Insurance | April – June 2024
Regulatory Updates
Master Circular on Rural, Social Sector and Motor Third Party Obligations, 2024
The Insurance Regulatory and Development Authority of India (“IRDAI”) notified the IRDAI (Rural, Social Sector and Motor Third Party Obligations) Regulations on 20 March 2024 with the object of specifying the norms relating to minimum rural, social sector and third-party motor insurance businesses. Thereafter, on 10 May 2024, the IRDAI issued the Master Circular on Rural, Social Sector and Motor Third Party Obligations 2024 (“Rural and Social Sector Master Circular”) which has repealed certain past circulars. The Master Rural and Social Sector Circular is applicable to all life, general and stand-alone health insurers, and, inter alia, provides for methodologies of arriving at the obligations of insurers with respect to the rural sector, social sector and motor third party.
Master Circular on Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers, 2024
The IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) Regulations, 2024 (“Registration Regulations”) were notified on 22 March 2024 with the object of simplifying the process of registration, transfer of shareholding, other forms of capital, amalgamation of insurers, listing of shares on stock exchanges and promoting ease of doing business for insurers. Thereafter, on 15 May 2024, the IRDAI issued the Master Circular on Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers, 2024 (“Registration Master Circular”) which has repealed the (i) Master Circular on Registration of Indian Insurance Companies, 2023, (ii) Circular on Exercise of ESOPs, 2021 and (iii) Circular on Creation of Debenture Redemption Reserve, 2018. The Registration Master Circular has provided certain clarifications relating to the Registration Regulations and provided the various forms required to be filled by an applicant entity for obtaining registration as an Indian Insurance company. The Registration Master Circular has provided clarifications on aspects relating to, inter alia, grant and exercise of ESOPs, transfer of shares, listing of equity shares and issuance of other forms of capital.
Master Circular on Expenses of Management, including Commission, of Insurers, 2024
The IRDAI (Expenses of Management, including Commission, of Insurers) Regulations, 2024 (“Expenses of Management Regulations“) were notified on 23 January 2024 with the object of providing flexibility to insurers to manage their expenses, including commission within overall limit as specified by the IRDAI. Thereafter, on 15 May 2024, the IRDAI issued the Master Circular on Expenses of Management, including Commission, of Insurers, 2024 (“Expenses of Management Master Circular”) which repealed the (i) circular dated 31 March 2023 on “Guidance note – Board policy of the insurer on the commission structure” and the (ii) circular dated 5 April 2023 on “IRDAI (Expenses of Management of insurers transacting Life Insurance business) Regulations 2023 – Clarifications” while supplementing the Expenses of Management Regulations. The Expenses of Management Master Circular, applicable to life, general and health insurers, provides clarifications on, inter alia, provisions pertaining to payment of commission, business plan for general/health/life insurers, returns of expenses of management and returns of commission required to be filed by insurers.
Master Circular on Actuarial, Finance and Investment Functions of Insurers, 2024
The IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024 (“AFIFI Regulations”) were notified on 20 March 2024 with the object of ensuring sound management practices and standards in discharge of actuarial, finance and investment functions in order to protect the interests of policyholders and facilitate ease of doing business. Thereafter, on 17 May 2024, the IRDAI issued the Master Circular on Actuarial, Finance and Investment Functions of Insurers, 2024 (“Actuarial Master Circular”) which has approximately 37 previous circulars on the subject. The Actuarial Master Circular, applicable to all insurers including those engaged exclusively in reinsurance business, inter alia, provides for necessary guidance on aspects pertaining to various provisions of the AFIFI Regulations.
Master Circular on Corporate Governance for Insurers, 2024
The IRDAI (Corporate Governance for Insurers) Regulations, 2024 (“CGI Regulations”) were notified on 21st March 2024 with the object to outline general terms, framework to adopt sound and prudent principles and practices of their governance structure and to delineate the roles and responsibilities of the board and management of the insurers. Thereafter, on 22 May 2024, the IRDAI issued the Master Circular on Corporate Governance for Insurers, 2024 (“Corporate Governance Master Circular”)which has repealed approximately 11 previous circulars on the subject. The Corporate Governance Master Circular is applicable to all insurers except a foreign company engaged in re-insurance business through a branch established in India. The Corporate Governance Master Circular, inter alia, sets out the norms in relation to composition of board of directors, appointment of common directors, roles and responsibilities of the board, conflict of interest, delegation of functions, remuneration of directors, disclosure requirements, and the various policies required to be adopted by the insurers.
Circular on Unsolicited Commercial Communications (UCC) through Telecom Resources – TRAl’s Guidelines, 2024
The IRDAI vide a circular dated 28 May 2024, brought recent guidelines of Telecom Regulatory Authority of India to the notice of all the Regulated Entities in order to curb Unsolicited Commercial Communications through voice calls or messages, by requiring them to follow various measures, including registration with any telecom service provider for sending commercial communication, use only of the ‘140/160’ number series for making commercial calls and registration of headers for sending SMS messages. Further, the regulated entities are required to be responsible for confidentiality and security of their customer’s data and are required to take steps to spread awareness among the customers in local language.
Master Circular on Health Insurance Businesses, 2024
The IRDAI (Insurance Products) Regulations 2024 (“Product Regulations”) were notified on 20 March 2024 with the object to facilitate insurers to respond faster to the emerging market needs, to promote ease of doing business, to improve insurance penetration and to protect the interests of policy holders. Thereafter, on 29 May 2024, the IRDAI issued the Master Circular on Health Insurance Business, 2024 (“Health Insurance Master Circular”)which has repealed approximately 55 previous circulars/orders/guidelines on the subject.The Health Insurance Master Circular, inter alia, requires insurance products not in compliance with the Product Regulations and the Health Insurance Master Circular to be modified before 30 September 2024. The Health Master Circular, inter alia, provides certain requirements to be followed by insurers undertaking health insurance business to ensure that the objectives of the Product Regulations are met.
Master Circular on Reinsurance, 2024
The IRDAI (Registration and Operations of Foreign Reinsurers Branches and Lloyd’s India) Regulations, 2024 were notified on 20 March 2024 with the object of strengthening and harmonizing the regulatory framework for reinsurance operations in India. Thereafter, on 31 May 2024, the IRDAI issued the Master Circular on Reinsurance, 2024 (“Reinsurance Master Circular”)which has repealed approximately 7 past circulars on the subject. The Reinsurance Master Circular, inter alia, provides norms on reinsurance programme and collateral requirements for placement of reinsurance business with cross border reinsurers.
Master Circular on General Insurance Business, 2024
Pursuant to the notification of the Product Regulations, on 11 June 2024, the IRDAI issued the Master Circular on IRDAI (Insurance Products) Regulations 2024 – General Insurance (“General Insurance Master Circular”) which has repealed approximately 16 previous circulars on the subject. The General Insurance Master Circular, inter alia, provides the norms relating to information for a retail policyholder, general operation principles and product management.
Master Circular on Life Insurance Products, 2024
The IRDAI issued the Master Circular on Life Insurance Products on 12 June 2024 (“Life Insurance Master Circular”) to be read with the Product Regulations. The Life InsuranceMaster Circular has repealed approximately 4 previous circulars on the subject.
The Life Insurance Master Circular provides norms in relation to, inter alia, general information for the policyholder/prospect/customer and implementation of the IRDAI (Insurance Products) Regulation, 2024.
The Life Insurance Master Circular envisages a product governance framework to ensure that every life insurer has board approved policies in place for product design, pricing, underwriting and advertisement of products. An internal governance framework is sought to be put in place by all insurers to ensure adherence to product design and pricing principles.
Provisions in relation to pricing of insurance products and the product approval process have been provided in the Life Insurance Master Circular along with the relevant forms.
Master Circular on Submission of Returns, 2024
The IRDAI issued the Master Circular on Submission of Returns on 14 June 2024 (“Returns Master Circular”). The Returns Master Circular has repealed approximately 10 previous circulars on the subject. The Returns Master Circular applies to all life insurers, general insurers, health insurers, reinsurers and foreign reinsurance branches transacting reinsurance business in India.
The Returns Master Circular has specified the various returns required to be submitted by the different categories of insurers/reinsurers and provides the formats for the same.
Master Circular on Operations and Allied Matters of Insurers, 2024
The IRDAI issued the Master Circular on Operations and Allied Matters of Insurers on 19 June 2024 (“Operations Master Circular”) with a view of strengthening the governance measures in relation to the operations of insurers.
The Operations Master Circular has repealed approximately 11 past circulars/guidelines on the subject. The Operations Master Circular provides compliances and other norms in relation to, inter alia, advertisement, opening of places of business of insurer, outsourcing of activities by insurers, grievance redressal mechanism, usage of trade logos of promoter partners/related parties, group insurance policies, unclaimed amounts of policyholders and servicing of policies in case of exit of distribution channels.
It has been clarified in the Operations Master Circular that insurers shall be required to open places of business within a period of one year from the date of approval, post which the approval shall stand lapsed. In relation to outsourcing the Operations Master Circular provides certain principles required to be followed by insurers when undertaking outsourcing of activities.
In relation to usage of trade logos of promoting partners/any other party, the parties shall be required to enter into an agreement and specify the consideration towards usage of trade logo in the agreement.
Order in the matter of Go Digit General Insurance Ltd.
The IRDAI vide order dated 02 May 2024 imposed a penalty of Rs 1 crore on Go Digit General Insurance Ltd. (to be charged to its shareholders account) for failure to comply with Section 26 of the Insurance Act, 1938, which provides that any alterations made to any matters required to accompany an application (which includes shareholders agreements) by an insurer for registration shall be furnished to the IRDAI. In this case, there was an inordinate delay in filing the amendment to the joint venture agreement with the IRDAI (which amended the conversion ratio for the compulsorily convertible preference shares). The change was material as it led to a change in the shareholding of the promoter entity of the insurer, upon conversion of the compulsorily convertible preference shares. Hence, a penalty was imposed on the insuer.
For more information contact:
Shubhangi Pathak
Practice Head – Insurance
shubhangi.pathak@veritaslegal.in
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