra
Committee in its report. This committee was headed by Mr. R.N.
Malhotra (retired Governor of the Reserve Bank of India). It was finally
set up at New Delhi on April 2000, but later on, it was shifted to
Hyderabad, Telangana in 2001. The main recommendation made by this
committee was to allow the entrance of private sector companies and
foreign promoters and independent regulatory authority for the
Insurance sector in India.
 Objectives of IRDA

Following are the objectives of the IRDA:

• To carry forward the interests of the policyholders.
• To uphold the development of the Insurance industry.
• To ensure speedy resolution of claims.
• To prevent frauds and malpractices.
• To ensure fair conduct on the part of the financial market and
transparency when dealing with insurance. 
 Powers of IRDA / IRDA Functions

As per Section 14 of the Insurance Regulatory and Development of Authority Act, 1999 the Authority
has to ensure the regulation, development and promotion of the insurance business and reinsurance
business. Following are the other powers, duties and functions of the Authority:
• To avail the applicant a certificate of registration, renewal, modification, withdrawal, suspension or
cancellation of such registration.
• To protect the interests of the policy holders in cases related to assigning and nomination of policy
holders, understanding of insurance claims, insurable interests, surrendering of the value of the
policy and other terms and conditions of the insurance contract.
• To specify the necessary qualifications, code of conduct and practical training for intermediary or
insurance intermediaries and agents.
• Explaining the required code of conduct to the surveyors and loss assessors.
• To ensure that the proficiency and efficiency of the conduct of the business of insurance.
• To encourage and regulate the relationship between the professional organisations and the
insurance and reinsurance businesses. 
• To levy charge to carry out the purpose of the Act.
• To call for the information, undertaking an inspection of, conducting enquiries and investigations
including the audit of insurers, intermediaries, insurance intermediaries and other organisations
connected with the insurance business.
 Powers of IRDA / IRDA Functions
• To control and regulate the rates, benefits, terms and conditions which are offered to the insurer in respect of
general insurance business that is not controlled and regulated by the Tariff Advisory Committee under Section 64U
 of the Insurance Act of 1938 (4 of 1938).
• To specify the manner in which the books are to be maintained and the way in which the statement of accounts
shall be rendered by insurers and other insurance companies.
• To maintain the investment funds by the insurance companies.
• To regulate the maintenance of margin solvency.
• Deciding the disputes between the insurers and the intermediaries of insurance intermediaries.
• Administering the functioning of the Tariff Advisory Committee. 
• To set down the percentage premium income of the insurer of finance schemes for promoting and regulating the
professional organisations.
• To protect the interests of the policyholders in cases related to assigning and nomination of policyholders.
• To set out the percentage of life insurance business and general insurance business to be taken forward by the
insurer in the rural or social sector.
• Exercising other powers as may be prescribed.
Composition of Authority (IRDA) as per IRDA Act 1999

As per the Sec 4 of the IRDA Act, the authority shall consist of the following
members:
• One chairperson;
• Maximum 5 whole-time members;
• Maximum 4 part-time members.

It may be noted that these members shall be appointed by the Central

Government. Here the Central Government, while appointing the chairperson and
whole-time members, must ensure that minimum one person is a person with
knowledge or experience in Life insurance, general insurance or actuarial science.
 Tenure and Removal of Members

The tenure of the chairperson shall be 5 years, and he shall be eligible for
reappointment until the age of 65 years. The appointment of members shall also be for
5 years however no person can hold office as a whole-time member after 62 years of
age.
A member may be removed from the office by the Central Government if:
• He is declared bankrupt;
• Has become either physically challenged or mentally incapable of acting as a member;
• Has been convicted of any offence;
• Has acquired financial or other interest which affects his function as a member;
• Has abused his position in a way that his continuation in office is detrimental to public
interest.