Revised Exposure Draft – IRDAI (Expenses of Management of Insurers transacting General or

IRDAI has issued an revised Exposure Draft – IRDAI (Expenses of Management of Insurers transacting General or Health Insurance Business) Regulations, 2022 (“revised Exposure Draft”) for seeking comments/suggestions of the stakeholders.

Background – The Exposure Draft – IRDAI (Expenses of Management of Insurers transacting General or Health Insurance Business) Regulations, 2022 was issued on August 1, 2022 for stakeholders comments. Basis detailed deliberations and comments received the Revised Exposed Draft is issued for comments/suggestions of the stakeholders.

Major highlights of the Exposure Draft are as follows:

• Applicability : The Regulations shall be applicable to the Insurers transacting General Insurance or Health Insurance business and shall come into effect from April 1, 2023.
• Definitions: The revised Exposure Draft introduces new definitions such as:
• ‘Insurtech Expenses’ means expenses incurred towards technology-enabled innovation in insurance services (Policyholder oriented) that could result in new business models, applications, processes or products.
• ‘Insurance Awareness’ means awareness creation done by Insurers through (a) direct campaigns including through branches, social media campaign, etc. and/or (b) supporting the General Insurance Council, to educate its customers and public at large in making the right choices by being aware of insurance requirements and role of the Insurance intermediaries and agents,

Provided that it shall not include Insurance Advertisement as defined under IRDAI (Insurance Advertisements and Disclosure) Regulations, 2021 as amended from time to time.

• Limit of Expenses Of Management (EOM) :
• For insurers carrying General insurance business the EOM shall not exceed 30% of gross premium written in India in a financial year.
• For insurers carrying Health insurance the EOM shall not exceed 35% of gross premium written in India in a financial year.
• Additional allowance : In addition to above mentioned limits, the insurer shall be allowed following additional allowance as prescribed for respective heads:

Heading of expenses

Limits

Head office expenses – For insurers having branch outside India or having IIO branch

Not exceeding 10% of the GWP through such branch/IIO during the year

Expenses towards Rural sector, PMJAY, PMFBY

Not exceeding 15% of the incremental premium over the previous FY, sourced from the rural sector

Expenses towards PMSBY or such other schemes notified by the Authority

Not exceeding 15% of the gross direct premium sourced during the year from such schemes

Expenses incurred towards Insurtech and Insurance awareness

Not exceeding 5% of allowable EOM as specified in Regulation 3

• Board approved policy and Business Plan : Insurer shall have a board approved policy and an annual business plan prepared well in advance.
• Returns :
• The Return of EOM shall be prepared in the format prescribed and shall be signed by Chief Executive Officer, Chief Financial Officer, Chief Compliance Officer and Appointed Actuary of the Company.
• The Returns shall be certified by the Statutory Auditors and the certificate duly signed by at least one of the statutory auditor shall be filed in the given format.
• The Return shall be reviewed by the Audit Committee prior to being placed for approval of the Board of the Insurer.
• Authority may grant forbearance to new insurers in case of excess expenditure up to first 5 years of duration of business.
• Forbearance may be granted to insurers whose actual EOM exceeds allowable EOM for FY 2022-23, subject to confirmation that EOM shall be brought within allowable limits within 3 years i.e FY 2025-26.
• Insurers are required to maintain EOM within the allowable limits, any excess in such limits shall be charged to Profit and Loss account.

Source category: IRDAI

Attachments

• /2022/69_REVISE~1.PDF