Role of regulatory authority in insurance industry_Vinayak_Priyanka

8/7/2019 Role of regulatory authority in insurance industry_Vinayak_Priyanka

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ROLE OF REGULATORY

AUTHORITY IN INSURANCE

INDUSTRY

Vinayak Raj Sinha 24

Priyanka Battoo 32


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Regulator and its Function


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Whydo we needRegulator??


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IRDAIn april 1993, the government of India appointed a committee of

Reforms in insurance sector with Shri. R.N. Malhotra, a former

governor of Reserve Bank Government of India in January 1994.In

accordance with the recommendations of the committee, the

government set up a regulatory body known as (Insurance Regulatory

and Development Authority" and enacted the Act known as InsuranceRegulatory and Development Act, 1999

Mission: Insurance Regulatory & Development Authority (IRDA) is

regulatory and development authority under Government of India in

order to protect the interests of the policyholders and to regulate,promote and ensure orderly growth of the insurance industry.


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Objectives OfIRDA

Take care ofpolicy holders

interest.

Open theinsurance for

private sectors

Ensurecontinuous

financialsoundness and

solvency

Regulateinsurance andreinsurancecompanies

Eliminatedishonesty and

unhealthycompetition

Supervise theactivities of

intermediaries


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PROTECTION

ESTABLISH A REGULATORY FRAMEWORK TOPROVIDE ADEQUATE PROTECTION TOCONSUMERS

PREVENT /ENFORCE SUCH REGULATIONS

INSTIL PUBLIC CONFIDENCE


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PROMOTION

* Provide a favorable climate for productdevelopment/intermediation and healthy growth ofinsurance

- A reliable and stable market

- Freedom of entrepreneurialspirit

* Balance between degree of prudential regulationand degree of freedom


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COMPETITIVE

NEUTRALITYLevel playing field for all participants

Minimal entry and exit barriers

No undue restrictions on institutions or

products

Well defined rules of game


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JUDICIARY

Decide on suits

Give interpretations

Decide on t e legality of aninsurance practice


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SOURCES OF REGULATIONS

* Laws / Statutes - Government

*Formal Regulations - Regulations

O Non-formal Regulations - Guidelines

O Self-regulation - Industry

O Internal Regulation - Corporate

Governance


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PFRDA


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Role ofPFRDA

To establishCentral RecordKeepingAgency

PF managementcompanies

appointment


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Overlapping Products

Personal PensionPlans:-IRDA/PFRDA

GroPensionPlans:-

IRDA/PFRA

Pension Prod cts withMutual Funds:-SEBI

li s:-IRDAAnd SEBI


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RBI

Insurance Industries have to borrow from CBLO or thebanks and not from RBI.

This creates less opportunities for it to borrow money andhigher interest rates.

Insurance companies can easily borrow from RBI likesbanks and at less interest rates.

This will help both IRDA and RBI to keep a check on

borrowing and the system will be more transparent

This will help to curb the gap in balance sheet on theimmediate basis.


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SEBINone of the insurance companies are listed on stock exchange.

This hampers them to a major source of their securities

Not eing listed they have less ays to raise money.

If listed y the help of SEBI and IRDA, it ill e helpful for them toraise money

This ill lead to less premium eing charged from the customers.

Will also help in transparency of mitigating their reputation andcredit risk.


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Role ofself- regulation in

insurance

Regulation should be so designed that it should achieve theobjective of protecting consumer interests in the most

efficient manner.

In the case of market practices, SROs can play an importantrole due to lower cost of information acquisition on marketpractices.SROs can complement the role of IRDA.

IRDA has envisioned an important role for SROs in Indiaparticularly with respect to market practices.


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Growing

customer awareness,

expectations

Increasing Product-Price

Complexity and Flexibility,

ART, Derivatives

,

Disintermediation

and

Reintermediation

Regulatory Mission,

Competition,

International Benchmarks,

Changing

Pricing scenario /

De-tariffing

Rapid rate of

technology

advancements

& innovation

Convergence of

Institutions,Instruments,

Intermediaries

Insurance

Industry

New Business

Models

CHALLENGINGENVIRONMENT


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Major ChallengeO De-tariffing : Because of de-tariffing,

there is increased competition in the

industry. Because this, competition hasincreased and profit margin are coming

down.

Suggestion

Just as RBI has introduced the concept ofbase rate, IRDA could also give this base

rate below which discount on policies are

not given


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CONCLUSIONRBI,SEBI,IRDA,PFRDA all have different domain

areas of their specialization and control. But

despite of this they have number of overlapping

functions. In financial markets , they need to

work hand in-hand

In order manage concept of super regulator is

proposed and it is under consideration.

Government of India should facilitate and develop

the platform where all regulators could work

together on common grounds and formulate the

policies in best interest of the country.


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