Insurance Regulatory and Development Authority Act, 1999 -In 1993 Malhotra committee was
set up by the government of India to examine the structure of insurance industry and recommend
changes to make it more efficient and competitive.
-The committee submitted its report on 7 January 1994.
Major recommendations of the committee
-Recommendation of the entry of private entities into insurance sector.
-Till then insurance sector was a government monopoly, so it recommended to withdraw the
existing government capital.
-Recommended that General Insurance Corporation (GIC) would exclusively deal with
reinsurance business.
-Recommendation to spread the insurance sector to rural areas.
-Recommendation to delink the tariff advisory committee from GIC.
Enactment of IRDA Act
-The recommendations of the committee were discussed at different forums.
-It was widely supported for the set-up of an autonomous body named Insurance Regulatory and
Development Authority.
-Thus, the Insurance Regulatory and Development Authority Act, 1999 was passed which
replaced the controller of insurance.
OBJECTIVES OF IRDA ACT
-Establishing an authority to protect the interest of the holders of insurance policies.
-To regulate, promote and ensure orderly growth of insurance industry.
-To amend the insurance act, 1938, life insurance act, 1956 and general insurance business
(nationalization) act, 1972.
Establishment and composition of IRDA
-Sec 2(b) defines the authority as the Insurance Regulatory and Development Authority.
-It was established under sec 3 of the acts.
-It is established by a notification by the central government in the official gazette.
-It is a body corporate with perpetual succession and common seal.
-It has the power to acquire, hold and dispose of property in its own name.
-It has the power to enter into contract in its own name.
-It can sue and be sued in its own name.
-Central government by notification decides the principal place of business and it has powers to
open branches as required by it.
-Sec 4 deals with composition of the authority.
-It consists if a chairperson and other members not exceeding 9. (Including chairman 10) -Out of
these members 5 shall be full time members.
-And 4 shall be part time members.
-Chairman and members shall be appointed by the central government.
-They are to be appointed from amongst persons of ability, integrity, who has knowledge in
insurance, general insurance, finance, economics, law, accountancy etc.
-Chairperson and full-time members shall hold office for 5yrs or till the age of 65yrs in case of
chairperson and 62 yrs. in case of members.
-Part time member can hold office for a term not exceeding 5 yrs.
-Members can also be removed and they can relinquish the office by giving three months’ notice.
-Central government may remove a member if found:
a. Insolvent
b. Has become mentally or physically incapable.
c. Has acquired financial interest which will prejudicially affect his functions.
d. Has been convicted of any offence including moral turpitude.
e. Has abused his position.
-He can be removed only after giving reasonable notice.
-He should br given opportunity to be heard.
-For a period of two years from the time they cease to hold office chairman and members cannot
accept any other government office.
-Salaries are fixed as per rules.
DUTIES, POWERS AND FUNCTIONS OF IRDA
-Issue the applicant certificate of registration, renew, modify etc.
-Protection of the interest of the policy holders in matters concerning assignment of policy,
nomination etc.
-Prescribing qualifications and code of conduct for insurance intermediaries.
-Specifying code of conduct for surveyors and loss assessors.
-Promoting efficiency in insurance business.
-Promoting and regulating professional organizations.
-Levying fees and other charges for carrying out the purpose of this Act.
-Calling for information, inspection, inquiries, investigations etc. of insurance business.
-Specifying forma and manner in which books of account has to be maintained.
-Regulating investment of funds by insurance companies.
-Adjudication of disputes.
-Supervising tariff advisory committee.
-Specifying percentage of premium income.
-Any other powers as may be prescribed.
POWERS OF CENTRAL GOVERNMENT
-Central government has the power to give directions.
-The decision of central government is final.
-Sec. 18 clearly mentions that central government is final and binding on the authority.
-Central government can supersede the authority for a period of 6 months.
-If the central government supersedes the authority it appoints a controller of insurance if such a
controller is appointed the authority stands dissolved and a new authority will be constituted.
INSURANCE ADVISORY COMMITTEE
-The authority under sec.25 has the power to constitute an insurance advisory committee.
-This committee provides advice to the authority.
-This committee is established by a notification by the authority.
-The chairperson and the members of the committee shall be ex officio members of the advisory
committee.
-The chairperson and members should not exceed 25.
-They can be members of commerce, industry, agriculture, transport etc.
-The object of this committee is to advice the authority on matters relating to making of
regulations in relation to service conditions of the staff, conducting transactions of meetings etc.
