Explain the need for insurance regulatory intervention.

Need for Regulatory Intervention
Insurance regulations are a set of principles that cover the minimum requirements for best practices in the area of licensing, prudential regulations and requirements, managing asset quality and so on. Insurance regulations help in controlling premium and investments, fixing fair premium prices, continuing audit and intervention and approving policy wordings. It also obtains equitable allocations of profits among the company and the policyholders. 

The basic regulations which deal with the insurance business in India are the Insurance Act, 1938 and the IRDA Act, 1999. The acts that deal with various aspects relating to accounts and audit in insurance are:
1) The Insurance Act, 1938.
2) The Insurance Regulatory and Development Authority Act, 1999.
3) The Insurance Regulatory and Development Authority Regulations.
4) The Companies Act, 1956.
5) The General Insurance Business (Nationalisation) Act, 1972 (including Rules framed thereunder).

The Insurance Regulatory and Development Authority (IRDA) Act of 1999 was passed when the insurance sector opened to private companies. This act was passed to provide the establishment of an authority that protects the interests of the policy holders, to regulate, promote and ensure the orderly growth of the insurance industry and to amend the Insurance Act, of 1938, the Life Insurance Corporation Act, 1956 and the General Insurance
 

Business (Nationalisation) Act, 1972.
Protecting customers interest includes keeping prices affordable, having some mandatory products and standardisation of services. It is important for the regulatory authority to make sure that the insurers pay the customers. It also has to make sure that the claims made are settled quickly without unnecessary litigation.

Regulations relating to solvency and financial health have to be introduced to make sure that the insurance companies follow suitable prudential norms like solvency margins. The insurers keep the huge funds in their custody and invest them to produce more returns. Management of these funds is important to the insurer, the insured and the economy. Any private insurance company that wants to enter into the insurance industry should be regulated with appropriate capital adequacy norms. The insurance industry in India has a large potential and the framework of regulation has to enable the industry in tapping the vast potential.