Unit 3: IRDA regulatory framework

• Established under the Insurance Regulatory and Development Authority Act, 1999 (statutory body from April 2000); headquarters Hyderabad; renamed IRDAI in 2014.
• Composition: Chairperson, up to five whole-time members and up to four part-time members, appointed by the Central Government.
• Mission: protect policyholders' interests, regulate, promote and ensure orderly growth of the insurance industry.

• Powers: frame regulations, issue directions, impose penalties, cancel registrations, appoint administrators.

• Accounts under the IRDAI (Preparation of Financial Statements and Auditor's Report) Regulations: revenue account, profit and loss account, balance sheet, receipts and payments account, with schedules.
• Solvency margin: insurers must maintain a solvency ratio of at least 150% (available solvency margin ÷ required solvency margin) — moving towards a risk-based capital regime.
• Investments: prescribed pattern — a minimum share in government securities and approved investments; restrictions on exposure; Investment Committee.
• Audit: statutory audit by CAs (joint auditors for many insurers); internal audit; concurrent audit of investments; actuarial valuation by the Appointed Actuary; returns filed with IRDAI.

These were the foundation of policyholder protection (later replaced by the Protection of Policyholders' Interests Regulations, 2017 and consolidated in the 2024 regulations and master circulars).

• Insurance Ombudsman (Insurance Ombudsman Rules, 2017): handles complaints up to ₹50 lakh; free; award within 3 months; binding on the insurer.
• Bima Bharosa — IRDAI's integrated grievance management system.

Rationale for privatisation (Malhotra Committee, 1994)

• Low penetration and poor coverage under public monopoly.
• Need for competition, product innovation and better customer service.
• Mobilise long-term funds for infrastructure.
• Bring technology and global expertise (foreign partners).
• Improve efficiency and claim settlement.
• Outcome: private players, FDI (49% → 74% → 100% proposed), bancassurance, digital distribution, growth in penetration.

Credit and deposit insurance

• Deposit Insurance and Credit Guarantee Corporation (DICGC): a wholly owned subsidiary of RBI (1978 merger of DIC 1962 and CGCI); insures bank deposits up to ₹5 lakh per depositor per bank (raised from ₹1 lakh in 2020); covers commercial, RRB, co-operative and small finance banks; payment within 90 days of a moratorium under the 2021 amendment.
• Credit insurance: protects lenders/sellers against default — ECGC Ltd (export credit insurance), trade credit insurance by general insurers, CGTMSE credit guarantees for MSME loans, Credit Guarantee Fund for Start-ups.