IRDAI: Role, Mandate and Regulation of Insurance Business
What this domain tests
This section checks whether a POSP knows who IRDAI is, what powers it has, and how its rules reach the point of sale. Questions typically cover the IRDA Act 1999, licensing, product approval, solvency, market conduct and the POSP framework.
Statutory basis and mandate
IRDAI is a statutory regulator created by the Insurance Regulatory and Development Authority Act, 1999. It is not an insurer, a trade body or a consumer court. Its mandate is to protect policyholders' interests, promote and regulate the orderly growth of insurance, and ensure financial soundness. It operates alongside the Insurance Act, 1938 and regulations made under it. Its headquarters is in Hyderabad.
Core regulatory powers
- License insurers, brokers, corporate agents, individual agents and POSPs; renew, suspend or cancel licences.
- Approve or regulate products and rates where required; many products follow file-and-use.
- Prescribe solvency margin (currently 150%) and investment norms.
- Inspect, investigate, adjudicate and penalise; issue directions and circulars.
- Set conduct rules on disclosure, grievance redressal and claim timelines.
- Promote penetration in rural and social sectors.
Worked example
An insurer launches a motor own-damage add-on and appoints a POSP who has passed Class 10 and completed the prescribed training. The POSP tells a customer the add-on is "approved by IRDAI, so claims cannot be rejected." Analysis: product approval does not guarantee every claim. The insurer still assesses the claim under the policy terms. The POSP's statement is mis-selling, exposing the POSP to licence action and the insurer to conduct penalties. Approval and claim admissibility are separate issues.
Traps that cost marks
- Treating IRDAI as a claims court; disputes go to the insurer's grievance officer, the Insurance Ombudsman or consumer forums.
- Assuming IRDAI pays claims or guarantees returns.
- Confusing IRDA (1999) with the renamed IRDAI (2015).
- Believing a POSP may sell every product; POSPs are restricted to specified simple or pre-underwritten products.