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Insurance Notes for LIC AAO 2015-16: LIC (Umbrella Acts and IRDA formation)

Dear Aspirants,

In the previous article, we have discussed the LIC (existence and objectives). Today we will cover the formation of IRDA and the LIC Umbrella acts. These topics are relevant for the Insurance recruitment Examination as in the General Awareness Section, Questions related to Insurance Industry are always there. These Insurance notes will help you out in remembering basics terms and theories related to Insurance Industry.

IRDA (Insurance Regulatory and Development Authority of India):

It is an autonomous body that governs and regulates Insurance Industry in India. It was constituted by Government of India under the Insurance Regulatory and Development Authority Act, 1999.

Malhotra Committee:

Before moving further into the formation of IRDA, let's discuss Malhotra Committee. After the formation of Major Insurance players like LIC. GIC etc. The Government formed a Committee in 1993 under the leadership of Mr R.N. Malhotra to propose ways to initiate and implement reforms in Indian Insurance Industry. R. N Malhotra was the former Governor of RBI (4 February 1985 to 22 December 1990).The objective to set this committee was to match and analyse the pace in the financial sector.

After the analysis, the Committee submitted its report in 1994 with following recommended points:

1. Permission to the private sector to enter the Insurance Industry.

2. Participation of Foreign Country to enter into MOU (Memorandum of Understanding) with the existing or floating Indian company in the form of Joint Ventures.

IRDA (Birth): 

After the recommendations of Malhotra Committee, Government of India passed Insurance Regulatory and Development Act, 1999. It acted as the Governing Act for all the Insurance Industry. In August 2000, the IRDA opened the insurance sector by opening the registration for the foreign companies to engage in the sector with an ownership of up to 26% participation. IRDA has also been granted to frame the rules and regulation under the section 114A of Insurance Act, 1938. IRDA has framed many regulations for the management of Policies to carry out insurance business taking Customers benefit in an account as well.

Life Insurance Act. 1912:

In 1912, Life Insurance Company Act and the Provident Fund Act were passed by the Government of India. Under this act, the verification and certification of premium rate tables and the periodic valuation of companies was made mandatory. This Act aroused as a discrimination between Indian and Foreign Insurance Companies on many accounts, putting Indian companies under disadvantage.

Insurance Act 1938:

The sector got hiked at a very fine rate and by the year 1938, the 44 companies that initiated at a total business in force as 22.4 crore INR rose to 176 companies with a total in force business as 298 Crore INR. The earlier amended legislation was amended with a view to protect Indian Insurance Companies. The Insurance Act 1938 consisted of various provisions for effective control over Insurance companies and Insurers. This was the first act that legislates over life and non-life insurance cover. It also provided state control over Insurance Business.

As the LIC AAO Exam 2015-16 is at the doorsteps, keep reading and Don't forget to bookmark

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Previous Related Article: Insurance Notes for LIC AAO 2015-16: LIC (Objectives and Existence)

 

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