In a significant regulatory revamp, Insurance Regulatory and Development Authority (IRDAI) has replaced 34 existing regulations with six regulations and introduced two new regulations.
On March 19, the IRDAI Board approved the eight principle-based consolidated regulations to enhance clarity and coherence in the regulatory landscape.
The regulations encompass pivotal domains such as safeguarding of policyholders’ interests, rural and social sector responsibilities, electronic insurance marketplace (Bima Sugam), insurance products and operation of foreign reinsurance branches, as well as aspects of registration, actuarial, finance, investment and corporate governance.
For the first time, governance aspects under the existing guidelines have been notified in the form of regulations. This highlights the importance of governance in the functioning of an insurance company. Also, the IRDAI has now de-tariffed (de-notified) the policy wordings, which means general insurers are at liberty to come out with new wordings suitable to the customers and requirement of the market.
RURAL OBLIGATIONS
As regards rural, social sector and motor third party obligations, the erstwhile regulations pertaining to minimum business obligations have been consolidated.
Compliance and measurement of these statutory obligations have been revised where the unit of measurement under the rural obligations will now be gram panchayat.
The scope of the social sector has been extended to cover cardholders and beneficiaries under various schemes. Under the Motor Third Party Obligations, unit of measurement will be renewal of insurance coverage to goods carrying vehicles, passenger carrying vehicles and tractors.
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The most talked about regulations were related to Bima Sugam and the ones on product regulations (primarily changes in surrender value norms). The granular changes made to the surrender value regulations are however yet to be disclosed.
BIMA SUGAM
Bima Sugam will be an insurance electronic marketplace that aims to achieve universalisation and democratisation of insurance to empower and safeguard policyholders’ interests so as to achieve the vision of “Insurance for all by 2047”.
This marketplace would serve as a one stop solution for all insurance stakeholders, including customers, insurers, intermediaries, and agents, thereby, promoting transparency, efficiency, and collaboration across the entire insurance value chain.
On Bima Sugam, Sumit Bohra - President of the Insurance Brokers’ Association of India (IBAI), said: “Notification of Bima Sugam will accelerate the retail platform which was long overdue, this will help the customer with better choice. Although customers would definitely need an advisor to select the right product since products like health and Life are a longer term product and needs to be selected carefully looking into the future”.
SURRENDER VALUE
The IRDAI (Insurance Products) Regulations, 2024 has merged six regulations into a unified framework aimed at enabling insurers to swiftly respond to evolving market demands, enhancing the ease of conducting business, and boosting insurance penetration.
These regulations promote good governance in product design and pricing, including strengthening of the principles governing guaranteed surrender value and special surrender value along with disclosures thereof, IRDAI has said.
It also ensures that the insurers adopt sound management practices for effective oversight and due diligence.
Additionally, the regulations encourage the development of innovative insurance products that cater to the requirements of different segments/strata of the society and provide wider choices while also considering the interests of policyholders and maintaining regulatory compliance, thereby, fostering a competitive marketplace.
CORPORATE GOVERNANCE
The IRDAI (Corporate Governance for Insurers) Regulations, 2024 aims to establish a robust governance framework for insurers, defining the roles and responsibilities of the board and management.
This is for the first time that the governance aspects under the existing guidelines are notified in the form of regulations, which highlights the importance of governance in the functioning of an insurance company.
It also prioritises meeting the expectations of all stakeholders, especially policyholders, while ensuring the adoption of sound and prudent governance principles and practices. By emphasising transparency, accountability, and ethical conduct, these regulations aim to enhance trust and confidence among stakeholders, IRDAI has said.
CAPITAL STRUCTURE
The IRDAI (Registration, Capital Structure, Transfer of Shares & Amalgamation Insurers) Regulations, 2024 has streamlined seven regulations into a single comprehensive framework.
It aims to foster the growth of the insurance sector by simplifying various processes, including registration of insurers, transfer of shareholding, capital structure, amalgamation of insurers, and listing of shares on stock exchanges.
By streamlining these procedures, the regulations seek to enhance the ease of doing business within the insurance industry, facilitating smoother operations and promoting overall sectoral growth.
POLICYHOLDERS’ INTERESTS
The IRDAI (Protection of Policyholders’ Interests and Allied Matters of Insurers) Regulations, 2024 consolidate eight regulations into a unified structure, focusing on several key objectives aimed at ensuring fair treatment of prospects during solicitation and sale of insurance policies.
This regulation seeks to protect the interests of policyholders throughout their engagement with insurers and distribution channels. It emphasises the adoption of standard procedures and best practices by insurers and distribution channels to fulfill their obligations towards policyholders, including grievance redressal and policyholder-centric governance.
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Additionally, the regulations aim to promote prudent practices in risk management related to outsourcing activities by insurers. Furthermore, the regulation ensure that the opening or closing of places of business by insurers, both domestically and internationally, is conducted in a manner that prioritizes the interests of policyholders.