The Insurance Regulatory and Development Authority of India (IRDAI) has announced three new regulations that are anticipated to have major economic implications on market participants, including insurers and intermediaries. The three new rules are as follows:
- IRDAI (Expenses of Management of Insurers transacting General or Health Insurance business) Regulations, 2023
- Insurance Regulatory and Development Authority of India (Payment of Commission) Regulations, 2023
- IRDAI (Expenses of Management of Insurers transacting life insurance business) Regulations, 2023
In the process, IRDAI replaced the previous regime of ‘product-wise capping’ of commission payable to intermediaries.
- This is subject to insurers adhering to the IRDAI’s overall ‘expenses of management’ (EOM) limits.
IRDAI (Expenses of Management of Insurers transacting General or Health Insurance business) Regulations, 2023
Objective: To enable and provide flexibility to insurers in managing their expenses within the overall limits based on their gross written premium and optimally utilizing their resources for boosting policyholder benefits.
- These regulations will take effect on April 1, 2023, and will be in force for 3 years.
The regulations will be applicable to insurers operating business in either general insurance or health insurance.
Key Points:
i.According to this regulation, standalone health insurers are permitted to incur expenses of management (EOM) up to 35% of gross written premium in India during a financial year, whereas general insurers are permitted to incur EOM up to 30% of gross written premium in India for a financial year.
ii.The new regime has removed the previous segmental product-based calculation of allowed limits by imposing a single limit based on the total gross written premium of the general and health insurers.
iii.It allows for more restrictions on management expenses, incentivizing insurers to focus on increasing insurance penetration.
Insurance Regulatory and Development Authority of India (Payment of Commission) Regulations, 2023
Objective: To provide insurers the flexibility to control their expenses based on their growth objectives and the constantly shifting insurance needs in order to increase insurance penetration.
- These regulations will take effect on April 1, 2023.
These regulations must be reviewed every three years from the date of notification, unless a review, repeal, or amendment is warranted earlier.
Key Points:
i.In order to give insurers more flexibility in managing their expenses, the IRDAI has requested that insurance companies, both life and non-life, impose an overall cap on commission payments to agents, brokers, and other intermediaries.
ii.It has replaced the earlier cap on different types of commission payments to intermediaries with an overall board-approved cap that should be within the permissible expenses.
iii.Earlier, IRDAI permitted insurance companies to pay up to 22.5% of the total premium on two-wheelers and 19.5% of the total premium on other vehicles such as cars and sport utility vehicles (SUVs).
IRDAI (Expenses of Management of Insurers transacting life insurance business) Regulations, 2023
Objective: To enable and provide flexibility to insurers in managing their expenses within the overall limits based on their gross written premium and optimally utilizing their resources for boosting policyholder benefits.
- These regulations will take effect on April 1, 2023, and will be in force for 3 years.
The regulations would apply to insurers operating life insurance business in India.
Recent Related News:
Recently, the Insurance Regulatory and Development Authority of India (IRDAI) has permitted general insurance companies in India to launch telematics-based motor insurance covers, such as pay as you drive (PAYD) and pay how you drive (PHYD), allowing vehicle owners to decide how much to pay on their car insurance.
About Insurance Regulatory and Development Authority of India (IRDAI):
Chairperson – Debasish Panda
Headquarters – Hyderabad, Telangana
Establishment – 1999 (Incorporated on 1st April 2000)
