IRDAI Master Circular on Operation and Allied Matters of Insurers

IRDAI vide Master Circular bearing reference no: IRDAI/PPGR/CIR/MISC/97/06/2024 dated June 19, 2024, issued Master Circular on Operations and Allied Matters of Insurers (“ Master Circular 2024 ”). The Master Circular 2024 shall apply to all Insurers and Distribution Channels in India.

Major highlights of the Master Circular are as follows:

1. Advertisement: Insurers shall comply with the following requirements concerning Advertisement of Insurance Products as prescribed under Chapter I of the Master Circular:

a. Requirements with respect to compliance, control of Advertisements, and constitution of Advertisement Committee:

There shall be no advertisement:

i. On services not related to insurance

ii. On comparison of rates/discounts to erstwhile tariff

iii. Exaggerating the benefits of the products

iv. Denigrating the reputation of a competitor or the industry

v. Highlighting the potential benefits of an insurance product without a fair indication of associated risks, if any.

b. Advertisements on linked products and variable annuity payout options.

c. Advertisements mentioning Rating, Ranking or Awards: Insurers and Distribution Channel shall ensure the following:

i. Claim of rating/award shall be based on those declared by entities which are independent of insurers and their affiliates.

ii. The source of the rating/award is to be disclosed conspicuously and legibly.

iii. No claim of ranking by an insurer, based on any criteria is permissible in any of the advertisements.

iv. Publication of claim ratios and it shall be arrive basis number of policies and shall be computed on annual audited figures submitted to the Authority.

d. Adherence to the Advertisement Code prescribed by the Advertising Standards of India (ASCI).

e. Advertisement on Product Combinations: Insurance Advertisement shall not offer as inducement, any award/reward points and discounts. Further, where more than one product is promoted, a specific disclosure shall be made stating that it is a combination of products along with product name, UIN and specific details of the individual product.

f. Requirements concerning Spurious Phone Calls and Fictitious/Fraudulent Offers

2. Opening of Places of Business of Insurers: Insurers and Distribution Channels shall comply with the following requirements concerning opening of places of business as prescribed under Chapter II of the Master Circular:

a. Manner of obtaining approval for opening

b. Requirement concerning shifting or relocation of place of business

c. Opening of Representative Office or Liaison Office outside India

d. Opening of Foreign Branch Office outside India or at IFSC: The Board of Insurers shall ensure:

• Approve, inter alia, the operational matters pertaining to establishment and conduct of business of the foreign branch office in the host country.
• Monitor the financial and business performance of the foreign branch
• Report to the Authority any events or developments which can impair the functioning of the foreign branch office.

e. Infusion of Capital into the Foreign Branch Office or Office at IFSC: Insurers shall have appropriate arrangements to ensure:

• Ring fencing of policyholders’ liabilities
• Requirement concerning the additional capital for meeting the losses or for meeting the capital or other regulatory requirement.
• Infusion of Capital shall be with the prior approval of the Competent Authority.

f. Activities permitted at a Representative or a Liaison Office: The following activities are permitted at a Representative or a Liaison Office:

• Undertaking development and promotional activities such as gathering financial, economic and commercial information,, educating prospects about advantages of insurance
• Promotion of products to the Company, customer service and identifying prospects of the host country.
• Conducting seminars to create awareness on insurance.
• Liaison with foreign brokers, and re-insurers for ceding/accepting reinsurance and support for formalizing treaties
• Liaison with surveyors/risk assessors.
• Supporting expertise on underwriting practices

g. Reporting/Disclosure Requirements

3. Outsourcing Activities: Insurers and Distribution Channels shall comply with the following requirements concerning outsourcing activities prescribed under Chapter III of the Master Circular.

a. The insurer while outsourcing the activities shall:

• conduct due diligence, including cost-benefit analysis, when selecting and monitoring service providers for outsourcing activities.
• Ensure that the service provider has established procedures to protect proprietary and customer information, including disaster recovery plans with regular testing.
• ensure outsourcing service providers safeguard all confidential information of insurers from unauthorized disclosure to third parties, intentional or inadvertent.
• Evaluate significant outsourcing arrangements for risks and conduct due diligence.
• Grant prompt access to relevant information regarding outsourced activities to insurers, auditors, and regulatory authorities.
• Refrain from outsourcing activities that could pose conflicts of interest with insurer functions, related parties, group companies, or insurance intermediaries and their related parties or group companies.

b. Outsourcing Committee shall be responsible for the maintenance of relevant records, and documents relating to outsourcing activities.

c. A summary of the material risks arising out of outsourcing contracts shall be reviewed by the Risk Management Committee.

d. Principles for outsourcing activities

e. Requirements concerning the constitution of the Outsourcing Committee

f. Activities prohibited for Outsourcing: Insurers are prohibited from outsourcing any of the following activities:

• Investment and related functions
• Fund Management including NAV calculations
• Compliance with AML and KYC verification through third party service providers.
• Decision Making on:
• Product designing actuarial functions and enterprise risk management
• in underwriting and claims functions
• related to policyholders’ grievances redressal and allied matters.

g. Reporting Requirements

4. Grievance Redressal System: Insurers and Distribution Channels shall comply with the following requirements concerning the Grievance Redressal System as prescribed under Chapter IV of the Master Circular:

a. board-approved grievance redressal policy.

b. Strive for “zero grievances” by adopting consumer-friendly processes.

c. Collect regular customer feedback, especially after grievance resolution, to assess satisfaction and improve the redressal process.

d. Integrate grievance portals with Bima Bharosa for online registration and tracking, ensuring real-time synchronization of grievance databases.

e. enable recording of grievances received through various channels on Bima Bharosa.

f. establish an Internal Ombudsman Scheme (guidelines to be issued separately).

g. appoint designated officers at each location to handle grievances and implement an internal escalation matrix for unresolved issues.

h. display insurance ombudsman details prominently for easy access.

i. Establish technology-based grievance redressal infrastructure

j. Systems for obtaining customer feedback

k. Recording of the Grievance on Bima Bharosa

l. Timelines for redressal of grievances issued by Customers

Activity

Timeline (from date of registration of the grievance)

Written acknowledgement of grievance to a complainant

Immediately

Seek and Obtain further details, if any, from the complainant (permitted only once)

Within one week

Resolution of grievance and issue of final letter of resolution

Within two weeks

Closure of grievance on non-receipt of reply from the complainant

Within eight weeks

5. Usage of Trade Logo of Promoting Partners or Related Parties: Insurers and Distribution Channels shall comply with the following requirements concerning usage of trade of third party as prescribed under Chapter V of the Master Circular:

a. Insurers shall create their trade logos. If using logos of promoting partners or other parties, a written agreement with clear terms and compliance with laws is required.

b. Agreements shall specify unambiguous considerations for logo usage.

6. Group Insurance Policies: Insurers and Distribution Channels shall comply with the following requirements concerning group insurance policies as prescribed under Chapter VI of the Master Circular.

a. Issuance of group policies under life, general and health insurance

• insurer shall have a group underwriting policy which shall include:
• Entry criteria for group insurance.
• Coverage options for members exiting mid-policy.
• Safeguards against fraud and misrepresentation.

ii. The insurers shall ensure:

• Group master policyholders do not charge individual members more than the insurer’s premium amount.
• Premiums or benefits for individual members remain unchanged after policy issuance.

c. Requirements for Employee-Employee Group Insurance

• The employer shall be the master policyholder, and employees are the members.
• Except for group fund-based products, claims are paid directly to the employee or beneficiary.
• Insurers shall quickly obtain member details from the employer to provide cashless health insurance settlements. Claims cannot be denied due to lack of details.

d. Requirements for Non-Employer-Employee Group Insurance:

• There shall not be any policy issued with unnamed members.
• The individual group member shall be the insured member, and the holder of policy shall be the master policyholder.
• The insurer shall issue a certificate of insurance, including: Schedule of benefits, coverage period, individual premium, payment frequency, policy term, premium paying term, exclusions, etc. Coverage status during the grace period, claims registration procedure including insurer’s address, and required documents.
• The insurer must serve the insured member directly and may engage the group master policyholder in claim notifications only upon written request from the claimant.
• For group fund-based products, premium payment shall be made directly to the insurer via electronic transfer. The master policyholder cannot accept premiums or claims.
• The insurer shall ensure that claim payment is made: directly via electronic transfer to the insured member’s or nominee’s bank account. To the group policy holder if it’s a financial institution with a valid assignment, contingent upon prior notification and consent from the policyholder or beneficiary/nominee regarding the assignment and confirmation of the outstanding loan amount, subject to specified condition:
• Authorized assignment by the insured member to the group holder must be effective on the event date.
• Assignment limited to outstanding loan amount as per the schedule on the event date.
• Difference between sum assured and outstanding loan amount paid directly to claimant or insured member.
• Insurer communicates settlement details directly to insured member/nominee/beneficiary.

vii. The insurer shall ensure that the master policy holder keeps:

• Proper account of each member
• the members informed regarding insurance coverage
• and the insurer shall be held responsible to the group members insured in case of violation of the above.

7. Unclaimed Amount of policyholders: Insurers shall comply with the following requirements concerning the unclaimed amount of the customers as per prescribed under Chapter VII of the Master Circular:

• The Definition of Unclaimed Amount:
• Pending amounts subject to the following conditions are held under a separate sub-heading “Litigation and others” within unclaimed amounts until payment:
• Due to litigation under an insurance policy.
• Due to rival claims or open title.
• Due to freezing/blocking of insurance policies by any government agency.
• Additionally, amounts payable under the following are excluded from unclaimed amounts:
• Annuity policies and all in-force insurance policies, including reduced paid-up and fully paid-up policies on the due date.
• Claims initiated by consumers.

b. Treatment of Unclaimed Amount:

• Insurers are prohibited from appropriating or writing back unclaimed amounts under any circumstances.
• Unclaimed amounts of consumers held for more than 10 years as of September 30th each year must be transferred to the Senior Citizens’ Welfare Fund (SCWF) by March 1st of the financial year.
• Insurers must maintain searchable databases on their websites regarding unclaimed amounts of ₹1000 or more. This information display must persist even after ten years.
• Insurers must offer a website feature allowing consumers to check for any unclaimed amounts, requiring Name of the Policyholder and Date of Birth/Date of Incorporation as mandatory fields.
• Upon matching these fields, the insurer’s website shall confirm the name of the policyholder, address, policy number, and unclaimed amount. Insurers update unclaimed amounts biannually, by March 31st and September 30th, within 30 days. Individual website links are provided.
• Consumers shall have up to 25 years from transfer to the Senior Citizens’ Welfare Fund to claim dues under their policies.

c. Requirements concerning Governance:

• A detailed agenda covering the following shall be places before the PPGRCMC of every insurer on a quarterly basis-
• Aging analysis
• Progress of settlement
• Steps taken to reduced unclaimed amount
• The Audit Committee shall be responsible of the compliance of the above requirements.

d. Requirements with respect to Payment of Unclaimed Amounts:

• All insurers shall remit proceeds of all claims via electronic mode as prescribed by RBI.
• Insurers must implement a system to automatically validate mobile numbers and email addresses of existing and new customers.

e. Communication to the Policyholders:

• Insurers shall regularly inform policyholders about updates, changes, and maturity details via physical or electronic means, such as SMS, instant message services, email, or letters.
• Insurers shall obtain contact details and necessary support from the distribution channel.

f. Accounting and Disclosure requirements:

• Insurers shall maintain a single segregated fund for all unclaimed amounts and the sum of such fund shall be invested in money market instruments, liquid mutual funds and / or fixed deposits of scheduled banks or any other as may be permitted by the Authority.
• Unclaimed amounts must be disclosed separately in the Balance Sheet.
• Insurers shall report movements in unclaimed amounts as a part of the Notes to Accounts forming part of the financial statements.
• Insurers shall adjust any claims received for unclaimed amounts with the amounts due to be transferred to the Senior Citizens’ Welfare Fund.
• All life insurers shall maintain the “Unclaimed Amount of Policyholders” under an individual Segregated Fund with a specific SFIN, disclosed under the Schedule of Current Assets on the Balance Sheet.
• For insurers Non-life insurers, investment of Unclaimed Amount should be shown under the Schedule of Current Assets on the Balance Sheet.
• The ‘Credit Balance’ in the Unclaimed Fund should include outstanding unclaimed amounts and the earned income.

g. Accounting of Investment Income requirements:

• Insurers shall credit investment income accruing on outstanding amounts to the respective identified unclaimed account.
• Insurers shall pay the identified unclaimed amount along with the investment income credited to consumers whenever a claim is made.

h. Recovery of Fund Administration Expenses: Insurers shall recover administration and fund management expenses up to a maximum of 20 basis points per annum on a quarterly basis.

i. Unclaimed Amounts and Solvency margin: Liabilities for unclaimed amounts and the accrued investment income, along with investments for such amounts, are not counted towards computing the available solvency margin of insurers.

j. Maintenance of Records and Reporting of Unclaimed Amounts:

• Insurers shall maintain policy-wise detailed records of unclaimed amount and investment income accrued.
• Insurers shall furnish an intimation of transfer if unclaimed amounts to the Senior Citizen’s Welfare Fund (SCWF) to the Authority in the format.

8. Policyholders’ Engagement and Awareness: Insurers and Distribution Channels shall comply with the following requirements concerning awareness of policyholders as prescribed under Chapter VIII of the Master Circular:

a. Customer Information Sheet

b. Regular contact with the policyholders: Every insurer shall put in place required systems:

• to verify policyholders’ contact information, including email IDs, mobile numbers, and bank account details, annually updating any changes.
• to send renewal notices to all policyholders at least 30 days before the due date, along with an annual statement of their policies, accrued benefits, and other relevant information.

c. Periodic Statement:

• Insurers shall disclose the premium payment status, accrued bonus, paid-up value, and other relevant information to policyholders.
• For participating policies, insurers must disclose the basis used for computing the assets share, profit sources, allowed expenses, asset categories with the yield earned in the last year, bonus earning capacity, future bonus projections, expense comparison for participating and non-participating policies, bonuses declared to date, funds available for bonus smoothing, strategy for equitable treatment, and overall Internal Rate of Return (IRR) since policy purchase.

d. Policyholder Awareness:

• Insurers and Insurance Councils shall promote awareness campaigns on various insurance aspects to policyholders, prospects, and public, including types of insurance products and service aspects.
• Insurers shall prominently display on their website a premium calculator providing premium estimates without collecting contact details like name, mobile number, or email ID.
• Insurers shall prominently display

9. Servicing of policies in case of exit of distribution Channel: Insurers shall comply with the following requirements concerning servicing of policyholder post exit of distribution channel as prescribed under Chapter IX of the Master Circular:

a. Existing policies previously serviced by terminated distribution channels can be handled by the insurer by offering policyholders the choice to:

• Opt for online premium payment and other services.
• Assign an insurance agent or direct sales staff.

b. The insurer cannot accept new policies from assigned agents or staff if:

• The allotted policy is not revived.
• The allotted policy is revived but lapses or is surrendered within months.

c. Renewal commissions may be paid to assigned agents or staff for inforce policies as per the Board approved policy.

d. Clause 1 of this chapter exemptions apply to single premium, fully paid up, and distant mode policies.

10. Repeal of the Guidelines and Circulars: The Master Circular supersedes all the IRDAI Guidelines and Circulars listed under Chapter X of the Master Circular.

Source category: IRDAI

Attachments

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