1. Guidelines on Standard Domestic Travel Insurance Product.

Circular No. IRDAI/HLT/REG/CIR/119/05/2021 dated 5th May,2021.

The IRDAI through Circular No. IRDAI/HLT/REG/CIR/119/05/2021 dated 5th May,2021 issued “Guidelines on Standard Domestic Travel Insurance Product.

The Insurance Regulatory and Development Authority of India (IRDAI) has issued guidelines on Bharat Yatra Suraksha, the standard domestic travel insurance product, that will provide coverage for hospitalization expenses, death, permanent complete or partial disablement due to an accident, for travel through taxi, bus, train, ship, and airplane in the country.

The base cover will provide coverage for hospitalization expenses ranging from Rs1 lakh to Rs10 lakh and an accidental death benefit ranging from Rs1 lakh to Rs1 crore. Optional covers include coverage for missed flight connections, loss of checked-in baggage, trip delays beyond three hours, and cancellations.

There will be no co-payment under the standard domestic travel products, but insurers have been allowed to put deductibles.

Co-payment is a cost-sharing requirement where the policyholder will bear a certain percentage of the amount of the admissible claims, while deductibles are the amount that an insured must pay from their own pocket before the insurer pays for the policy coverage.

The policy has restricted room rent, boarding and nursing expenses at up to 2% of the sum insured subject to a maximum of Rs10,000 per day and intensive care unit (ICU) charges have been capped at 4% of the sum insured or a maximum of Rs20,000 per day.

The product will come in five variants depending on the distance of the journey as well as the mode of transportation. Under Plan A, the coverage will be for travel through a taxi or bus within 100 km from the place of origin. While Plan B will offer coverage for travel via taxi or bus distance of more than 100 km, Plan C and D cover air and train travel with no restriction on the journey distance. Plan E covers all the above-mentioned modes of transportation plus it provides coverage for the round trip. Moreover, only Plan E provides cover for up to 30 days period, while other plans are valid for a single journey only.

There shall be no restriction on minimum and maximum age in the policy.

According to IRDAI, the product can be offered on an individual as well as a group basis, but when it comes to the family cover, the sum insured will apply to each family member separately. 

2. Exercise of Employee Stock Options (EOSPs).

Circular No. IRDA/F&A/MISC/CIR/134/05/2021 dated 11th may,2021.

The Authority (IRDAI) through Circular No. IRDA/F&A/MISC/CIR/134/05/2021 dated 11th may,2021 asked all insurers to consider SEBI’s “Exercise of Employee Stock Options (EOSPs)” guidelines while approving remuneration of Whole-time Director, Chief Executive Director and Managing Director of the company.

The Authority instructed all insurers to consider SEBI’s ESPOs Guidelines, while approving the remuneration of Whole-time Director, Chief Executive Director and Managing Director, is also considering the granting and / or vesting of ESOPs. However, in a few cases, it has been observed that the exercise of ESOP by one or more KMPs whether singly or jointly is beyond the threshold limits specified in Section 6A (4) (b) of Insurance Act, 1938. Accordingly, the exercise of such ESOPs results in invocation of the provisions of the said section.

The Authority further instructed all insurers to report ESOPS at the time of grant and where exercise of ESOPs by one or more KMPs, whether singly or jointly is beyond the threshold limit specified in Section 6A(4)(b) of the Insurance Act, 1938, the prior approval of Authority shall be sought before such exercise.

3. IRDAI (Preparation of Financial Statements and Auditor’s Report of Insurance Companies) (First Amendment) Regulations ,2021.

IRDAI/Reg/5/177/2021 dated 12th May,2021.

The Authority has amended IRDAI (Preparation of Financial Statements and Auditor’s Report of Insurance Companies) Regulations, 2002 by inserting and substituting below mentioned provisions.

The following amendments have been made:

  • Schedule B, Part 2 of Part 1, which specifies the recognition of premiums, has been substituted, namely:

“Premium shall be recognized as income over the contract period or the period of risk, whichever is appropriate. Premium received in Advance is the premium where the period of inception of the risk is outside the accounting period and is to be shown under current liabilities. Unallocated premium includes premium deposit and premium which has been received but for which risk has not commenced. It is to be shown under current liabilities.”

  • Schedule B, Part 2A, which specifies the unearned premium reserve, has been inserted, namely:

“A reserve for unearned premium shall be created as the amount representing that part of the premium written which is attributable to and allocated to the succeeding accounting periods. Such Reserves shall continue to be computed as under:

1. Marine Hull: 100 percent of Net Written Premium during the preceding twelve months.

2. Other Segments: 50 percent of Net Written Premium during the preceding twelve months or based on 1/365th method on the unexpired period of the respective policies.”

4. Availability and Renewal of Standard Corona Specific Products.

IRDAI Press Release No. 525/IRDAI/HLT/CK/2020-21 dated 10th May,2021.

The Authority through Press Release dated 10th May,2021 mandated to issue and renew all Corona Kavach and Corona Rakshak Insurance Policies.

The Authority is in receipt of complaints stating that some of the insurance companies are not issuing Corona Kavach and Corona Rakshak Policies. In this regard, it is clarified that all General and Health Insurers are mandated to offer Corona Kavach Policy vide guidelines dated 26.06.2020.

Insurers were also advised to offer renewal of Corona Kavach and Corona Rakshak Policies vide circular dated 13.10.2020.

On 06.05.2021, all insurers, as applicable, were advised to continue offering Corona Kavach and Corona Rakshak Policies and also to renew these policies.

Every advertisement by an insurance agent must be approved by the insurer in writing prior to its issue and it shall be the responsibility of the insurer while granting such approval to ensure that all advertisements that pertain to the company or its products or performance comply with these regulations and are not deceptive or misleading.

5. Indian Insurance Companies (Foreign Investment) Amendment Rules, 2021.

IRDAI Notification No. G.S.R. 337(E) dated 19th May,2021.

The Finance Ministry has notified final rules for foreign investment limit of 74 per cent in the insurance sector, which came into effect on May 19, 2021.

The new arrangement is expected to benefit 23 private life insurers, 21 private non-life insurers and 7 specialized private health insurance companies. Considering the capital required for pandemic induced expansion needs, finalization of rules will be helpful for the insurance sector, officials feel. One of the major proposals is the additional layer of solvency margin for higher limit of foreign investment. It prescribes 50 per cent of net profit in a financial year needs to be retained in the general reserve provided the solvency margin is lower than 1.2 times of the control level of solvency and the payment of dividend on equity shares.

Solvency margin is the excess of value of assets over the value of liabilities. Similarly, solvency ratio refers to the ratio of the amount of Available Solvency Margin to the amount of Required Solvency Margin. At present, IRDA prescribes this ratio at 150 per cent.

Any Indian insurance company having foreign investment, “existing on or before the date of commencement of the Indian Insurance Companies (Foreign Investment) (Amendment) Rules, 2021, shall within one year from such commencement comply with the requirements,” of rules related with management persons, it further stipulates

Total foreign investment here would mean the sum of both direct and indirect foreign investment.

Direct investment by a foreigner will be called Foreign Direct Investment, while investment by an Indian company (which is owned or controlled by foreigners) into another Indian entity is considered as Indirect Foreign Investment.

Foreign investment up to 26 per cent was permitted in the insurance sector in 2000. Later, in 2015, this limit was raised to 49 per cent.

According to a State Bank of India analysis, the pandemic has shown that there is need for further penetration of insurance in India and for that capital infusion is required. The report, using March 2019 data, said average FDI investments in the 23 private life insurers is only 35.5 per cent, 30 per cent in 21 non-life private insurers and 31.7 per cent in 7 specialized health insurance companies.

6. Guidelines on Insurance claims of victims of Cyclone Tauktae and Cyclone Yaas in the calamity affected areas.

IRDAI Circular No. IRDAI/NL/CIR/MISC/153/05/2021 dated 29th May,2021.

The Authority has instructed General Insurers who have issued insurance policies to the people living in those areas affected by cyclone Tauktae and cyclone Yaas. There is an urgent need for the insurance industry to take immediate steps to mitigate the hardships of the affected insured population by ensuring immediate registration and settlement of eligible claims.

The General Insurers are advised to initiate immediate steps for quick registration and disposal of claims on the following lines: –

a. Please nominate a senior officer at the company level who would act as a Nodal Officer for the affected states. The Nodal Officer would be coordinating the receipt, processing, and settlement of all eligible claims. The Nodal officer should contact the designated officers of the State Govt. immediately and be in regular contact thereafter.

b. It needs to be ensured that all claims are surveyed immediately and claim payments/on account payments are disbursed at the earliest and in any case not exceeding the stipulated time-line.

c. Adequate number of surveyors may be engaged immediately as required.

d. You are also requested to launch extensive awareness campaign duly highlighting the measures taken by you.

e. In view of Corona Virus (Covid-19) pandemic, the Insurers shall encourage the policyholders to use electronic communication wherever possible for correspondence while intimating the claim and filing all the relevant documents. Efforts shall be made to ensure that digital processes are resorted to the extent possible for assessment of claims.

The IRDAI has requested insurers to take urgent steps for expeditious settlement of claims in the cyclone hit areas and submit details of the same as advised above.

7. Order in the matter of M/s. Shriram General Insurance Company Limited.

IRDAI Order No. IRDA/ENF/ORD/ONS/123/05/2021 dated 6th May,2021.

The Authority had conducted an onsite inspection of the insurer during 02.12.2019 to 06.12.2019. The inspection report, inter alia, revealed certain violations of provisions of the Insurance Act, 1938, IRDAI’s Regulations, Guidelines and various circulars issued there under, whose details are given as follows;

Charge No.1

Violation of:

Decision: The Authority has not pressed the charge and issued direction for strictly compliance with extant Regulations, Guidelines and Circulars.

Charge No.2

Violation of:

  • Para 3A.1 of Circular No. IRDA/F&A/GDL/CG/100/05/2016 dated 18th May 2016
  • F&U Circular No. IRDAI/NL/GDL/F&U/030/02/2016 dated 18th February 2016.

Decision: The Authority has imposed Penalty of Rs.6,00,000 and issued direction.

8. Order in the matter of M/s Universal Sompo General Insurance Company Ltd.

IRDA Order No. IRDA/NL/ORD/MISC/124/05/2021 dated 7th May,2021.

The Authority had issued Show Cause Notice dated 23.09.2020. On examination of data submitted by the insurer in accordance with IRDAI (Obligation of Insurer in respect of Motor Third Party Insurance Business) Regulations,2015 it was observed that the insurer did not comply with Motor TP Obligations for FY 2018-19 & FY 2019-20.

Charge No.1

Violation of:

Non-Compliance with minimum obligations under Motor Third Party business as specified in IRDAI (Obligation of Insurer in respect of Motor Third Party Insurance Business) Regulations, 2015 for the financial years 2018-19 and 2019-20.

Decision: i) For FY 2018-19 – Penalty of Rs. 15 Lakh only and Advisory issued.

ii) For FY 2019-20 – Penalty of Rs. 10 Lakh only and Advisory issued.

9. Order in the matter of M/s SBI General Insurance Company Limited

IRDA Order No. IRDA/NL/ORD/MISC/122/05/2021 dated 10th May,2021.

The Authority had issued Show Cause Notice dated 23.09.2020. On examination of data submitted by the insurer in accordance with IRDAI (Obligation of Insurer in respect of Motor Third Party Insurance Business) Regulations,2015 it was observed that the insurer did not comply with Motor TP Obligations for FY 2018-19.

Charge No.1

Violation of:

Non-Compliance with minimum obligations under Motor Third Party business as specified in IRDAI (Obligation of Insurer in respect of Motor Third Party Insurance Business) Regulations, 2015 for the financial years 2018-19.

Decision: i) For FY 2018-19 – Penalty of Rs. 30 Lakh only and Advisory.

10. Order in the matter of M/s Policybazaar Insurance web aggregator Pvt. Ltd.

IRDAI Order No. IRDA/INT/MISC/ORD/140/05/2021 dated 20th May,2021.

As a part of regulatory process, the Authority noticed that Policybazar has sent an SMS to their customers that “life insurance prices are set to increase from 1st April save upto Rs. 1.65 Lakhs by buying Term Plan today.” The Authority has sought explanation from Policybazar on such SMS and after receipt of reply below mentioned decision has taken;

Charge 1:

Violation of Clause a(i) & a(ii) of Form V of Schedule VIII read with Regulations 32 and Clause 10(b)(iv) of Form T of Schedule VI read with Regulation 29 of Web Aggregator Regulations,2017.

Decision: The SMS forwarded by Policybazar have created unnecessary panic and was completely avoidable. The SMS forwarded to its customers may create a panic situation and hence Policybazar cautioned by the Authority to be more circumspect when sending such types of communications.

Charge 2:

Violation of Regulation 11 of IRDA (Insurance Advertisements and Disclosure) Regulations,2000.

Decision: Since the web aggregator has withdrawn immediately SMS, the Authority has not pressed the charge and same has been dropped.

Charge 3:

Violation of Regulation 9 of IRDA (Insurance Advertisements and Disclosure) Regulations,2000.

Decision: The Policybazar has not disclosed its name in the SMS send to its customers. The Authority has imposed penalty of Rs. 24.00 Lakhs.

DISCLAIMER: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, author assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws and take appropriate advice of consultants. The user of the information agrees that the information is not professional advice and is subject to change without notice. Author assume no responsibility for the consequences of the use of such information.

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