1273533, DIVYA JAIN,F1, Q-20, Comment on Regulatory trends i.e. mandated regulatory changes by the IRDA to promote a competitive environment in both the life and non-life insurance sectors

INTRODUCTION

Before liberalization the Insurance sector was controlled by Controller of Insurance but now the corporate body known as Insurance Regulatory & Development Authority (IRDA) has been formed under IRDA Act 1999. The IRDA has issued licences to 20 Life Insurance companies and to 15 General Insurance companies including exclusive health insurance company. The private insurers have started their business during the year from 2000 to 2001; and till date there is growth in insurance penetration from 1.93 to 2.40 as well as insurance density from 8.50 to 9.36

STEPS TAKEN BY IRDA

•  Policies And Measures To Develop Insurance Market
• Research and Development Activities Undertaken by  the Insurance companies.
• Protection of Interests of Policyholders
• Maintenance of Solvency Margins of Insurers
• Monitoring of Investments of the Insurers
•   Health Insurance
• Public Complaints & Functioning of Ombudsman (a person who decides the complaints of an individual on insurance matters)
•   Re-insurer (means insurance of insurance companies)

IRDA has recently issued health insurance regulations that come after an exposure draft released earlier. These new regulations will lead to, inter alia, standardisation of the important aspects of health insurance such as key definitions of ailments and the nature of medical treatments which are covered or not covered under a policy contract. This will bring uniformity in health coverage practices.

DISCUSSION

Mr J Hari Narayan, ex-Chairman, IRDA indicated that mandatory product approvals would now become faster, since the product structures would be clearly defined by the new regulations. The IRDA board has approved the product guidelines and these are expected to be notified shortly.

Main Regulatory trends given by IRDA are:-

•          To increase the penetration of health insurance products across the country, IRDA has decided to allow standalone health insurance companies to avail the services of agents, corporate agents of other life or non-life insurance companies to distribute their products. An agent cannot offer his/her services to more than one standalone health insurance company.
•          IRDA has decided to include vehicle paint under the purview of depreciable part and fixed rate of depreciation for the same. The change is applicable to all policies whose risk inception date falls on or after February 1, 2013.
•          Following IRDA’s directive to the industry to finalise procedures for fraud detection and control under the aegis of the GI Council, all insurers have started to share fraudulent data. The data collected would be used to analyze trends in fraud and would also ensure that individuals who have committed frauds are not covered by any insurer in future, while business transactions with entities who have committed fraud could be avoided by all insurers.Well-defined procedures to identify, detect, investigate and report insurance frauds will have to be laid out by insurers. The insurers have to submit a compliance report with the regulator by June 30, 2013.
•          The regulator is likely to scrap the embedded value requirement for listing of general insurance companies on stock exchanges.Also, the regulator will look into the financial position, capital structure and regulatory record before permitting them to come up with share sale offer. This may require insurers to undertake independent financial stress testing of their businesses.
•         The IRDA is planning to shift insurance companies to a risk-based solvency model from the current factor-based solvency model in the near future.
•        SEBI will be making another attempt to convince the IRDA board to allow insurance companies in the stock lending and borrowing (SLB) mechanism. Through SLB, an entity can borrow shares on a temporary basis to meet its delivery obligations.
•          The IRDA has halved the requirement of compulsory ceding of reinsurance business by domestic general insurers to the General Insurance Corporation (GIC Re).
•          IRDA continues to remain concerned over foreign investments flowing into the sector via tax havens and called for measures to discourage such flows.

CONCLUSION

The above mention are the Regulatory trends given by IRDA to promote a competitive environment in both the life and non-life insurance sectors. These will help allot in development and growth of Insurance sector in India. These recommendations were analysed for legal and regulatory consistency, as well as the developments in Financial Markets including Unit Linked Insurance Policies . The IRDA has also made amendments or  key changes in  IRDA (INVESTMENT) REGULATIONS, 2000 AS  IRDA (INVESTMENT) (5TH AMENDMENT) REGULATIONS, 2013.These regulations had been effective from 1st April, 2013.