INSURANCE REGULATORY UPDATES –MAY, 2021

The IRDAI and Insurance Law updates provides synopsis of the introduction, amendments and changes brought by the Government the previous month ( April 2021) is being published in this bulletin.

Sr.
No.
Particulars Page No.
1. IRDAI through Circular No. IRDAI/ACT/CIR/MISC/070/04/2021 dated 1st April,2021 has instructed the insurers to submit Technical Note on Motor Insurance. 3
2. IRDAI through Circular No. IRDAI/ACT/CIR/MISC/069/04/2021 dated 1st April,2021 has instructed the insurers to submit Technical Note on Health Insurance. 4
3. IRDAI through Circular No. IRDAI/F&I/CIR/INV074/2021 dated 8th April,2021 on Investment in Alternative Investment Fund(AIFs). 5
4. IRDAI has through Notification dated 7th April,2021 amended IRDAI( Regulatory Sandbox) Regulations,2019. 6
5. IRDAI through Press Release Ref. No.: IRDAI/Reg./02/174/2021 dated 12th April 2021 issued IRDAI( Insurance Advertisements and Disclosure) Regulations,2021. 7
6. IRDAI through Circular No. IRDAI/HLT/MISC/CIR/99/04/2021 dated 22nd April 2021 instructed all insurers on Facilitation by insurers for Cashless Services at Network Hospitals. 8
7. IRDAI through Circular No. IRDAI/F&A/CIR/INV/098/04/2021 dated 22nd April,2021 allowed insurance companies to invest in Debt Securities of InvIts and REITs. 9
8. IRDAI through Circular No. IRDAI/HLT/MISC/CIR/102/04/2021 dated 23rd April,2021 communicated with all insurers on Settlement of Health Insurance Claims. 10
9. IRDAI has through Press Release No. IRDAI/Reg/04/176/2021 dated 26th April,2021 has issued IRDAI( Manner of Assessment of Compensation to Shareholders or Members on Amalgamation) Regulations,2021. 11
10. IRDAI through Circular No. IRDAI/HLT/MISC/CIR/113/04/2021 dated 29th April,2021 issued Norms on Settlement of COVID-19 Health Insurance Claims. 12
11. IRDAI through Order No. IRDA/Enf/Ord/Ons/079/04/2021 dated 7th April 2021, imposed penalty of Rs. 1.00 Crore on M/s. Muthoot Risk Insurance and Broking Services Pvt. Ltd. 13
12. IRDAI through Order No. IRDA/NL/ORD/MISC/086/04/2021 dated 15th April ,2021 imposed penalty of Rs.25.00 Lakhs on M/s. SBI General Insurance Company Limited. 14
13. IRDAI through Order No. IRDA/NL/ORD/MISC/085/04/2021 dated 15th April,2021 issued direction, warning and imposed penalty on M/s. Royal Sundaram General Insurance Co. Ltd. 15
14 IRDAI through Order No. IRDA/NL/ORD/MISC/91/04/2021 dated 16th April,2021 ,imposed penalty of Rs. 13.00 Lakhs and issued Caution, Direction against M/s. Liberty General Insurance
Limited.
16
15 IRDAI through Order No. IRDAI/NL/ORD/MISC/92/04/2021 dated 17th April,2021 imposed penalty of Rs. 10.00 Lakhs against M/s. Bajaj Allianz General Insurance Company Limited. 17
16 IRDAI through Order No. IRDA/NL/ORD/MISC/099/04/2021 dated 27th April,2021 ,issued an advisory and imposed penalty of Rs. 5.00 lakhs against M/s. IFFCO Tokio General Insurance Company Limited. 18
17 IRDAI through Order No. IRDA/Enf/ORD/ONS/082/04/2021 dated 12th April,2021 on M/s. Future Generali India Insurance Company Limited. 19

Standard Technical Note( Template)-Motor Insurance.

The IRDAI has drawn attention of all insurers to the Circular No. IRDAI/NL/GDL/F&U/030/02/2016 dated 18th February 2016 on “Guidelines on Product Filing Procedures for General Insurance Products”. In terms of the above Circular, insurers are required to submit a Technical Note detailing pricing aspects of general insurance product as a part of filings.

1. In order to expedite the product clearance process, it has been decided to standardize the Technical Note so that insurers can provide all necessary details in a prescribed standard format. This will help to ensure uniformity amongst insurers in the matter of filing pricing and product related information for general insurance products.

2. Insurers shall submit Technical Note providing complete information and duly signed by the Appointed Actuary as per the prescribed format. The format is enclosed as Annexure – 1 with this Circular.

3. Discounts/loadings, if any, shall be offered by the insurer as per the criteria mentioned in the Technical note.

4. This Standard Template shall come into force with immediate effect.

https://taxguru.in/corporate-law/standard-technical-note-template-motor-insurance.html

Standard Technical Note( Template)-Health Insurance.

The IRDAI has drawn attention of all insurers to the Circular No. IRDAI/ HLT/ REG/ CIR/ 194/ 07/ 2020 dated 22nd July 2020 on “Consolidated Guidelines on Product filing in Health Insurance Business”. In terms of the above Circular, insurers are required to submit a Technical Note detailing pricing aspects of health insurance product filing.

1. In order to expedite the product clearance process, it has been decided to standardize the Technical Note so that insurers can provide all necessary details in a prescribed standard format. This will help to ensure uniformity amongst insurers in the matter of filing pricing and product related information for health insurance products.

2. Insurers shall submit Technical Note providing complete information and duly signed by the Appointed Actuary as per the prescribed format. The format is enclosed as Annexure – 1 with this Circular.

3. In case, a General Insurance packaged product has Health as one of its sections or covers, this Technical Note template shall be used for health portion of the packaged product.

4. This Technical Note format shall also be used while filing PA (Personal Accident) and Pilot health insurance products.

5. This Circular shall come into force with immediate effect.

https://taxguru.in/corporate-law/standard-technical-note-template-health-insurance.html

Investment in Alternative Investment Funds(AIFs)

The Authority has introduced additional guidelines on insurers’ investment in Alternative Investment Funds (AIFs), including one mandating them to report compliance on a quarterly basis.

A circular said the norms would replace a Point 1.5 of Master Circular,2017 on Investment, that stipulates “no investment is permitted in AIFs, which are of fund of funds and leverage funds.”

Circular said that;

i) “no investment is permitted into AIFs which undertake leverage or borrowing other than to meet day-to-day operational requirements and as permitted under SEBI (Alternative Investment Funds) Regulations, 2012.”

ii) Insurers are allowed to invest in Fund of Funds (FoFs), which in turn, invest within the country.

iii) Further, such FoFs should not invest in AIFs that invest in overseas companies/funds.

iv) The regulator also barred insurers from investing in an AIFs that has exposure to a FoF in which the insurer has invested.

v) The insurer, on a quarterly basis, needs to obtain a certificate issued by the concurrent auditor on the compliance of the conditions and file it with quarterly periodical returns.

https://taxguru.in/corporate-law/irdai-investment-alternative-investment-fund-aifs.html

IRDAI( Regulatory Sandbox)( Amendment) Regulations,2021

The Authority through Notification dated 7th April ,2021 amended Regulation 1(3) of IRDAI( Regulatory Sandbox) Regulations,2019 by substituting the Words “ 2 years ,the Words “4 years”.

The objective of these Regulations is to amend the Insurance Regulatory and Development Authority of India (Regulatory Sandbox) Regulations, 2019 to extend its validity for a period of 2 years. This is with a view to enabling the completion of experiment of the existing sandbox proposals and also to allow new sandbox proposals for experiment.

https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4445&flag=1&flag=1

IRDAI(Insurance Advertisements and Disclosures) Regulations,2021 

The Insurance Regulatory and Development Authority of India on 7th April 2021 has published the Insurance Regulatory and Development Authority of India (Insurance Advertisements and Disclosure) Regulations, 2021.

This Regulations is applicable to all insurers, intermediaries and insurance intermediaries registered with the Authority except those engaged exclusively in reinsurance business. If an entity is engaged in both direct Insurance as well as reinsurance business, these regulations are applicable only in respect of direct Insurance business of such entities.

The object of this regulation is to ensure that the insurers, intermediaries or insurance intermediaries adopt fair, honest and transparent practices while issuing advertisements and avoid practices that tend to impair the confidence of the public and to ensure that the advertisement is relevant, fair and in simple language enabling informed decision making.

Every insurer, intermediary or insurance intermediary shall establish and maintain a system of control over the content, form, and method of dissemination of all advertisements concerning its policies or products and shall maintain a specimen of all advertisements for a minimum period of three years.

The insurer or the intermediary shall file a certificate of compliance stating that, to the best of its knowledge, advertisements disseminated during the preceding year have complied with the provisions of these regulations and the advertisement code as stated in Regulation 13 within 30 days of closing of financial year.

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.

https://taxguru.in/corporate-law/irdai-insurance-advertisements-disclosure-regulations-2021.html

Facilitation by insurers for Cashless Services at Network Hospitals 

The Insurance Regulatory and Development Authority of India (IRDAI) has asked insurers to facilitate cashless services at network hospitals. It said insurers will have to take appropriate action if a network hospital is found denying cashless facility and deviating from agreed terms and conditions.

It has been brought to the notice of the Authority that some hospitals are denying cashless facility to policyholders for treatment of COVID-19 treatment despite having cashless arrangement with the Insurers.

The Authority further instructed all insurers that;

Your attention is drawn to the Authority’s circular Ref. No: IRDAI/HLT/MISC/CIR/189/07/2020 dated 14.7.2020 on Provision of cashless facility to the policyholders where in it was specified that the Insurers shall ensure that where the policyholder is notified about availability of cashless facility at the empanelled network provider, the cashless facility at such network provider shall be made available to the policyholders in accordance with the terms and conditions of the policy contract and as per the terms agreed in Service Level Agreement (SLA).

Therefore, general and health Insurers shall ensure that all such network provider hospitals extend cashless facility for any treatment to the policyholder including COVID-19 treatment in accordance with agreed provisions of SLA and terms and conditions of the policy contract.

Where any network provider denies cashless facility and deviates from agreed terms of the SLA, insurance company shall take an appropriate action against such network providers as provided in SLA in addition to taking up appropriate action as specified in the aforesaid circular.

The Insurers have also been directed to ensure smooth availability of cashless facility with all network providers empanelled with them by putting in place continuous communication channel with all the network providers for prompt cashless services and for resolution of grievances of policyholders if any.

https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?age=PageNo4455&flag=1PageNo4444&flag=1

Investment in Debt Securities of InvITs and REITs

The Authority allowed insurance companies to invest in debt securities of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs). Earlier, insurance companies were only allowed to in units of InvITs and REITs.

This decision has been taken by the Insurance Regulatory and Development Authority of India (IRDAI) post the passage of the Finance Bill,2021 which had proposed permitting trusts to issue debt securities.

The regulator has said, insurers can invest in debt securities of InvITs and REITs that are rated not less than “AA” under the “approved investment” category.

In the event of a subsequent downgrade, the instrument will become part of their “other investments”.

It has also specified that the cumulative investment of insurance companies in units and debt instruments of InvITs and REITs cannot exceed 3 per cent of their total fund size at any point in time.

“No insurer shall invest more than 10 per cent of the outstanding debt instruments (including the current issue) in a single InvIT/REITs issue”.

Also, if the sponsor of the InvITs and REIT is also the promoter of an insurance company then that company cannot invest in the debt instruments of such InvITs and REITs.

The regulator has also instructed that investment by insurers in the debt instruments of InvIT will be classified as “Infrastructure Investment” while investment in debt instruments of REITs will form part of industry group ‘Real Estate Activities” under NIC industry classification.

Also, the investment in debt securities of InvITs or REITs has to be valued either as per Fixed Income Money Market and Derivatives Association of India (FIMMDA) or at applicable market yield rates published by any rating agency registered with the Securities and Exchange Board of India (Sebi), the insurance regulator said.

https://taxguru.in/corporate-law/irdai-guideline-investments-debt-securities-invits-reits.html

Communication on Settlement of Health Insurance Claims

On the basis of reports received from market that some network providers( hospitals) are charging high rates and insisting cash payment from Policyholders for providing treatment to COVID-19 ailment even through they have Cashless Payment arrangement with the insurers.

The Authority has instructed all insurers that;

1. In compliance with the provisions of Regulation 31of IRDAI ( Health Insurance ) Regulations, 2016, the Insurers, in case of “cashless claim” under a health insurance policy, are advised to ensure expeditious settlement of such claims on cashless basis in accordance to the Service Level Agreements ( SLAs) entered with hospitals.

2. While reviewing cashless requests the Insurers are also advised to ensure that the policyholders are charged as per the rates agreed to by network providers wherever applicable. Insurers are also advised to ensure that hospitals do not levy any additional charges for the same treatment other than those rates that are agreed with the insurers.

3. In order to ensure that all network providers extend cashless services to policyholders and to address any issues causing inconvenience to policyholders while availing cashless service, the Insurers are advised to put in place an effective communication channel with all the network providers for prompt resolution of grievances of policyholders. Insurers are advised to report levying of excess charges or denial of cashless facility to the respective State Governments for appropriate action.

4. All Insurers are directed to ensure that the “reimbursement claims “under a health insurance policy shall be settled as per the terms and conditions of the respective policy contract expeditiously. Insurers are advised to issue suitable guidelines on this to all TPAs.

https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4457&flag=11

IRDAI( Manner of Assessment of Compensation to Shareholders or Members on Amalgamation) Regulations, 2021

The following provisions has been made under the Insurance Regulatory and Development Authority of India (Manner of Assessment of Compensation to Shareholders or Members on Amalgamation) Regulations, 2021 are as follows: –The Insurance Regulatory and Development Authority of India (IRDAI) on April 20, 2021 has issued the Insurance Regulatory and Development Authority of India (Manner of Assessment of Compensation to Shareholders or Members on Amalgamation) Regulations, 2021 with the objective to provide for the manner of assessment of compensation for the shareholders or members whose interests in, or rights against, the transferee insurer resulting from amalgamation are less than his interest in, or rights against the original insurer.

The person who is registered as a shareholder or a member of the original insurer and the interest or rights of such shareholder or member against the transferee insurer are less than the interest will be eligible for compensation.

  • The compensation assessed paid either in cash or in kind or partially in cash and partially in kind.
  • Methodology for assessment of Compensation to Shareholders or Members.
  • the purpose of computation of residual value of assets by the Authority, “assets” shall be the sum total of the following: –
  • the amount of cash in hand and the amount of balances with any bank immediately before the appointed date, whether in deposit or current account, and money at call and short notice, balance held outside India being converted at the market rate of exchange.
  • the market value, as on the day immediately before the appointed date, of any securities, shares, debentures, bonds and other investments, held by the original insurer concerned.

https://taxguru.in/corporate-law/irdai-manner-assessment-compensation-shareholders-members-amalgamation-regulations-2021.html

Norms on Settlement of COVID-19 Health Insurance Claims

The Insurance Regulatory and Development Authority of India (IRDAI) on April 29, 2021 has issued a circular for the norms on settlement of COVID-19 health insurance claims. In the wake of prevailing conditions of COVID-19 cases in the form of second wave and in line with aforesaid directions of the Hon’ble High Court, the following directions are issued to all insurers:

  • Decision on authorization for cashless treatment for COVID-19 claims shall be communicated to the network provider (hospital) within a period of 60 minutes from the time of receipt of authorization request along with all necessary requirements from the hospital.
  • Decision on final discharge of patients covered in COVID-19 claims shall be communicated to the network provider within a period of ONE hour from the time of receipt of final bill along with all necessary requirements from the hospital.

https://taxguru.in/corporate-law/decide-cashless-treatment-covid-19-60-minutes-irdai.html

Penalty Order -M/s. Muthoot Risk Insurance and Broking Services Pvt. Ltd.

The IRDAI has through Order No. IRDA/Enf/Ord/Ons/079/04/2021 dated 7th April,2021 imposed penalty of Rs. 1.00 Crore for violation of;

Charge No. Brief Title of charge and the provisions violated Decision
1 Charge 1: Engaging unlicensed entities to canvass insurance business.

Provision: Para 3(b) of Schedule VIA (Code of conduct) under regulation 28 of IRDAI (Insurance Brokers) Regulations, 2013 & clause 3(b) of Schedule I – Form H (Code of conduct) under regulation 30 & 8(2) of IRDAI (Insurance Brokers) Regulations, 2018 to be read with Regulation 2(1)(d) of IRDAI (Insurance Brokers)
Regulations, 2018.

Penalty crore of One

https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4440&flag=1

Penalty Order -M/s. SBI General Insurance Company Limited

The IRDAI through Order No. IRDA/NL/ORD/MISC/086/04/2021 dated 15th April,2021 ,imposed a penalty of Rs. 25.00 Lakhs on SBI General Insurance Company Limited for Non-Compliance of Minimum Obligations under Motor Third Party business for FY 2017-18.

Charge
No.
Violation of Provisions Decision
1 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 year 2017-18 Penalty of Rs. 25 Lakh only and Advisory

https://taxguru.in/sebi/irdai-penalises-sbi-general-insurance-company-ltd.html

Penalty Order -M/s. Royal Sundaram General Insurance Company Limited 

IRDAI has through Order No. IRDA/NL/ORD/MISC/085/04/2021 dated 15th April,2021 issued warning, directions and imposed a penalty of Rs. 3.00 lakhs on M/s. Royal Sundaram General Insurance Co. Limited on violation of below mentioned provisions.

Charge Violation of Provisions Decision
1 Violation of para 15(16) of MISP Guidelines Penalty of Rs. 3 Lakh
2 Violation of para 9(d) of MISP Guidelines and section 14(2)(h) of IRDA Act, 1999. Warning and Direction.

https://taxguru.in/corporate-law/irdai-penalises-royal-sundaram-general-insurance-co-ltd.html

Penalty Order -M/s. Royal Sundaram General Insurance Company Limited

The Authority through Order No. IRDA/NL/ORD/MISC/91/04/2021 dated 16th April,2021 issued direction, caution and imposed penalty of Rs. 13.00 Lakhs on M/s. Liberty General Insurance Limited for violation provisions of MISPs Guidelines;

Charge No. Violation of Provisions Decision
1 Para of Guideline 15 (5) (d) of MISP Guidelines Penalty of Rs. 13 Lakh only and direction
2 Para 4(a), 3(c) and 3(f) of MISP Guidelines Caution and Direction

https://taxguru.in/corporate-law/irdai-fines-liberty-general-insurance-limited-violating-misp-guidelines.html

Penalty Order -M/s. Bajaj Allianz General Insurance Company Limited

The Authority through Order No. IRDAI/NL/ORD/MISC/092/04/2021 dated 17th April,2021 imposed penalty of Rs. 10.00 Lakhs on M/s. Bajaj Allianz General Insurance Company Limited for violation of Section 42D(8) of Insurance Act,1938.

As per Sub-section (8) of Section 42D of the Insurance Act, 1938: `Any person who acts as an intermediary or an insurance intermediary without being registered under this section to act as such, shall be liable to a penalty which may extend to ten lakh rupees and any person who appoints as an intermediary or an insurance intermediary or any person not registered to act as such or transacts any insurance business in India through any such person, shall be liable to a penalty which may extend to one crore rupees`.

The insurer has transacted business with some automobile dealers without appointing them as Motor Insurance Service Provider.

https://taxguru.in/corporate-law/irdai-fines-bajaj-allianz-general-insurance-company-ltd.html

Penalty Order -M/s. IFFCO Tokio General Insurance Company Limited

The IRDAI through Order No. IRDA/NL/ORD/MISC/099/04/2021 dated 27th April,2021 issued an advisory and imposed penalty of Rs. 5.00 Lakhs on M/s. IFFCO Tokio General Insurance Company Limited for non-compliance of MISP Guidelines;

Charge No. Violation of Provisions Decision
1 Violation of Guideline 9 (d) of MISPG and Section 14 (2) (h) of IRDA Act, 1999 – Non-submission of information/data/documents sought by the Authority. Advisory.
2 Guideline 15 (5) (d) of MISPG – Indirect payments. Rs. 5 lakh penalty.

https://taxguru.in/corporate-law/irdai-fines-iffco-tokio-general-insurance-company-ltd.html

Penalty Order -M/s. Future Generali India Insurance Company Limited

The Authority through Order No. IRDAI/Enf/ORD/ONS/082/04/2021 dated 12th April,2021 issued advisories, directions and imposed penalty of Rs. 17.00 Lakhs on M/s. Future Generali India Insurance Company Limited for violation of below mentioned provisions of PPHI Regulations;

Violation of Provisions Decision
1 Clause 1(1) (i) of Schedule-I to IRDAI (Assets, Liabilities, and Solvency Margin of General Insurance Business) Regulations, 2016. Advisory
2 Regulation No.12 (4) of IRDAI (Insurance Surveyors and Loss Assessors), Regulations, 2015 and Regulation No. 9 (1) of IRDA (Protection of Policyholders’ Interests) Regulations, 2002. Advisory
3 Regulation 9(5) of IRDA (Protection of Policyholders’ Interests) Regulations, 2002. Direction
4 Regulation No.9 (2 & 5) of IRDA (Protection of Policyholders’ Interests) Regulations, 2002. Direction & Advisory
5 Regulation 27(iv & v) of IRDAI (Health Insurance) Regulations, 2016 and Regulation 13 (3) and 15 (1, 4, 8 & 9) of IRDAI (Protection of Policyholders’ Interests) Regulations, 2017. Direction & Advisory
6 Regulation 3(2) of IRDA (Protection of Policyholders’ Interests) Regulations, 2002 and Product filing guidelines. Penalty of Rs.17 lakh, advisory
and direction

https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4443&flag=1

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