The Insurance Regulatory and Development Authority of India recently replaced the 2009 corporate governance guidelines with the Guidelines for Corporate Governance for Insurers in India. The 2016 guidelines seek to incorporate relevant changes introduced by the Companies Act and consider other relevant changes in the insurance sector in order to provide an appropriate corporate governance regime for Indian insurers.
The Insurance Regulatory and Development Authority of India (Registration of Indian Insurance Companies) (Seventh Amendment) Regulations 2016 have introduced a number of key changes to the existing regulations. These key amendments have provided welcome clarifications and will help to encourage investment in the insurance sector and promote growth and expansion therein.
Until recently, the 2006 Insurance Regulatory and Development Authority of India (IRDAI) Guidelines on File and Use Requirements for General Insurance Products governed the procedures and processes for introducing, modifying and withdrawing general insurance products. The procedures and processes have now significantly changed with the introduction of the IRDAI's revised guidelines, which will come into force on April 1 2016.
The Insurance Regulatory and Development Authority (IRDAI) recently released new draft regulations clarifying that commission and remuneration paid to insurance agents and insurance intermediaries will continue to be regulated and subject to the limits specified by the IRDAI. While some stakeholders view the proposed payment structure as more liberal, others believe that there is scope for further liberalisation.
The insurance sector has witnessed sweeping changes to its regulatory regime since the beginning of 2015. The most recent additions are the guidelines on the term 'Indian owned and controlled' issued by the Insurance Regulatory and Development Authority. While the guidelines shed some light on certain grey areas surrounding the recent regulatory changes in the insurance sector, further regulatory clarity is needed.
The Insurance Regulatory and Development Authority recently released draft regulations on the issuance of other forms of capital by insurers. While these draft regulations are seen as progressive, they contain certain inherent restrictions and limitations. As such, if implemented in their present form, they may run contrary to the recent amendments to the Insurance Act, which aim to encourage and facilitate increased investment in the insurance sector.
The Insurance Regulatory Development Authority of India recently issued rules and guidelines for insurers wishing to establish insurance businesses in special economic zones. However, the way in which the guidelines and rules will be implemented, and the enthusiasm with which domestic and global insurance industry players will receive this new means of carrying out insurance business, remain to be seen.
The insurance regulatory regime has experienced sweeping changes in recent months, but certain aspects are still unclear, including how foreign investment in Indian promoters will be calculated. As such, the insurance industry is eagerly awaiting further clarifications and amendments in order to finalise investment plans and determine how the recent reforms will be applied.
In order to implement the Insurance Laws (Amendment) Ordinance 2014, the Ministry of Finance has ratified the Insurance Companies (Foreign Investment) Rules 2015, which provide insurers and insurance intermediaries with much-needed clarity regarding increases in foreign investment. However, further clarifications and amendments are needed and, until then, it may be difficult to implement the rules and recent press note.
In a recent National Consumer Disputes Redressal Commission case, the insured informed his insurer that his vehicle had been stolen three months after the theft. The insurer repudiated the claim on the grounds that the significant delay in notification was a violation of the insured's policy. The national commission ruled that any delay in notifying the police or an insurer after a vehicle has been stolen is fatal to a claim.
The long-awaited increase in permitted foreign holdings in an Indian insurance company from 26% to 49% is now law. However, rather than becoming law through the usual legislative process, the reform became law through an unusual and temporary device: an ordinance. This places an unwelcome question mark over the resilience of this otherwise welcome reform.
The Allahabad High Court has issued perhaps the sternest order ever issued against an insurer. It directed the insurance industry regulator to examine every policy issued by SBI Life Insurance Company Limited and, if any policy was issued in breach of the file and use procedure and regulations, to discontinue all of SBI Life's policies if appropriate.
In the 2014 Budget Speech, the finance minister stated that foreign direct investment in the insurance sector will be raised from 26% to 49% and that the increase will be coupled with "full Indian management and control", meaning that overseas investors will not have significant management rights or controls. The proposal will come into effect once both houses of Parliament pass the Insurance Bill.
The Insurance Regulatory and Development Authority (IRDA) has drafted regulations that permit IRDA-licensed insurance marketing firms to distribute insurance products. If the regulations are finalised in their present form, apart from establishing a new type of distribution channel, the proposed remuneration structure is likely to have far-reaching implications.
The Department of Industrial Policy and Promotion recently issued a press release clarifying that the 26% limit on foreign investment would apply to insurance companies, insurance brokers, third-party administrators, surveyors and loss assessors. While the press release made the position clear with respect to the insurance intermediaries named therein, it has not clarified the position in terms of other insurance intermediaries.
The Reserve Bank of India recently issued draft guidelines that (once finalised) would permit 'scheduled banks' to undertake insurance business departmentally, subject to the requirements specified in the guidelines. Among other things, the draft guidelines specify that insurance broking services can be offered only in accordance with a bank's comprehensive policy approved by its board of directors.
While the government continues to make assurances that the 26% foreign investment limit in the insurance industry will be lifted, a modest change has recently been made to reinsurance limits. The new regulations introduce a relaxation for reinsurance purchased outside India from 10% to 20%, although the precise level will depend on the credit rating of the reinsurer concerned.
The Insurance Regulatory and Development Authority recently issued a circular directed at loss adjusters, or 'surveyors' as they are known in the Indian market, reiterating their duties and responsibilities. The circular refers to eight particular provisions that require "immediate attention and necessary action from all existing and new corporate [surveyors]".
New draft regulations issued by the Insurance Regulatory and Development Authority propose several important changes that, if implemented, could widely affect the entities presently licensed as web aggregators. While a few of the changes have been positively received, the draft regulations have largely been viewed as imposing greater restrictions on a segment of the industry that was already operating with limited functionality.
The insurance industry is poised for two significant amendments that, if brought into force, are likely to change the manner in which it operates. A proposed increase in foreign investment limits should draw in foreign investors and has the potential to boost the Indian insurance industry, while new bancassurance norms will revolutionise distribution structures on both a theoretical and practical level.