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On March 20th, 2024, the Insurance Regulatory and Development Authority of India (IRDAI) issued new regulations titled “Insurance Regulatory and Development Authority of India (Rural, Social Sector and Motor Third Party Obligations) Regulations, 2024.” These regulations are aimed at specifying minimum requirements for insurers in rural, social sector, and motor insurance domains. This article provides an in-depth analysis of these regulations and their implications.

Detailed Analysis:

The IRDAI’s latest regulations focus on ensuring insurers fulfill their obligations towards rural, social sector, and motor third-party insurance segments. Under these regulations, insurers are mandated to underwrite a minimum level of business in these sectors to promote financial inclusion and social welfare.

In the Rural Sector, the regulations stipulate minimum coverage thresholds for various types of insurance, including life, general, and health insurance, within gram panchayats. Insurers are required to cover a specified percentage of lives, dwellings, shops, and vehicles in these areas. Additionally, conditions are outlined for insurance policies related to government social security schemes and other recognized schemes.

Similarly, in the Social Sector, insurers are obligated to extend coverage to economically vulnerable or backward classes, informal sector workers, and other specified categories of persons. The regulations emphasize the inclusion of beneficiaries under government social security schemes and other recognized schemes to meet social sector obligations.

Moreover, the regulations address obligations concerning motor third-party insurance business. Insurers are required to maintain a certain market share percentage and increase the number of insured vehicles within specified categories. Renewal of existing vehicles and uninsured vehicles meeting certain criteria are considered towards fulfilling motor third-party obligations.

The regulations also outline implementation mechanisms, including options for fulfilling obligations, submission of returns, and the authority’s power to issue guidelines and directions as necessary for regulatory compliance.

Conclusion:

The issuance of the Insurance Regulatory and Development Authority of India (Rural, Social Sector and Motor Third Party Obligations) Regulations, 2024, underscores the IRDAI’s commitment to enhancing financial inclusion and social welfare through the insurance sector. By imposing specific obligations on insurers and providing implementation guidelines, these regulations aim to address societal needs while ensuring the stability and sustainability of the insurance industry.

Insurers must ensure timely compliance with the prescribed obligations and proactively engage in the implementation process to contribute to the effective realization of the regulations’ objectives. Additionally, stakeholders should anticipate further guidance from the IRDAI and collaborate with regulatory authorities to foster a conducive regulatory environment for the insurance sector’s growth and development.

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INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA

NOTIFICATION

Hyderabad, the 20th March, 2024

Insurance Regulatory and Development Authority of India (Rural, Social Sector and Motor Third Party
Obligations) Regulations, 2024

F. No. IRDAI/Reg/4/198/2024.—In exercise of the powers conferred by Section 114A(2)(id) and (ie) read with Sections 32B, 32C and 32D of the Insurance Act, 1938 and Section 14(2)(p) read with Section 26 of the Insurance Regulatory and Development Authority Act, 1999, the Insurance Regulatory and Development Authority of India, in consultation with the Insurance Advisory Committee, hereby makes the following Regulations, namely-

CHAPTER-I

PRELIMINARY

1. Short Title, Applicability and Commencement

2. These Regulations may be called the Insurance Regulatory and Development Authority of India (Rural, Social Sector and Motor Third Party Obligations) Regulations, 2024.

3. These Regulations shall come into force from 1st April, 2024.

4. These Regulations shall be reviewed once in every three years from the date of notification, unless review or repeal or amendment is warranted earlie

2. Objective

To specify minimum rural and social sector business that the insurers are required to underwrite under section 32B and 32C of the Insurance Act, 1938 and minimum third party motor insurance business that the insurer carrying on general insurance business is required to underwrite under section 32D of the Insurance Act, 1938.

3. Definitions

(1) In these Regulations, unless the context otherwise requires

(a) “Act” means the Insurance Act, 1938 (4 of 1938);

(b) “Authority” means the Insurance Regulatory and Development Authority of India established under the provisions of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999).

(c) “Competent Authority” means:

(i) Chairperson, or

(ii) such Whole-Time Member or such committee of the Whole-Time Members or such Officer(s) of the Authority, as may be determined by the Chairperson;

(d) “Economically Vulnerable or Backward Classes” means persons who live below the poverty line;

(e) “Gram Panchayat” means a rural body constituted by the State Government under various laws for local administration of a village or a group of villages;

(f) “Informal Sector” includes small scale, self-employed workers typically at a low level of organisation and technology, with the primary objective of generating employment and income, with heterogeneous activities like retail trade, transport, repair and maintenance, construction, personal and domestic services and manufacturing, with the work mostly labour intensive, having often unwritten and informal employer-employee relationship;

(g) “Motor Third Party Insurance Business” consists of motor insurance liability only policies as well as liability portion of package policies;

(h) “Other Categories of Persons” includes persons with disability as defined in Rights of Persons with Disabilities Act, 2016 and who may not be gainfully employed; and also includes guardians who need insurance to protect spastic persons or persons with disability;

(i) “Rural Sector” means such areas which are administered under Gram Panchayats;

(j) “Social Sector” includes Unorganised Sector, Informal Sector, Economically Vulnerable or Backward Classes and Other Categories of Persons, residing in both rural and urban areas; and

(k) “Unorganised Sector” shall have the same meaning assigned to it under Unorganised Workers Social Security Act, 2008.

(2)  All words and expressions used herein and not defined herein but defined in the Insurance Act, 1938 (4 of 1938) as amended from time to time, or in the Insurance Regulatory and Development Authority Act, 1999 as amended from time to time or in the Insurance Rules, 1939 or any other Regulations issued there under shall have the meanings respectively assigned to them in those Acts or Rules or Regulations.

CHAPTER II

PART 1

Obligations with respect to Rural and Social Sector

4. Every insurer, shall ensure that it undertakes obligations set out by the Authority during the financial years indicated herein

(A) Rural Sector

(a)  Life Insurance – All life insurers shall collectively insure the following minimum number of lives in a gram panchayat under individual and/ or group insurance policies. The methodology of arriving at the obligations to be achieved by each life insurer shall be as specified by the Competent Authority.

Financial year following notification of Regulations

Minimum number of gram panchayats Minimum percentage of lives to be covered in a gram panchayat
First year 25,000 10%

(b) General Insurance (General Insurers other than stand-alone health insurer(SAHI), Agriculture Insurance Co. Ltd (AIC) and ECGC)

i) All general insurers other than stand-alone health insurers, AIC and ECGC shall collectively insure the following minimum number of a) dwellings and shops under fire insurance; and b) vehicles under motor insurance in a gram panchayat. The methodology of arriving at the obligations to be achieved by each general insurer shall be as specified by the Competent Authority.

ii) Coverage of new vehicles shall not be counted towards Rural Sector obligations for general insurance.

Financial year following notification of Regulations

Minimum number of gram panchayats Minimum percentage of dwellings and shops to be covered in a gram panchayat Minimum percentage of vehicles to be covered under motor insurance in a gram panchayat
First year 25,000 10% 10%

(c) Health Insurance (General Insurers including SAHI other than AIC and ECGC) – All general insurers including SAHI other than AIC and ECGC shall collectively insure the following minimum number of lives under a) health insurance and b) personal accident insurance in a gram panchayat under individual and/ or group insurance policies. The methodology of arriving at the obligations to be achieved by each general insurer, including SAHI shall be as specified by the Competent Authority.

Financial year following notification of Regulations

Minimum number of gram panchayats Minimum percentage of lives to be covered in a gram panchayat under health insurance Minimum percentage of lives to be covered in a gram panchayat under personal accident insurance
First year 25,000 10% 10%

(B) Social Sector

In respect of all Insurers (Life, General and Standalone Health, excluding AIC and ECGC)

Financial Year following notification of Regulations

Minimum percentage of lives to be covered as a proportion of total lives covered
First year 10%

5. Conditions applicable to Rural and Social Sector Obligations

a) The term ‘lives’ referred to in Regulation 4 in respect of all Insurers refers to human lives insured.

b) Insurance business pertaining to Government social security schemes where total/partial premium is paid by the Government, with/without any contribution from the members/beneficiaries covered shall be considered for the rural and social sector obligations. For the avoidance of doubt, it is hereby clarified that schemes promoted by the Central and/or the State Government such as Pradhan Mantri Suraksha Bima Yojana (PMSBY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) shall be considered towards fulfilment of rural and social sector obligations.

c) Insurance policies issued to beneficiaries of PM Kisan Samman Nidhi Yojana, PM Viswakarma Yojana, Pradhan Mantri Jan Arogya Yojana, Pradhan Mantri Awas Yojana, Pradhan Mantri Mudra Yojana, BPL cardholders, MNREGA cardholders, eShram cardholders, DBT beneficiaries, Jan Dhan account holders, Other Government Schemes and any other Scheme/ Beneficiary recognized by the Competent Authority would qualify for Social Sector Obligation.

d) Insurance policies sold by Bima Vahaks shall count towards rural and social sector obligations.

e) The allocation of the gram panchayats, number of lives, dwellings, shops and vehicles amongst the insurers shall be as specified by the Competent Authority.

PART II

Obligations with respect to Motor Third Party Business

6. Manner of arriving at the Obligations

a) Every General Insurer (other than stand-alone health insurers, AIC and ECGC) shall ensure the following with respect to motor third party business:

Financial Year following notification of Regulations

Motor Third Party Insurance Market Share of general insurer in the last financial year Minimum percentage increase in number of Goods Carrying, Passenger Carrying Vehicles and Tractors (Miscellaneous segment) over last financial year separately for each category
First Year Upto 2% 12.5%
2%-5% 10%
5%-10% 7.5%
More than 10% 5%

b) Coverage of new Goods Carrying, Passenger Carrying vehicles and Tractors (Miscellaneous segment) shall not be counted towards Motor TP obligations. Renewal of the existing vehicles and uninsured vehicles that are insured provided the gap in insurance is at least 30 days shall only be reckoned for Motor Third Party Obligations.

c) Every insurer shall underwrite a minimum of 5,000 goods, 5,000 passenger carrying vehicles and 1,000 tractors (Miscellaneous segment) in the first financial year following notification of Regulations.

d) Regulation 6 shall not apply to Stand Alone Health Insurers, Reinsurers including foreign companies engaged in re-insurance business through a branch established in India, Agriculture Insurance Company of India, Export Credit Guarantee Corporation of India.

e) At no instance an insurer carrying on general insurance business shall refuse to underwrite the “liability only” motor policy covering motor third party insurance risk to any prospective policyholder.

CHAPTER III

IMPLEMENTATION AND OTHER PROVISIONS

7. Option to fulfil the obligations

a) In cases where an Insurer commences operations in the second half of the financial year no rural, social sector and motor third party obligations shall be applicable for the said period.

b) An insurer who achieves more than the specified rural, social sector and motor third party obligations shall be suitably rewarded in such manner as may be determined by the Competent Authority.

c) The obligations for second and third year shall be determined by the Competent Authority based on the experience during the first year.

8. Submission of Returns

Every Insurer shall submit a return in the manner specified by the Competent Authority.

9. Powers to issue Circular, Guidelines and Directions from time to time

The Competent Authority may issue circulars, guidelines and directions, if necessary, from time to time, relating to these regulations including, but not limited to, transitory provisions regarding implementation process of these regulations.

10. Repeal and Savings Clause

a) The following Regulations are repealed:

(i) Insurance Regulatory and Development Authority of India (Obligation of Insurer to Rural and Social sector) Regulations, 2015; and

(ii) Insurance Regulatory and Development Authority of India (Obligation of Insurer in Respect of Motor Third Party Insurance Business) Regulations, 2015.

b) Notwithstanding such repeal, anything done or any action taken or purported to have been done or taken under the repealed Regulations, prior to such repeal, shall be valid.

DEBASISH PANDA, Chairperson
[ADVT.-III/4/Exty./847/2023-24]

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