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REGULATORY UPDATES - A GIST OF IMPORTANT CIRCULARS/NOTIFICATIONS/GUIDELINES ISSUED BY THE AUTHORITY(IRDAI)

Submitted, for information, the supervisory/ regulatory directions from IRDAI from 1st July 2021 to 31st October, 2021.

The Authority has issued certain Regulations/Guidelines/Circulars on issues as listed below:

1. Standards and Benchmarks for the Hospitals in the provider Network-(IRDAI Circular No. IRDAI/HLT/REG/MISC/199/07/2021 dated 23rd July,2021).

2. Withdrawal of Guidelines on Indian Owned and Controlled –(IRDAI Circular No. IRDAI/F&A/CIR/MISC/211/07/2021 dated 30th July,2021).

3. Solvency Margin for Crop Insurance Business –(IRDAI Circular No. IRDA/ACT/CIR/SLM/217/08/2021 dated 4th August,2021).

4. IRDAI encouraged all General Insurers to file Title Insurance Products with the Authority- (IRDAI Circular No. IRDAI/CIR/MISC/243/09/2021 dated 8th September ,2021).

Important Updates by IRDAI from July 2021 to October 2021

5. The Authority has constituted a Working Group with a focus to examine possibility of binging standardization of Cyber Liability Insurance Policy Wording- (IRDAI Circular No. IRDAI/NL/CIR/MISC/242/09/2021 dated 8th September ,2021).

6. Guidelines on Trade Credit Insurance-(IRDAI Notification No. IRDAI/NL/GDL/MISC/244/09/2021 dated 8th September,2021).

7. Extended timelines of sale and renewal of Short-Term CORONA specific Health Insurance Policies-(IRDAI Circular No. IRDAI/HLT/REG/CIR/246/09/2021 dated 13th September,2021).

8. Extended timelines of issued of e- insurance policies and dispensing with wet signature on proposal form up to 31/03/2021-(IRDAI Circular No. IRDAI/NL/CIR/MISC/247/09/2021 dated 13th September,2021).

9. Issued Dividend criteria for Equity Investment under " Approved Investment"-(IRDAI Circular No. IRDAI/F&I/CIR/INV/255/09/2021 dated 28th September,2021).

10. Issued guidelines on Public Disclosures by Insurance Companies- (IRDAI through Circular No. IRDAI/F&A/CIR/MISC/256/09/2021 dated 30th September,2021).

11. Maintenance of Current Accounts in multiple banks by Insurers- (IRDAI Circular No. IRDAI/F&A/CIR/MISC/262/10/2021 dated 5th October,2021).

ANNEXURE-A

1. Standards and Benchmarks for the Hospitals in the provider Network - (IRDAI Circular No. IRDAI/HLT/REG/MISC/199/07/2021 dated 23rd July,2021)

The Insurance Regulatory and Development Authority of India vide its circular dated 23rd June 2021 has extended the timeline for complying with the registration process for a further period of one year for all the existing network providers as on the date.

All the network providers shall register with the Registry of Hospitals in the Network of insurers maintained by insurance information Bureau (llB). [https://rohini.iib.gov.in] and shall Obtain either "NABH Entry Level Certification" (or higher level of certificate) issued by National Accreditation Board for Hospitals and Healthcare Providers (NABH) or State Level Certificate (or higher level of certificate) under National Quality Assurance Standards (NOAS), issued by National Health Systems Resources Centre (NHSRC).

Impact: the registration process enhance standard of services in these network hospitals. Chapter IV deals with Standard and Benchmarks for Hospitals in the provider network. Through registration process the network hospitals will force to follow NABH laid standards and other standards as may be specified.

2. Withdrawal of Guidelines on Indian Owned and Controlled –(IRDAI Circular No. IRDAI/F&A/CIR/MISC/211/07/2021 dated 30th July,2021)

The Authority, in exercise of powers conferred under Section 14 (1) of the IRDA Act 1999, vide IRDA/ F&A/ GDL /GLD /180/10/2015 dated October 19, 2015, had issued Guidelines on "Indian owned and controlled" with an objective to bring more clarity on the issue of compliance with the manner of "Indian owned and controlled".

 

(i) Insurance (Amendment) Act, 2021, notified on 25.03.2021, made the following amendments to sub-clause (b) of clause (7A) of section 2 of Insurance Act, 1938:

(a) Foreign investment ceiling has been increased from existing 49 percent to 74 percent.

(b) Explanation to sub-clause (b) of clause (7A) of Section 2, which mandated the requirement of "Indian owned and controlled" has been omitted.

(ii) The definitions of "Control", "Indian Control of an Indian Insurance Company" and "Indian Ownership" provided under Indian Insurance Companies (Foreign Investment) Rules, 2015 have been omitted vide Indian Insurance Companies (Foreign Investment) (Amendment) Rules, 2021.

Accordingly, in exercise of its powers under Section 14(1) of the IRDA Act, 1999, the Authority hereby withdraws the Guidelines on "Indian owned and controlled" dated October 19, 2015, with immediate effect.

Impact: the Authority has withdrawn guidelines to align Foreign Investment Ceiling in insurance companies from 40% to 74%. Because the control in insurance companies will be changed once FDI limit exceeds 50%.

3. Solvency Margin for Crop Insurance Business - (IRDAI Circular No. IRDA/ACT/CIR/SLM/217/08/2021 dated 4th August,2021)

The Authority through above Circular said that Premium Receivables to State/Central Government Sponsored Schemes for all quarters of the FY 2021-22 to the extent that they are not realized within a period of 270 days should be placed with zero value and same will be effective for a period of 1st April,2021 to 31st March,2022.

Impact: the decision of the Authority to consider Premium Receivable to State/Central Government Sponsored Schemes for all quarters of FY 2021-22 to the extent that they are not realized within a period of 270 days should be placed with Zero value . will impact Solvency Margin and Profitability of insurance company.

 

4. IRDAI encouraged all General Insurers to file Title Insurance Products with the Authority- (IRDAI Circular No. IRDAI/CIR/MISC/243/09/2021 dated 8th September, 2021)

The Authority through circular no. IRDA/CIR/MISC/243/09/2021 dated 8th September,2021 has advised all General Insurers to come with products of Tile Insurance and file the same with the Authority according to File and Use process.

The IRDAI circular said, "Considering the requirements of legal protection for promotors in the early stages of development of the project during financial appraisal, registration and approval with RERA authorities and safeguarding the interests of individual buyers after taking over the physical possession of the property, the regulator needs to expand the current title insurance products suitable to promotors/developers and retail property buyers."

According to the new notification, the Title Insurance covers, "Promoter Legal Expenses (Defense Cost) Policy: This cover will indemnify the insured against legal defense costs only against suits challenging the Title of the project".

Promoter Legal Expenses (Defense Cost) Policy; means that the expense incurred by the potential owner of the property in legal proceedings such as filing a court case, legal documentation and appointed lawyer's fees filed against the developer, promoter or any other allottee party will now be managed by the insurance. This is further designed to strengthen the stand of the potential property owner and support them in every possible manner to obtain possession of their property."

As mentioned above, currently, the title insurance provides indemnity coverage to developers, allotees and homebuyers against losses due to defects/faults in the title arising out of third-party challenges.

Impact: Title Insurance is the new product for insurance companies covering legal expenses incurred by the Promoters/ Developers for defending defect in title of land acquired. This will help a lot to the real estate players.

5. The Authority has constituted a Working Group with a focus to examine possibility of binging standardization of Cyber Liability Insurance Policy Wording- (IRDAI Circular No. IRDAI/NL/CIR/MISC/242/09/2021 dated 8th September, 2021)

The Insurance Regulatory and Development Authority of India (IRDAI) on September 08, 2021, has issued guidance document on product structure for Cyber Insurance. After keeping in mind, the rising incidences of cyber-attacks along with a growing number of high-profile data breaches. The online exposures for individuals, business organizations, offices and other establishments continue to increase more so in the current pandemic situation.

IRDAI has constituted a working group with a focus to examine the possibility of bringing standardization of Cyber Liability Insurance policy wording.

The main objectives of the guidance document on product structure for Cyber Insurance are;

• to enable insurers to evaluate new technologies posing heightened cyber risk, identify protection gaps in the existing products and address the changing needs of market.

• to facilitate insurers in developing stand-alone cyber insurance products, specifically designed to address the evolving cyber risks.

• to provide a set of recommendations on maximum possible coverages that could be included in the cyber insurance products.

• to encourage insurers to adopt best practices and provide additional covers in response to customer needs.

• to improve the development of the cyber insurance market with new products and enhance benefits for policyholders.

General insurers who have already developed some cyber insurance products with exclusive coverage for individuals to protect against cyber perils and currently offering the products that mainly focused on commercial business, may review the product structure based on the coverages advocated in the guidance document.

The above objectives should be implemented by insurers in a manner that is fair and useful to policyholders.

In addition to common reference framework contained in the document, it is equally important for insurers to consider the emerging insurable cyber perils and provide to customers a core insurance protection against cyber risks.

Impact: The Cyber Liability Insurance products will protect customers against emerging cyber perils and provide a core insurance against cyber risks.

6. Guidelines on Trade Credit Insurance- (IRDAI Notification No. IRDAI/NL/GDL/MISC/244/09/2021 dated 8th September,2021)

The Insurance Regulatory and Development Authority of India on 8th September 2021 has revised the guidelines on Trade Credit insurance which shall be effective from 1st November 2021.

The guidelines set out the regulatory framework to promote sustainable and healthy development of trade credit insurance business and to facilitate general insurance companies to offer trade credit insurance covers to suppliers as well as licensed banks and other financial institutions to help businesses manage country risk, open up access to new markets and to manage non-payment risk associated with trade financing portfolio.

These guidelines shall apply to all insurers transacting general insurance business, registered under the Insurance Act, 1938. However, ECGC Ltd (formerly Export Credit Guarantee Corporation of India Ltd) is exempted from the application of these guidelines.

A trade credit insurance for Banks / Financial Institutions and Factoring Companies shall cover the loss on account of non-receipt of payment from a buyer, due to commercial or political risks, against the bills / invoices purchased or discounted and it shall be issued for covering trade related transactions other than loan default of seller.

A trade credit insurance policy shall not cover any receivable arising from transactions made other than trade credit transaction.

Every insurer underwriting trade credit insurance business shall have Board approved Underwriting and Risk Management Policy in addition to or forming part of the underwriting policy prescribed under Guidelines on Product Filing Procedures for General Insurance Products which shall be filed with the Authority.

Impact: The guidelines set out the regulatory framework to promote sustainable and healthy development of trade credit insurance business and to facilitate general insurance companies to offer trade credit insurance covers to suppliers as well as licensed banks and other financial institutions to help businesses manage country risk, open up access to new markets and to manage non-payment risk associated with trade financing portfolio.

7. Extended timelines of sale and renewal of Short-Term CORONA specific Health Insurance Policies-(IRDAI Circular No. IRDAI/HLT/REG/CIR/246/09/2021 dated 13th September,2021)

The IRDAI considering situation and danger amid to CORONA Virus Pandemic has extended the sale and renewal of CORONA specific short term Health Insurance Policies till 31.03.2022.

The Authority instructed the insurers that , Corona Kavach Policies offered as per Guidelines on Covid Standard Indemnity based Health Policy of Circular ref no. IRDAI/HLT/REG/CIR/163/06/2020 dated 26.06.2020 and Corona Rakshak Policies offered as per Guidelines on Covid Standard benefit-based Health Policy of Circular ref no. IRDAI/HLT/REG/CIR/164/06/2020 dated 26.06.2020 are also permitted to be offered and renewed by all insurers up to 31.03.2022.

Impact: the decision of Authority to extend timelines for sale and renewal of Short-term CORONA specific policies is a welcome step and this will help financially to all customers against financial loss due to CORONA complications.

8. Extended timelines of issued of e- insurance policies and dispensing with wet signature on proposal form up to 31/03/2021-(IRDAI Circular No. IRDAI/NL/CIR/MISC/247/09/2021 dated 13th September,2021)

The IRDAI considering situation amid to CORONA Virus and for the safety of the policyholders extended timelines for issue of e-insurance policies and dispensing with physical copies and capturing wet signature on proposal form till 31/03/2021.

The Circular says that this has reference to IRDAI circular Ref: No. IRDA/NL/CIR/MISC/237/09/2020 dated 10th September,2020 and Ref: IRDAI/NL/CIR/MISC/064/03/2021 dated 24th March 2021 on the above subject. The exemptions granted for issuance of electronic policies as well as dispensing with physical document and wet signature have been extended up to the period 31/03/2022.

Impact: This will help in reduction of policyholder’s grievances and availability of documents and safety of the policyholders against CORONA Pandemic. The e-insurance policy is easy to handle for policyholders and servicing by the insurers.

9. Issued Dividend criteria for Equity Investment under " Approved Investment"-(IRDAI Circular No. IRDAI/F&I/CIR/INV/255/09/2021 dated 28th September, 2021)

The Authority through Circular No. IRDAI/F&I/CIR/INV/255/09/2021 dated 28th September,2021 allowed insurers to classify investments in Preference Shares and Equity Shares as part of "Approved Investment" if dividend is paid on such shares " far at least 2 years out of 3 consecutive years immediately preceding " instead of " for 2 consecutive years immediately preceding [ as required under Regulation 3(a)(4) and 3(a)(5) of IRDAI(Investment) Regulations, 2016] for the period from 1st October, 2021 to 31st March,2022.

Impact: the consideration of investments in Preference Shares and Equity Shares as " Approved Investment", if dividend on such shares has been paid for at least 2 years out of 3 consecutive years immediately preceding. This will share to increase in solvency ratios of the insurer.

10. Issued guidelines on Public Disclosures by Insurance Companies- (IRDAI through Circular No. IRDAI/F&A/CIR/MISC/256/09/2021 dated 30th September,2021)

The Authority (IRDAI) had issued circulars ref: IRDA/F&I/CIR/F&A/012/01/2010 dt. 28.01.2010 and IRDA/F&I/CIR/PBDIS/105/05/2011 dt. 27.5.2011 on "Public Disclosures by Insurers". Guidelines on Periodic Disclosures were also issued by the Authority on 9.4.2010 and vide circular ref: IRDA/CAD/CIR/245/11/2012 dt. 20.11.2012.

The revised instructions on Public Disclosures by Insurers placed at Annexure A will supersede the provisions of circular ref. IRDA/F&I/CIR/F&A/012/01/2010 dt. 28.01.2010, Guidelines on Periodic Disclosures dt. 9.4.2010, circular ref: IRDA/F&I/CIR/PBDIS/105/05/2011 dt. 27.05.2011 and circular ref: IRDA/CAD/CPR/245/11/2012 dt. 20.11.2012 issued by the Authority on Public/Periodic Disclosures by Insurers.

Insurers may note that the revised instructions shall come into effect from the financial year 2021-22 and the uploading of disclosures on website shall be on quarterly basis from the period ending 30th September 2021 whereas publishing in Newspapers will be on half yearly basis from the period ending 30th September 2021. The insurers may also make the quarterly disclosures in the revised formats for the period ending 30th June 2021 on voluntary basis on their websites.

The insurers are hereby, directed under Section 14 (2) (e) of the IRDA Act, 1999 to take necessary action to ensure compliance with the public disclosures requirements as indicated in Annexure A, from the FY 2021-22.

Impact:- this will help general public to make constructive decision before purchasing products an insurance company. The disclosure of important information by insurer will lead to healthy competition in the insurance market and it is customer friendly.

11. Maintenance of Current Accounts in multiple banks by Insurers- (IRDAI Circular No. IRDAI/F&A/CIR/MISC/262/10/2021 dated 5th October,2021)

RBI, vide its circular ref: RBI/2020-21/20 DOR.No.BP.BC/7/21.04.048/2020-21 dt. 6th Aug. 2020 on "Opening of Current Accounts by Banks – Need for Discipline", has instructed banks not to open current accounts for customers who have availed credit facilities in the form of cash credit (CC) / overdraft (OD) from the banking system. On a review, vide its circular ref: RBI/2020-21/79 DOR.No.BP.BC.30/21.04.048/2020-21 dt. 14th December 2020, RBI has permitted banks to open specific accounts which are stipulated under various statutes and instructions of other regulators/regulatory departments, without any restrictions placed in terms of the above-mentioned circular.

The Authority has allowed the Insurers to maintain separate current accounts with banks at different operational levels, i.e., Branch offices, Controlling offices, Corporate office, etc., for the purpose of premium collection, management expenses, policy payments, investment operations, etc. Maintenance of current accounts at different operational levels for specific purposes helps the insurers in managing funds, reconciliation of transactions and servicing claims of policyholders efficiently.

Impact: Insurers maintain separate current accounts with banks at different operational levels, i.e., Branch offices, Controlling offices, corporate office, etc., for the purpose of premium collection, management expenses, policy payments, investment operations, etc. Maintenance of current accounts at different operational levels for specific purposes helps the insurers in managing funds, reconciliation of transactions and servicing claims of policyholders efficiently.

DISCLAIMER: The above details have been shares for information and knowledge of readers. It is advisable to go through Circulars, Notifications etc, for more clarification and understanding.

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Category Corporate Law, Other Articles by - FCS Deepak Pratap Singh 



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