Insurance Regulatory and Development Authority of India
Insurance Regulatory and Development Authority of India (Expenses of Management of Insurers transacting Non-life and Health Insurance business) Regulations, 2015
Insurance Laws (Amendment) Act 2015 has carried out amendments to the sections 40B and 40C. By the virtue of the amendment in these sections, the rule 17E and 17F prescribed by the Central Government have become defunct and Authority has been empowered to frame regulations governing the expenses of management.
In view of the above, it has necessitated to frame regulations on Expenses of Management for Insurers transacting Non-life and Standalone Health Insurance Business. The Authority has issued exposure draft seeking comments of the stakeholders on or before 11.10.2015.
Based upon the comments received, the draft regulations have been revised. The revised draft regulations are attached. The revised draft contains, amongst the others, the following.
1. Expenses of Management include remuneration / commission to the agents/ insurance intermediaries and other expenses debited to Revenue Account. However it does not include charge to Profit such as Income Tax, Wealth Tax etc.
2. Board approved policy for allocation and apportionment of the Expenses of Management within various segments.
3. Certification from one of statutory auditors on compliance of the Regulations and the allocation. Auditor also needs to certify that allocation and apportionment of expenses is in accordance with the board approved policy.
4. Provides for prohibited expenses.
5. Returns to be signed by Chief Financial Officer, Chief Executive Officer and Compliance Officer to be adopted by the Board on the recommendation of Audit Committee
6. Allowance of Head Office for foreign branch / subsidiary @ 10 of the gross premium income written direct outside India.
7. No arbitrage in the allowance of EoM on health portfolio of Nonlife Insurer and Health insurer.
8. Miscellaneous class of Business: The segment is classified under Corporate / Group and Retail.
9. Motor is recognised as a separate segment for the purpose of EoM.
10. Health classified into three broad categories (i) Health Retail, (ii) Health Group, and (iii) Health Govt Scheme
11. Powers of the Authority to exempt for initial period of five years
12. Further Powers of the Authority to allow higher expenses provided that the excess should be debited to shareholders’ fund
13. In case of Deviation in the claim ratio is more than 10 percent, Insurers are required to file exception report on segment basis along with the plan of action specifying the reasons for such deviation.
14. Transitory Provisions: Insurers to have option for FY 2015-16 either to comply with the regulations or to the erstwhile rules.
All are requested to offer their valuable comments/suggestions on the proposed regulations. The comments/suggestions should reach by 8th December, 2015 in the format attached to the undersigned by e-mail at rksharma [at] irda [dot] gov [dot] in with a copy to Dr. Mamta Suri, HOD-F&A at mamta [at] irda [dot] gov [dot] in
R K Sharma