Importance of stable and strong insurance system for economic development of the Country
Development of stable and strong insurance system is essential for economic development of the Country. Regulatory measures are required for instilling public confidence in insurance companies, deliver reliable and quality services.
It has to secure the long-term stability of financial services through monitoring of their financial soundness and fair treatment of their customer.
With the experience of failure of non-banking financial institutes and loss of depositors’ money, regulatory measures have to very effective, considering the interests of insurers; government has changed its traditional regulatory role to control with facilitating investment and trade.
Insurance Act 1938 is being modified as per the suggestions of IRDA. Globalisation of financial activity, innovations is financial instruments and practices have to be strictly controlled.
There is often a conflict between strict regulation and development. Regulation is based on past experience whereas development is future oriented. Developing new products, processing and servicing is no easy matter.
It is expected that regulations will work as driver for change to force players to do things in a better way. Regulations by IRDA in India are praiseworthy as it is pro- development.
It has emerged as prudential supervisor and developer of capacity in terms of risk pooling, reinsurance and skills. It has guide for insurance penetration and insurance density. It makes insurance available to poor in rural areas. Insurance companies have to provide risk cover as well as contribute to long term investment.