Insurance Regulatory and Development Authority
The Insurance Regulatory and Development Authority (IRDA) is a national agency of the Government of India, based in Hyderabad. It was formed by an act of Indian Parliament known as IRDA Act 1999, which was amended in 2002 to incorporate some emerging requirements. Mission of IRDA as stated in the act is "to protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto."
The law of India has following expectations from IRDA
1. To protect the interest of and secure fair treatment to policyholders;
2. To bring about speedy and orderly growth of the insurance industry (including annuity and superannuation payments), for the benefit of the common man, and to provide long term funds for accelerating growth of the economy;
3. To set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of those it regulates;
4. To ensure that insurance customers receive precise, clear and correct information about products and services and make them aware of their responsibilities and duties in this regard;
5. To ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices and put in place effective grievance redressal machinery;
6. To promote fairness, transparency and orderly conduct in financial markets dealing with insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players;
7. To take action where such standards are inadequate or ineffectively enforced;
8. To bring about optimum amount of self-regulation in day to day working of the industry consistent with the requirements of prudential regulation.
IIRM vs NIA
In collaboration with Andhra `Pradesh state government corporation in India, IRDA has created a training college called IIRM - Institute of Insurance & Risk Management mostly to provide competition to a National Insurance Academy, centre of excellence in Insurance professional education established by the primary effort of Government of India and its Public Sector Insurers. This competition has brought the best for the users. IRDA Regulations mandates statutory training and retraining for license and renewal of Brokers and Agents as intermediaries . As per extant regulation National Insurance Academy is the examining body for Indian Insurance Brokers.
It is unique in the regulatory system in the world to find IIRM advertizing that IRDA Chairman signs its educational certificates, particularly when IIRM seems to have corporate constitution with a Managing Director and sponsorship among others by a State Government corporation of Andhra Pradesh. This is a matter which should draw attention of Federal Government of Indian Republic and the insuring community - the question is fundamental for debate; should regulator be a player in the market?
Just also see these links of Loksabha and CAG to know more about IIRM, Parliament of India: http://184.108.40.206/lsq/quest.asp?qref=64586 CAG: http://220.127.116.11/search?q=cache:KuiHVD9b4DwJ:www.cag.gov.in/reports/civil/2005_4/Chapter9.pdf+irda+iirm&hl=en&gl=in&ct=clnk&cd=10
IRDA has a Chairman and some permanent and some part time members but the regulations are enacted under the guidance of a statutory advisory committee. The advisory committee consists of following individuals and ex-officio authorities:
Mr C S Rao is the second Chairman of IRDA after Mr N Rangachari as the first Chairman. Mr K K srinivasan is the Nonlife Member of IRDA. There is provision for a panel of other members and part time members. IRDA formed a high powered Insurance Law Reforms Committee known as KPN Committee with important insurance advisors like Mr N Govardhan and Dr K C Mishra as its members. There were also a few non-advisory committee members like Mr Liaquat Khan and Mr T Viswanathan etc. Full force and utility of various institutions like Advisory Committee and self-regulatory organizations are not yet realized as the regulator seems to be in a long learning mode. Due to over delegations, Individual incumbents decide the pace and extent of utilization of prudential and statutory bodies. Research is limited to opinion seeking through legacy channels. Market waits for revision of insurance act and establishment meaningfully functioning regulatory organs devoid of excess delegation and subjective localization of development agencies.
IRDA Journal is available as soft copy in its website. Unlike other Indian administrative Regulatory Agencies IRDA is perceived as a silent regulator with activities confined to its local existence. Even if IRDA is situated at Hyderabad, the capital of Andhra Pradesh for political considerations, there is no Head Quarter of any insurance company at Hyderabad. With maturity of the regulatory system, all these temporary toothing problems will get Indianized rather than localized.
S, Sree Ramulu, S/o Shri S. Venkiah Petitioner
Vs Respondent/- 1. Union of India, Through its Secretary Ministry of Finance 2. IRDA, Parishram Bhavan, Basheer Bagh, Hyderabad- 50004 3. IIRM Hyderabad
RE: Public Interest Petition
Petition under Article 226 of constitution of India challenging the ultra vires activities by the Insurance Regulatory and Development Authority and violation of Articles 14,19 and 21 of the constitution of India.
I , S, Sree Ramulu, S/o Shri S. Venkiah do hereby solemnly affirm and state as under:
1. I am a senior citizen of India and am a social activist as such I am swearing this public interest petition.
2. The 2nd Respondent which is a statutory body created by an act of parliament (IRDA act 1999) with a view to regulate and develop the insurance industry and to protect the interest of the policy holder. It is submitted that the said respondent is engaging in activities which by law it is not authorized to enter and spending public money activities it is not authorized to do. 3.. It is most humbly submitted that in the year 2002 IRDA has come up with an institute in most whimsical and arbitrary manner and against the interest of the public of India at large. IRDA has without any authority transferred the huge amount running into 10 crores to the above institute for the reasons best known to them and that too without the permission of the Ministry of Finance to which they are answerable. 4.. It is submitted that the above amount was transferred in a very mysterious manner and not through any negotiable instrument like cheque so as to make the transaction more secretive. It is submitted that the IRDA in order to tackle possible problem that may come up with CAG has brought a serious officer on deputation from CAG who has been made Administrator of the institute named as IIRM. 5. That the CAG has objected to the said transfer and also a Lok Sabha stared question number 422 on 22/8/2003 was asked on the above issue ( Annexure I). IRDA in itets annual report 2003-2004 page 156 (Annexure II) has shamefully admitted the mistake however public monies continue to be used against the law of the land. It is submitted that the IRDA can not undertake such transfer of funds to any such institute under the IRDA act,1999 6. That the 3rd respondent is charging an amount of 1.5 lacs using the umbrella of IRDA which is a statutory body and the apex regulator for the insurance industry in India. Thus IRDA is engaging in blessing one particular institute by supplying not only monies, logistics but also providing its staff as faculty to IIRM which activities is not only ultra vires but also highly arbitrary and against the Constitution of India. Copy of the Web advertisement of 3rd respondent is enclosed and marked Annexure P-1 7. That the 2nd respondent is using its authority and funds for the purposes not approved by the Insurance Act 1938 and the IRDA act 1999 and engaging in activities which are discriminatory and arbitrary and hit by article 14,19 and 21 of the Constitution of India. It is submitted that sec. 16 of the IRDA Act- 1999 deals with the Constitution of IRDA funds and specifies the purpose for which the funds and its monies can be used. The Section 16(2) is reproduced below.
The fund shall be applied for meeting- A) The salaries, allowances and other remuneration of the members, officers and employees of the authority B) The other expenses of the authority in connection with the discharge of its function and for the purpose of this Act. As such the said transfer of the funds to creating and running of the IIRM is not approved by the above act and the said transfer is also against the interest of the public since the public monies are being used for engaging in activities which are not warranted. In the process genuine providers of insurance education and training are also being affected due to the umbrella and patronage of the insurance regulator to IIRM and therefore the acts are also discriminatory and arbitrary in nature.
8. It is humbly submitted that the regulator is collecting heavy fees from the insurance companies which are in turn collecting the monies from the innocent public and the said monies are used to make personal gains and applied for useless purposes not provided by the very act that has created the Authority thus the action of the regulator is not only illegal but ultra vires the Insurance Regulatory and Development Authority Act, 1999 and needs to be declared illegal by this Apex Court to protect the monies of lacs of innocent public whose monies cannot be allowed to be used by the respondent in such whimsical, arbitrary and illegal manner and it is prayed that this Hon’ble Court as a custodian of the rights and interests of the Citizens of India may be pleased to interfere and put a stop to the working of the respondent No 3 and the illegal use of monies by the Respondent No.2.
9. That the 2nd respondent is blessing the 3rd respondent in every possible manner and deriving under table benefits for its important officials. The 2nd respondent has used 3rd respondent to provide education and employment to the children of its executive director and the chief accounts officer etc. Thus the above public monies are being transferred and used by the IRDA for securing personal advantage like creating special jobs for the children of the high officials of IRDA .
10. It is submitted that since in spite the noting in the CAG, The Lok Sabha Question and the Annual report 2003-04 the respondent no. 2 has chosen not to initiate any steps to correct and stop its illegal actions and further the respondent No. 1 has also not taken the pain of making enquiry and closing down the respondent No. 3 institute and has failed to stop the respondent No. 2 from embezzlement of public funds. It is therefore necessary that this Hon’ble Court may take serious note of this burning issue and pass necessary directions to pass signals to the other organizations as well that they cannot take the law for granted.
11. It is humbly submitted that the respondent No. 2 has created a training college called IIRM - Institute of Insurance & Risk Management i.e the respondent No 3 mostly to provide competition to a National Insurance Academy, centre of excellence in Insurance professional education established by the primary effort of Government of India and its Public Sector Insurers. It may be noted that the IRDA Regulations under the IRDA Act 1999 and the Insurance Act, 1938 mandates statutory training and retraining for license and renewal of Brokers and Agents as intermediaries . As per extant regulation National Insurance Academy is the examining body for Indian Insurance Brokers.
It is unique in the regulatory system in the world to find the respondent No. 3 is even beating drums about the illegality by saying that Chairman of respondent No.2 signs its educational certificates, particularly when respondent No. 3 seems to have corporate constitution with a Managing Director. This is a matter which should have drawn attention of Federal Government of Indian Republic - the question is fundamental for debate; should regulator be a player in the market but even the respondent No. 1 has turned a blind eye to the illegality.
12. It is most humbly submitted that it is a primary principle that ‘no man can be a judge in his own case’ which principle is also belittled by the respondent No.2. The Chairman Respondent No. 2 has approved the respondent No. 3 to conduct training and examination of brokers in order to make them eligible to get licence from the Respondent 2 the insurance regulator and the same Chairman of Respondent No. 2 is also the signatory of the certificates of the examining institute i.e respondent No 3. Is this not evidence of the malfunctioning of the regulator and its illegal activities. Is it not proof enough that the respondent No. 2 has created respondent No. 3 not only illegally but also using it to make personal gains at the cost of the public monies.
There is no equally efficacious remedy available to protect the interest of the citizens and therefore this Hon’ble Court may be please to interfere and pass suitable directions and declare the above activities ultra vires and against public interest.
It is most humbly prayed that this Hon’ble Court may please admit this Public Interest Litigation and
a) stay the operations of respondent No.3 immediately b) punish the Chairman and other senior officers of the respondent No.2 for indulging in corruption, malpractices and embezzlement of public monies. c) direct respondent No.2 to recover the monies illegally transferred to respondent No.3 and stop it from using the respondent No.3 for making personal gains d) direct the respondent NO.1 to enquire and shut down the respondent No. 3 and to keep control on the activities of respondent No.2 to prevent misuse of public monies. e) Pass any order/writ as the Hon’ble Court may deem fit in the circumstance and facts placed before it.