In India, insurance has a deep-rooted history. It finds mention in the writings of Manu ( Manusmrithi ), Yagnavalkya (Dharmasastra ) and Kautilya ( Arthasastra ).1818 saw the advent of life insurance business in India with the establishment of the Oriental Life Insurance Company in Calcutta. This Company however failed in 1834. Thereafter several companies came and post independence after nationalization we had LIC by the ordinance of 1956. Following the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in April, 2000.
Today there are 24 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 23 life insurance companies operating in the country.
The Authority is a ten member team consisting of
(a) a Chairman;- HARI NARAYAN
(b) five whole-time members;
(c) four part-time members,
(all appointed by the Government of India)
Section 14 OF THE IRDA Act,1999 lays the duties. Some of them are as follows -
- To protect the interest of and secure fair treatment to policyholders;
- 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;
- To set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of those it regulates;
- To ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices and put in place effective grievance redressal machinery;
- 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;
- To take action where such standards are inadequate or ineffectively enforced;
- To bring about optimum amount of self-regulation in day-to-day working of the industry consistent with the requirements of prudential regulation.
PFRDA was established by Government of India on 23rd August, 2003. The Government has, through an executive order dated 10th October 2003, mandated PFRDA to act as a regulator for the pension sector. The mandate of PFRDA is development and regulation of pension sector in India.
The Authority shall consist of a Chairperson and not more than five members, of whom at least three shall be whole time members, to be appointed by the Central Government. The present chairperson is Shri Yogesh Agarwal.
The New Pension System reflects Government’s effort to find sustainable solutions to the problem of providing adequate retirement income.
The Union Cabinet approved the introduction of certain official amendments to the Pension Fund Regulatory and Development Authority Bill, 2011. Based on the recommendations of the Standing Committee on Finance, the Government has decided to accept the following:
- That the subscriber seeking minimum assured returns shall be allowed to opt for investing his funds in such schemes providing minimum assured returns as may be notified by the Authority;
- Withdrawals not exceeding 25 per cent of the contribution made by subscriber will be permitted from the individual pension account subject to the conditions, such as, purpose, frequency and limits, as may be specified by regulations by the PFRDA
- The foreign investment ceiling in the pension sector at 26 per cent or such percentage as may be approved for the Insurance Sector, whichever is higher may be incorporated in the present legislation;
- To establish a vibrant Pension Advisory Committee with representation from all major stakeholders to advise PFRDA on important matters of framing of regulations under the PFRDA Act.
- The membership of the PFRDA will be confined to professionals having expertise in economics, finance or law only.
The New Pension Scheme (NPS) has been made mandatory for all the Central Government employees (except Armed Forces) entering service with effect from 1.1.2004. 27 State / UT Governments have notified NPS for their employees. NPS has been launched for all citizens of the country including unorganised sector workers, on voluntary basis, with effect from 1st May, 2009. Further, to encourage people from the unorganised sector to voluntarily save for their retirement, Government has launched the co-contributory pension scheme titled "Swavalamban Scheme" in the Budget of 2010-11. As on 7th September, 2012 the number of subscribers under NPS is 37.45 lakh with a corpus of Rs. 20535.00 crore.
PFRDA also intends to intensify its effort towards financial education and awareness as a part of its strategy to protect the interest of the subscribers. PFRDA’s efforts are an important milestone in the development of a sustainable and efficient voluntary defined contribution based pension system in India.
Rajan Agarwal is a student of Engineering and currently doing some research of the evolution of insurance in India along with pensions. You may contact him at firstname.lastname@example.org