Q.What is the Insurance Act, 1938? Explain the role and main functions of IRDA/IRDAI in regulating the insurance industry in India.

Because insurers hold the public's money against long-term promises, India has both a governing law and a dedicated regulator to protect policyholders and keep insurers sound.

The Insurance Act, 1938. The Insurance Act, 1938 is the principal, foundational law governing the conduct of insurance business in India. It provides for the registration of insurers, the maintenance of adequate reserves and solvency, the investment of insurers' funds, the licensing and conduct of agents and intermediaries, and various protections for policyholders, together with the powers needed to supervise the industry. It has been amended many times and remains the backbone of insurance law.

Why a regulator was needed. After the insurance sector — long carried on by public-sector bodies — was opened to private and foreign participation, a strong, independent regulator became necessary to license companies, set prudent rules, protect policyholders and guide the industry's growth.

IRDA/IRDAI. The Insurance Regulatory and Development Authority was established under the IRDA Act, 1999 as an autonomous statutory body (now formally the IRDAI); its head office is at Hyderabad, and it is headed by a Chairperson with whole-time and part-time members. Its twin objects are captured in its name — to regulate the industry and to promote its development.

Main functions and role:

1. Registration and licensing — granting, renewing, modifying, suspending or cancelling the registration of insurers, re-insurers and intermediaries (agents, brokers, surveyors).
2. Protecting policyholders' interests — regulating disclosure of terms, claim settlement, surrender values, nomination and assignment, and providing grievance redressal.
3. Setting prudential and conduct standards — prescribing the qualifications and code of conduct of intermediaries, regulating the investment of funds, and requiring adequate solvency margins so insurers stay financially sound.
4. Supervising products and premiums — overseeing the terms, conditions and general working of the market to keep it fair and competitive. …