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With the insurance Bill being approved by both Houses of Parliament, the sector is preparing for a host of new regulations by the Insurance Regulatory and Development Authority of India (Irdai). It has, however, sought more time for adoption of the norms being rolled out.
Rohan Sachdev, partner & India insurance leader, EY, said the Bill empowered Irdai to define the limits on management expenses, commission limits for agents, the qualifications of agents and surveyors and the extent of the motor third-party liability, among others. “As the regulator comes up with new guidelines on these aspects, insurance companies will have to respond quickly through appropriate changes to their operating model,” he said.
Regulatory officials say norms on expense management and the remuneration of agents will be among the first to be rolled out. This will be followed by claims management under Section 45 and norms relating to penalties. The final guidelines on appointment of agents were brought out on Tuesday.
Rajesh Sud, chief executive and managing director, Max Life Insurance, said the Bill, by mandating Irdai to prescribe regulations on a number of insurance-related subjects, had equipped it to go for a course correction. “We are hopeful, that to nurture the sector and ready it for a growth trajectory, Irdai will follow a phased regulatory agenda, allowing stability and growth, deepening access and eventually, strengthening the structure of the sector.”
At recent interactions with regulatory officials, executives from the sector have said while new norms conforming to the Bill are inevitable, companies need adequate time to adopt those. In the past, there have been instances when insurers were given only a few weeks to implement norms.
Irdai plans to announce about 40 regulations through the next few months. Apart from changes in the foreign direct investment structure, the Act will also effect several other changes. An ordinance in this regard had given more freedom to insurance companies to appoint agents and put corporate agents into the intermediary space.
“Expense management and agent remuneration directly affect the books of companies. Therefore, it is only fair that we be given at least six months to shift to a new set of regulations; we have expressed this directly and through the council,” said the chief executive of a private life insurance company.
FRESH REGULATIONS ON THE ANVIL
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Expense management: Further caps on expenses of insurers, to be decided by the regulator
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Agent appointment and remuneration: Norms to be decided afresh by regulator; additional penalties for mis-selling of products. Final guidelines on appointment of agents have been brought out
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Insurance intermediaries: Banks will be considered as insurance intermediaries and will be liable for the policies sold
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Rejection of claims: Revised Section 45 says no claim can be repudiated after three years of the policy being in force, even if a fraud is detected
- Imposition of penalties and aggrieved parties: Irdai will have the right to revise insurance penalties based on the violations and is expected to bring out norms on the same
