Assignment of Insurance Management

A Study Report on
Insurance Regulatory and Development Authority (IRDA)

Submitted to:
Dr. Vijay Agarwal

Submitted By:

Coordinator MBA Program

Birla Institute of Technology
MESRA, Patna Campus

Ravindra Kumar
Madhusudan Kr
Pratik Bhushan
Asiful Haque

MBA/15004/13
MBA/15005/13
MBA/15036/13
MBA/15056/13

Department of Management
Birla Institute of Technology, MESRA
Patna Campus

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MISSION STATEMENT OF 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 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.

Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of
IRDA..
Subject to the provisions of this Act 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.
Without prejudice to the generality of the provisions contained in sub-section
(1), the powers and functions of the Authority shall include, -

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

withdraw, suspend or cancel such registration;
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;

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 Specifying requisite qualifications, code of conduct and practical training

for intermediary or insurance intermediaries and agents
Specifying the code of conduct for surveyors and loss assessors;
Promoting efficiency in the conduct of insurance business;
Promoting and regulating professional organizations connected with the
insurance and re-insurance business;
Levying fees and other charges for carrying out the purposes of this Act;
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;
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);
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;
Regulating investment of funds by insurance companies;
Regulating maintenance of margin of solvency;
Adjudication of disputes between insurers and intermediaries or insurance
intermediaries;
Supervising the functioning of the Tariff Advisory Committee;
Specifying the percentage of premium income of the insurer to finance
schemes for promoting and regulating professional organizations referred
to in clause (f);
Specifying the percentage of life insurance business and general insurance
business to be undertaken by the insurer in the rural or social sector; and
Exercising such other powers as may be prescribed

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STRUCTURE OF IRDA
As per the section 4 of IRDA Act' 1999, Insurance Regulatory and Development
Authority (IRDA, which was constituted by an act of parliament) specify the
composition of Authority
The Authority is a ten member team consisting of
(a) Chairman;
(b) five whole-time members;
(c) four part-time members,
all appointed by the Government of India.

The present structure is same as above with the following

This been structure of the committee, IRDA has been excelling in its
management of the whole Insurance market. IRDA has been modifying its rules,
regulations and policies for better development of Insurance in the Indian market. It
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publishes its changes reports in official gazettes and its own websites. Its websites
arewww.irdaindia.org,
www.irdaonline.org.

http://www.policyholder.gov.in,

www.irda.gov.in,

Through this websites they combine all their activities in a readable version.
The IRDA performs various functions; legislates or imposes rules,
regulations(laws); penalties; changes policies; this is showcased in above sites with
A Z details. Not only this but it also showcases reports of all Insurance companies
in a statistical data form, warnings to insurance companies, public disclosures and
the meetings/arrangements on various Insurance topics.
The main part comes with its Journal which showcases Insurance issue topics,
thinkings by various personalities on the topics, key areas where the Insurance
companies should develop, research work, statistical data of the companies, points
on the events organized by IRDA every month.
Through this Journal, IRDA has been trying to develop Insurance in India. A good
example will be It tried to aware companies to insure persons suffering from AIDS,
other topics include grievance management, policy serving as a Fine Art, Policyholder
Service Strategy, Need for Innovation(G V Rao argues that while there is a great deal of
enthusiasm for filing products, it may not be backed by a sufficient market research),
consumer orientation, need of simplicity (Joydeep Roy emphasizes that the biggest
innovation waiting to happen will be to render insurance policies more comprehensible
to the lay person. He further says that the industry is in need of innovation in insurance
products which will offer consumers simple and easy-to-understand choices.), the
concept IBNR, undoing uncertainty, vital points for success, concept of Nuclear
Insurance.

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The Presidents speech on IRDA as during

Finance Minister Mr. PRANAB MUKHERJEE

It gives me great pleasure to be here today for the board meeting of Insurance
Regulatory Development Authority (IRDA). It is a matter of pride that the financial
regulatory framework in India is evolving in a manner which is conducive to
development of a robust financial sector, ensures the independence of the regulators and
enables the sector to grow in a healthy manner in line with the requirements of a growing
economy.
We have travelled a long distance since the time Insurance was nationalized in 1956.
As we look back from the time the IRDA Act, 1999 was enacted by the Parliament, it
is heartening to note that the objectives for which the IRDA was created, have been
largely achieved; and that the industry has been making steady progress. The growth in
premium underwriting has witnessed strong CAGR of 22.3% during the decade 20012011. Insurance penetration and density at 5.1% in 2010 is a marked improvement from
2.71% in 2001.The public confidence in the industry has improved and is positive. The
future
looks
bright
for
the
insurance
sector.
Asia excluding Japan will contribute nearly a quarter of global growth in next 5 years
and within Asia, India will be the fastest growing general insurance market, with an
average expected growth of 15%. A welcome feature is that the share of life insurance
premium in the gross domestic savings with the household is about 18% and is
increasing over the years. There are strong underwriting growth drivers. The demand
for insurance products is likely to increase due to growth of household savings and
purchasing
power.
The insurance sector has been an important contributor to the infrastructure
development of the country. The total investments of the insurance industry in
infrastructure (as on 31st March, 2011) were to the tune of Rs 198,369 crore, of which
78%
has
come
from
public
sector
insurance
companies.
I am happy to note that the Planning Commission and IRDA are working together to
develop necessary framework for infrastructure financing. I am sure that IRDA will
ensure all whats required to ensure that the growth potential of the insurance sector is
fully
realized.
There are a few concerns that need to be addressed. Notwithstanding Indias rapid
growth in recent decades, it has largely remained an underinsured market with financial
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vulnerability across most of the income segments. The protection level, as measured by
level of sum insured to Gross Domestic Product, at 55% is still low, pointing to the need
for promoting long term savings and protection. Further, the insurance market is
structurally challenged in terms of profitability. The industry profitability is driven by
the investment income, with continued deterioration in the core business economies.
No Company in India has yet achieved a sustainable balance between growth and
profitability.
The IRDA, through its regulations, has been ensuring policy holders protection.
Initiatives such as dematerialized accounts, declining risk pool for third party motor
pool, promotion of rural and social sector obligations, micro insurance policies,
Institution of ombudsman and Integrated Grievance Redressal Mechanism, to name a
few have strengthened the insurance sector tremendously. These efforts have to
continue in the near future. IRDA, I feel has a crucial role at this moment to see that the
sector develops in a healthy manner and the reach of insurance is maximized.
There are two potential scenarios for the market profitability (i) more holistic
competition with new business models (ii) aggressive price based competition. It is the
first option rather than aggressive competition in premium underwriting, that has been
the case so far. While de-tariffing has resulted in significant lowering of premiums for
the consumers, the adverse impact is being felt on the insurance companys balance
sheet. Underwriting performance is the biggest driver of superior returns and is the key
differentiator between the top performers and the rest. To ensure prudent underwriting
and curbing unhealthy and suicidal competition among the companies through
undercutting premiums is something that the Regulator will need to address suitably.
The focus area for an insurance company should be to strive towards a proper business
mix, distribution mix along with underwriting excellence, operation excellence and
claims excellence. It is imperative that (i) companies adopt the granular growth
approach and realign resources differentially by channel, product and geography, (ii)
strengthen core distribution capabilities (iii) deeper retention through Customers
lifecycle management, (iv) invest in technical excellence and (v) driving comprehensive
expenses management. It is time for the IRDA to examine promotion of Digital
channels and incentivize E-Governance and E-Policy so as to extend insurance coverage
especially
among
the
youth.
IRDA has made progress in ensuring policyholders protection. In continuing this work,
IRDA should be expressively punitive to companies who resort to mis-selling or violate
the initially agreed terms and conditions. I feel there is a case for moving to a use and
file system for approving products or mix it with the existing file and use policy, in
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order to speed up the product approval process which has been the concern in the sector
for some time. The regulatory environment should be conducive to changes with
regulator seeking broad guidelines as opposed to micro management.
Indian market, despite newer models of distribution is still largely dependent on the
agents and agency model of insurance. Can we think of a system where in the mass
market/OTC vanilla products with low ticket size are incentivized by having a second
level of agents with lesser entry restrictions? This will ensure widening the reach of
Insurance especially in semi-urban and rural areas. The low penetration in general
insurance is primarily because of low penetration in retail insurance product segment.
The efforts of IRDA in promoting rural and social sector insurance are steps in the right
direction. In this regard I have instructed the LIC as well as four Public Sector Insurance
Companies to have their presence in all district headquarters and upto the Tier IV cities
as classified by Census. In addition, IRDA may think of setting up a pool which should
be specifically meant to take up insurance literacy and awareness. This is one area I am
concerned and concerted efforts are needed to make people realize the importance of
insurance
especially
as
old-age
security.
IRDA should have a clear vision in insurance sector in India in this changing social
economic scenario and have a consistent long term policy framework so that the
industry
can
flourish.
To conclude, I would emphasize that though the journey has begun well, it is only halfcomplete. It is now up-to both the Department of Financial Services and IRDA to work
in a manner that insurance becomes an effective tool for transforming the lives of
individuals and the society at large.

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Function of IRDA

Registration (licensing) including renewal of registration of insurance

companies.

Licensing of insurance intermediaries such as agents, surveyors and loss

assessors, third party administrators, brokers etc.

official approval of agents training institutions.

Monitoring all non-tariff products including pricing of products, terms

and conditions thereof, etc

Supervision of the functioning of the companies and intermediaries

including review of company annual statements.

Formulation of regulations.

Enforcement of discipline.

Consumer education and assistance.

Framework of IRDA

Insurance Companies

Third party
administrators

Agents

Surveyors and loss

assessors

Insurance Advisory
committee

IRDA

Insurance ombudsman

Insurance brokers

Insurance
associations/
insurance councils

Tariff Advisory
committee

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