Regstreet Law Advisors

Miscellaneous IRDA

1. IRDA issues Investment Regulations and Staff Regulations

IRDA issued IRDA (Investment) Regulations, 2016 where the insurance regulator has tightened equity investment norms for insurers.

Insurance companies can invest in assets such as unencumbered immoveable property in India, equity shares of any listed company where at least 10% dividend has been paid for at least two consecutive years under the approved investment category etc. Under ULIPs, companies can invest 75% in approved securities and 25% in other than approved securities.

Separately, IRDA has notified IRDA Staff (Officers and Other Employees) Regulations, 2016 to comprehensively define the terms and conditions of service of officers and employees of IRDA.

2. Key takeaways from IRDAI 96th Board Meet

On June 19, 2017, the Insurance Regulatory and Development Authority of India (“IRDAI”) published the minutes of its 96th Board Meeting held on March 03, 2017. Amongst number of items that had been deliberated in the said board meeting, the major decisions include the reconstitution of the Insurance Advisory Committee which has become effective from May 25, 2017, approval to insurers to invest in units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) as a part of eligible Instruments subject to the prudential norms prescribed therein, approval to IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017 with a modification that the review report shall be submitted to the board of the insurer by the Outsourcing Committee.

3. IRDAI notifies Protection of Policyholders’ Interest Regulations

On June 22, 2017, the Insurance Regulatory and Development Authority of India (“IRDA”) has notified the IRDA (Protection of Policyholder’ Interests) Regulations, 2017. One of the significant changes brought includes amendment in Regulation 14 which states that an insurer is now obliged to settle the claim within 30 days from the date of receipt of last necessary document. In case of delay in the payment of a claim, the insurer shall now be liable to pay interest from the date of receipt of last necessary document to the date of payment of claim at a rate 2 per cent above the bank rate.

Also, the new regulations state certain terms and conditions that need to be stated explicitly in the insurance policy. For instance, as per Regulation 9, in life insurance policy an insurer is required to state things like the type of policy, features, information on premium payment, riders, exclusions, policy conditions for surrender or discontinuance, revival of the policy and the grievance redressal mechanism. IRDA has given the insurers time till December 31, 2017to make changes in their policy documents.

Further, Regulation 6(4) of the new regulations states that the distributors will provide all material information regarding the policy, and that the insurers will have to obtain a certificate from the policyholder certifying that the proposal form and policy documents have been fully explained and that the policyholder understands the policy.

4. Guidelines for Online Sale of Insurance

IRDAI vide circular dated March 09, 2017 has issued Guidelines on insurance e-commerce. These permit registered insurers and other persons recognized by IRDAI to set up Insurance Self-Network Platforms (“ISNP”) for selling insurance products on digital platforms. Customers can transact through the authorized platforms i.e. websites and mobile apps through their email-ids and registered mobile numbers, and the insurance policies would be credited to their e-insurance accounts. ISNPs are required to put in place measures to safeguard the privacy of data maintained and set up a grievance redressal mechanism. This move would help reduce cost, achieve wider reach and improve the efficiency of transacting in insurance business.

5. IRDA Introduces Stewardship Code for Insurance Companies

Considering the fiduciary role played by insurance companies and the increase in investments in insurance sector, IRDAI has introduced Exposure Draft stipulating Stewardship Code for Insurers (“Code”) in India. Comments and suggestions on the draft Stewardship Code are open till February 15, 2017. Pursuant to the Code, the insurers will have to formulate the policies adopting principles inter-alia:

  • It shall lay down responsibilities of insurer and action plan for stewardship. In case of outsourcing of responsibility, the policy shall lay down the extent of such responsibility and the insurer shall lay down that the mechanisms to ensure that the overall stewardship responsibilities are carried out seamlessly.
  • It shall lay down policy for identifying and managing conflicts of interest with the aim of taking all reasonable steps to put the interests of their client or beneficiary first. The policy shall address how matters are handled when the interests of clients or beneficiaries diverge from each other.
  • Insurers shall have mechanisms for regular monitoring of their investee companies in respect of their performance, leadership effectiveness, succession planning, corporate governance, reporting and other parameters they consider important. If insurers wish to be actively involved with the investee companies (become an ‘insider’), the insurer shall indicate the same in its stewardship statement.
  • It shall lay down the circumstances in which they will actively intervene and regularly assess the outcomes of doing so. Further, the Code also stipulates the conditions in which the insurer may want to intervene in the investee companies viz. concerns about the investee company’s strategy, performance, governance, remuneration or approach to risks etc.

It shall lay down a voting policy in terms of voting in the Board decisions of the investee companies. The voting decisions taken in respect of all the investee companies should also be disclosed publicly along with the rationale for such decision

1. Draft IRDAI (Outsourcing Of Activities By Indian Insurers) Regulations, 2017

On January 25, 2017, the Insurance Regulatory and Development Authority of India (IRDAI) issued a Revised Draft of the Proposed IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017 and has invited the comments/ suggestions by February 07, 2017. The Regulations will also be applicable to all existing Outsourcing arrangements. Insurers will have 180 days to make the current arrangements compliant with these Regulations.

The Regulations primarily aim at ensuring that the insurers follow prudent practices, protect the interest of the policyholders, ensure sound and responsive management practices and perform adequate due diligence with regard to the outsourcing activities undertaken by them. Further, major focus has been placed on issues like Board of Directors’ responsibilities, cost benefit analysis and maintenance of proper records by the Insurers.

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