Will get more powers after the Insurance Act is amended.
Ahead of amendments to the Insurance Act, the Insurance Regulatory & Development Authority (Irda) has formed half-a-dozen committees to review the regulations governing the sector.
The rules are being reviewed for the first time after the sector was opened to private competition at the start of the decade.
Since the enactment of the Insurance Regulatory and Development Authority Act in 1999, the regulator has issued nearly two dozen regulations, including on solvency margins, licensing of agents, investment, advertisements and third-party administrators.
The proposed amendment to the insurance laws will give additional powers to the insurance regulator.
Irda has formed these committees to manage the different tasks that it will undertake after the Bill is cleared by Parliament, according to a source close to the development.
The first committee will look after registration, capital structure, initial public offerings and mergers and acquisitions. The second will look into actuarial, account, binding up and solvency issues. The third will take care of intermediaries, commissions, rural and social sector obligations, policy protection, solatium fund, ombudsman and grievances. The fourth has been asked to keep tabs on investment, expenditure control and unit-linked insurance products). The fifth one will oversee penalty, penal causes, adjudication, prosecution, nomination, succession and other legal issues, while the sixth will look into reinsurance-related issues.
Once the laws are amended, regulations related to the commission will fall under Irda’s purview and it will have the power to change the commissions paid for insurance products, which are right now embedded in the product.
"Since the commission is embedded in the price of the product premium, you cannot rebate it. Once the law is amended, all this will come under regulation and we will be able to look at it. We will set up a group to look into this and other related matters," Irda Chairman J Hari Narayan had said recently.
Other than this, investment guidelines, agent training and agent licensing are some of the issues that will be omitted from the Act and will find a place in the regulations, allowing Irda the flexibility to amend them on its own.
"Every time you need some amendment you have to wait for Parliament to amend the law. The amendment to the Irda Act, 1999, will make Irda a more effective regulator," said a senior Irda official.
The Insurance Bill is pending for amendment since November 2008. The changes proposed in the Bill include amendments to the Insurance Act, 1938, the General Insurance Business Nationalisation Act, 1972, and the Irda Act, 1999. In addition, the foreign direct investment limit is sought be raised to 49 per cent from 26 per cent at present.