In Q4 FY 2022-23, the insurance sector witnessed a range of regulatory updates being introduced. The updates comprised circulars, notifications, guidelines and other regulations introduced by the Insurance Regulatory and Development Authority of India (IRDAI). For businesses dealing in general or health insurance and life insurance, IRDAI has introduced the concept of expenses of management (EOM) and laid down strict financial limits for expenses which may be incurred by an insurer vis-à-vis the gross premiums collected.
Along with this, IRDAI has clarified operational issues pertaining to the regulatory sandbox and has invited applications under the same. These steps have been taken with the idea of promoting innovation in the insurance sector and encouraging technological solutions on a continuous basis.
- ‘Expenses of management’ shall include all expenses like operating expenses of the insurance business, commission to insurance agents, intermediaries or insurance intermediaries and commission and expenses on reinsurance inward, which are charged to the revenue account.
- Every insurer shall have a board-approved policy which shall specify measures to bring cost-effectiveness and reduction of the expenses of management and the manner of transfer of benefits arising from reduction of expenses to the policyholders by way of reduction in premium.
- Total commission payable to an insurance agent, intermediary or insurance intermediary by insurers under life insurance products and general insurance products, including health insurance, shall not exceed EOM limits under EOM Regulations.
- A committee on regulatory sandbox with representation from industry and academia has been constituted to screen applications, evaluate the test design of the hypothesis and recommend applications for experimentation.
- The insurers can generate FRNs independently for the CBRs who qualify for auto-renewal from 2023-24 onwards. The CBRs, who do not qualify for auto-renewal, shall have to obtain FRNs annually.
- Life insurers shall have at least two actuaries, in addition to the appointed actuary, for pricing and valuation purposes, on or before 31 December 2023.
This report compiles the various regulatory updates