Circular no. IRDA/F&I/CIR/DATA/066/03/2012, dated 2-3-2012

Ref: i. IRDA/F&I/CIR/F&A/008/01/2010, dated 21st January, 2010 on business generated through/payouts made to Bancassurance channel

ii. IRDA/F&I/CIR/DATA/091/06/2010, dated 11th June, 2010 on data submitted under section 31B (2) of Insurance Act, 1938

I. Introduction:

On review of the details furnished by the insurers under the aforesaid circulars, certain discrepancies were observed by the Authority. It was also observed that while some of the insurers have robust IT backed systems/processes in place to ensure compliance with the stipulations as regards limits on various expense heads, in case of others there was a felt need for building up such platforms and ensure that they function at the desired levels of effectiveness and efficiency.

The following directions are therefore being issued in this regard:

II. Control Functions:

Insurers shall confirm the presence of effective internal controls/systems towards compliance with section 40A of the Insurance Act, 1938. The same shall be strengthened with Proper IT backed systems and appropriate internal reporting mechanism. These systems shall, at the minimum, comply with the following:

 i.  Internal controls/systems shall be subject to half yearly internal audit.

 ii.  Reports of the internal auditors shall be placed before the Audit Committee.

iii.  Exception reports, if any, along with corrective steps taken shall be placed before the Board.

Where such systems do not presently exist, insurers shall take appropriate steps to bring about compliance with the requirements of this circular latest by end of March 2012.

III. Certification by the CEO/MD:

A Compliance Certificate duly signed by the Chief Executive Officer/Managing Director (by whatever name called) shall be filed with the Authority along with the details furnished under section 31B(2) of the Insurance Act, 1938 as per the revised format enclosed. This requirement is effective from the financial year ending 31st March, 2012. The format of the Compliance Certificate is placed at Annexure 1.

IV. Modifications to the aforesaid circulars:

The following modifications are being made for compliance in the filing/reporting requirements:

 i.  The details of various payments made to bancassurance channel shall now be made part of the annual filing made under section 31B(2) of the Insurance Act, 1938 as against the half-yearly filing stipulations presently in place.

 ii.  Clause (2) of the circular at (ii) above is amended requiring filing of details of remuneration paid whether by way of commission or otherwise to any person, in cases where such remuneration exceeds Rs. 5 lakh per annum in place of the threshold of Rs. 1 lakh per annum laid down earlier.

This threshold, however, does not apply to details of payments made to Bancassurance channel. These details shall continue to be provided for the entire business generated/payouts made.

iii.  Data shall be submitted in the revised formats placed at Annexure 2 (applicable to life insurance Companies) & Annexure 3 (applicable to general insurance companies), effective from the financial year ending 31st March, 2012.

These modifications are effective from the financial year 2011-12.

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