Effectively, the insurers can implement these six rules immediately after they have been notified by the government.
The government has notified six significant decisions of the insurance regulator IRDAI, which were decided by its board on November 25.
Effectively, the insurers can implement these six rules immediately after they have been notified by the government.
The speed of the notifications shows the government’s priority on the issue of penetration in the insurance sector. It is expected that the government will deal with the proposed amendments in the two insurance acts-Insurance Act,1938 and IRDA Act, 1999 for overhauling the insurance sector, which were put up for the public comments early this week, in a similar way, insurance experts said.
The following decisions have been made into rules by the government on Thursday.
Increase in tie-up limits for intermediaries: In order to enable the policyholders/prospects to have wider choice and access to insurance through various distribution channels and facilitate the reach of insurance to the last mile, the maximum number of tie ups for Corporate Agents (CA) and Insurance Marketing Firms (IMF) have been increased. Now, a CA can tie up with 9 insurers (earlier 3 insurers) and IMF can tie up with 6 insurers (earlier 2 insurers) in each line of business of life, general and health for distribution of their insurance products. The area of operation of the IMF has also been expanded to cover the entire state in which they are registered.
Regulatory sandbox: The Regulatory sandbox is a framework which provides a testing environment to the companies to enable them to test their innovative products, technologies, etc., in a controlled regulatory setting. It promotes innovation and technological solutions in the industry.
Certain amendments were also carried out in the Regulatory Sandbox Regulations to allow the insurers/intermediaries to do experimentation on an ongoing basis by increasing the experimentation period from ‘6 months’ to ‘upto 36 months’ and moving from the existing batch-wise (cohort approach) clearances/approvals to clearances/approvals on a continuous basis.
A provision for review of rejected applications under sandbox has also been introduced as a part of amendments.
Other forms of capital: In order to facilitate ease of raising other forms of capital viz., subordinated debt and/or preference shares, the requirement of prior approval from IRDAI is dispensed with. The amendments have also enhanced the limits for raising such capital (threshold limits increased from 25% to 50% of paid up capital & premium, subject to 50% of net worth of the company). This will enable companies to raise the required capital in a timely manner. Amendments have been introduced for Board’s Oversight in raising such capital.
Appointed Actuary: Appointed Actuaries (AA) play a pivotal role in the operations of an insurer. To ensure sufficient supply of Actuary professionals in the industry, the experience and qualification requirements have been made flexible.
Maintenance of solvency by the insurers is a critical aspect of the health of an insurer and AA plays a significant role in maintaining the solvency levels.
The responsibility of AA has been enhanced by introducing provisions for identification, monitoring, reporting and recommending actions to be taken for the risks affecting the solvency position of the company. Obligations have also been placed on insurers to ensure that the AA can discharge his responsibilities appropriately.
Solvency norms: With an objective of facilitating the insurers to efficiently utilize their capital and resources and to increase insurance penetration in crop Insurance, the period for considering State/Central Government premium dues for calculation of solvency position has been increased from 180 days to 365 days.
The solvency factors related to crop insurance are also reduced to 0.50 from 0.70 which will release the capital requirements for insurers by around Rs. 1460 crore.