The government on December 15, 2022 notified the six insurance regulations decided by the insurance regulator at its Board meeting last month, thus paving the way for the insurers to implement them immediately.
The Insurance Regulatory and Development Authority of India (Irdai ) had at its Board meeting on November 25, 2022 come out with these six rules covering a gamut of aspects.
According to the insurance industry experts, the pro-active steps by the government clearly shows the priority it gives to the insurance sector. Typically, it takes around two months to notify any Board decision of the Irdai.
Says Naval Goel, founder and CEO, PolicyX.com: “It is expected that the government will now deal with the proposed amendments in the two insurance acts – Insurance Act, 1938 and IRDA Act, 1999 for revamping the insurance sector.”
Here are the decisions that have been made into rules by the government:
Tie-Up Limits Increase For Intermediaries: In a move to give the policyholders wider access to insurance via various insurance channels, and facilitate the reach of insurance to the last mile, the maximum number of tie-ups for corporate agents and insurance marketing firms have been increased. While previously, corporate agents and insurance marketing firms could tie up with three and two insurance firms, respectively, in areas of life, general, and health for distribution of products, now they can tie up with nine and six insurers, respectively. The insurance marketing firms’ area of operation have also been expanded to cover the entire state in which they are registered.
Regulatory Sandbox: The regulatory sandbox is a framework that provides a testing space to the companies to allow them to test their innovative product, and technologies in a controlled manner. This promotes innovation and technological solutions in the industry. There have been certain amendments in the Regulatory Sandbox Regulations to allow the insurers and/or intermediaries to do experimentation on an ongoing basis by increasing the experimentation period from six months up to 36 months, and moving from the existing batch-wise clearances to clearances on a continuous basis. As part of the amendments, there has also been an added provision for review of rejected applications under sandbox.
Other Forms Of Capital: Prior approval from the Irdai is required to facilitate ease of raising other forms of capital, such as subordinated debt and/or preference shares. The amendments have increased the limit for raising such capital. This would enable the companies to raise the capital in a timely manner.
Appointed Actuary: An actuary plays one of the most critical roles in issuing an insurance policy. An actuary deploys their knowledge of advanced analytical and statistical skills, and uses different financial and mathematical models to determine the risks associated with each insurance proposal.
In a recent regulation, the Irdai reviewed the rules governing the appointment of insurance actuaries. According to the draft Irdai guidelines, an actuary must have access to all the necessary information
and documents in possession of the insurer for the effective execution of the functions and duties of the appointed actuary. It stated that the actuary should seek any information for Regulation 7(A) of the rules from any employee of the insurer.
Solvency Norms: With an aim to facilitate the insurers to efficiently utilise their capital and resources, as well as increase the insurance penetration in crop insurance, the period for considering state/central government premium dues for calculation of solvency position has been increased from 180 days to 365 days. The solvency factors of crop insurance have also been reduced from 0.70 to 0.50.
Registration Of Insurance Companies: The amendment related to registration of insurance companies are aimed at promoting ‘ease of doing business’, and simplifying the process of setting up an insurance company in India.
