IRDAI is the Insurance Regulatory and Development Authority of India. They are the regulators of all insurance companies. In short, what the Reserve Bank of India or the RBI is to banks, IRDAI is to Insurance Companies. IRDAI regulates both Life and Non-Life Insurance. All guidelines pertaining to the functioning of the insurance industry are laid down by IRDAI.
IRDAI is basically a national agency based in Hyderabad. It was formed by the act of Parliament called the IRDA Act 1999, which was later amended in 2002. It was formed with the vision of protection of the interest of the policyholders and to regulate and develop the insurance companies for a steady growth of the industry as a whole.
IRDAI looks after all the regulations from sourcing of a policy to a policyholder to issuing the same, from licensing of an agent or broker to payout of their commissions, etc. Thus, it actually regulates all verticals of the insurance industry, from the agent to the broker to the customer. Its basic responsibility is towards to policyholders so that their interest is not diluted by respecting others interests as well.
However, the IRDAI looks after the interest of the insurance industry as a whole so as to guide the path for growth since it is also a development authority along with being a regulatory one. As far as its regulatory role is concerned, no insurance company can sell any product without the permission of IRDA. All companies will have to submit reports of their performance to the IRDA in the prescribed form and have to get their accounts audited each year.
Hence for Insurance Companies, IRDAI behaves like the principal of a school whose primary objective is to regulate the school and maintain discipline along with ensuring growth and development of each and every student.