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

IRDAI vide ref no. IRDAI/F&I/ED/EMT/161/8/2022 dated August 1, 2022 has issued an Exposure Draft – IRDAI (Expenses of Management of Insurers transacting General or Health Insurance Business) Regulations, 2022 for seeking comments/suggestions of the stakeholders.

Major highlights of the Exposure Draft are as follows:

• The Regulations shall be applicable to the Insurers transacting General Insurance or Health Insurance business.
• Definitions have been prescribed by the Authority of which few important ones are as follows:

“Charges” means charge against profit such as income tax and other taxes like Goods and service tax as borne by the insurer and other charges and / or expenses which are levied against the profit.

“Duration of Business” means the duration of an insurer’s business reckoned from the beginning of the financial year of commencement of business if the date of commencement is in the first half of the financial year, and from the beginning of the immediately succeeding financial year if the date of commencement is in the second half of the financial year.

“Expenses of Management” shall include:

• expenses in the nature of operating expenses, commission, brokerage/remuneration, reward to the insurance agents, intermediaries and insurance intermediaries, commission & expenses on reinsurance inward, which are charged to Revenue Account.

However, it shall not include the Charges as defined in these Regulations.

“Expense rate” for the purpose of these regulations, expense rate shall be the average of percentage of actual expenses of management on gross written premium in India for the preceding three financial years.

“Market Share” shall be share of the gross direct premium of the insurer written in India in proportion to the total gross direct premium of all the insurers transacting general and health insurance business in India in a financial year.

• Limit of Expenses : The expenses of management shall not exceed the amount computed as lower of 30 percent or expense rate , multiplied by gross premium written in India in a financial year.

Provided that the amount of commission or other remuneration paid to insurance agents and insurance intermediaries in respect of their business transacted in the financial year is as allowed by the Authority from time to time.

• Additional allowance : In addition to above mentioned limits, the insurer shall be allowed following additional allowance as prescribed for respective heads: Head office expenses Expenses incurred towards rural sector, PMSBY, PMJAY, PMFBY business Expenses incurred towards Insurtech Expenses incurred towards IndAS Expenses incurred towards the Insurance awareness
• Board approved policy and Business Plan : Every insurer shall have a well-documented policy and a business plan prepared well in advance on an annual basis, which shall be approved by the Board.
• Returns : Return of Expenses of Management shall be prepared in the format prescribed and the same shall be signed by Chief Executive Officer, Chief Financial Officer and Chief Compliance Officer 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.
• The Regulations prescribes as to when the insurer may be exempted from the above provisions and also prescribes the actions that may be taken for any such non-compliance.
• IRDAI (Expenses of Management of Insurers transacting General or Health Insurance Business) Regulations, 2016 shall be repealed from the date the above Regulations come into force.

Source category: IRDAI

Attachments

• /2022/68_ANNEXU~1.PDF