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'New IRDAI head can study existing reports, plug gaps'
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SME Times News Bureau | 13 Oct, 2021
Even as strong views are being voiced on the need to review and recast
of the two decade old Insurance Regulatory and Development Authority of
India (IRDAI) by industry experts, some experts hold contrary opinions.
"There
are reports submitted by various agencies. If these reports are studied
and a number of gaps noted and noticed periodically are addressed, I
think there may not be a need to have another review," a former Member
of IRDAI told IANS preferring anonymity.
"When a new Chairperson
joins IRDAI the above can be the agenda to carry out the mandate
envisaged in the preamble of the IRDAI Act," he added.
According
to him, the Standing Committee of Finance and the Parliamentary
Committee on subordinate legislation reviews the Regulations and working
of Regulators periodically.
"Financial Sector Assessment
Programme (FSAP) of the International Monetary Fund (IMF) and World Bank
reviews the regulators including IRDAI periodically to see whether the
International Association of Insurance Supervisors (IAIS), Insurance
Core Principles (ICP) are adhered to," the expert added.
Financial
Action Taken Force (FATF) - the global money laundering and terrorist
financing watchdog -- also reviews the insurance regulatory bodies from
the money laundering angle periodically, he added.
"On the twin
aim of IRDAI Act 'to protect policyholders interests and promote orderly
growth of the industry' IRDAI seems to have done a reasonably good job
in the 20 years of its existence," K.K. Srinivasan, former Member,
IRDAI had told IANS.
According to him, a Government review of
IRDAI be taken up after reviewing the older financial services
regulators like the Reserve Bank of India (RBI) and the Securities and
Exchange Board of India (SEBI).
"It is time to do a review of
IRDAI. It is more than two decades since IRDAI came into existence. As a
matter of fact, every regulatory organisation should be reviewed at
regular intervals," N. Rangachary, the first Chairman of IRDAI told
IANS.
It was Rangachary who had paved the regulatory path for the sector as the first head of IRDAI.
"There
should be a review committee to go into all regulatory aspects. It is
time to see whether the original goal of forming the regulatory body has
been fulfilled and if not, the action to be taken," Rangachary
suggested.
Echoing similar views was R. Ramakrishnan, Member of the Malhotra Committee on Insurance Reforms.
"It
is high time the IRDAI is completely reviewed. This should have been
done at the end of the first five years. Better late than never,"
Ramakrishan told IANS.
"But the internal organisation of IRDAI
needs to be professionalised and strengthened. There is an undeniable
perception that compared to its rather small size, there is excessive
trade unionism within the Body," Srinivasan had said.
"This is
perhaps attributable to a large extent to the inevitable and somewhat
not desirable back-door recruitment of employees in the initial years of
its formation. However, this may get corrected in due course when
retirements take place," he added.
One of the areas that needs to be strengthened is the IRDAI's adjudicatory mechanism.
"With
the advent of adjudicatory mechanism that should precede penal action
in certain cases, it cannot be said that the adjudication officers have
to be continuously well trained and equipped with at least rudimentary
legal nuances so as to lend credibility to their performance in
quasi-judicial capacity, and recommending penalty with justice and good
conscience," D. Varadarajan, a Supreme Court lawyer specialising in
Insurance and Corporate Laws and a Member on KPN Committee on Insurance
Laws Reforms.
"In this context, it is also pointed out that
unlike the SEBI Act, there is no provision in the IRDA Act, to credit
all sums received as penalties to the Consolidated Fund of India. Hence,
the penalties imposed have to be just and reasonable, and not
excessive, leading to unjust enrichment of the coffers of the
Authority," Varadarajan added.
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