With the widespread impact of the COVID-19 pandemic and several regulatory changes having been introduced (as well as proposed) by the Insurance Regulatory and Development Authority of India (IRDAI), 2020 was a busy year for the Indian insurance sector. The year saw:
- the introduction of standardised and tariff products for various lines of business;
- the significant amendment of prevailing IRDAI guidance;
- the streamlining of various guidance pertaining to health insurance businesses;
- the consolidation of the advertisement regime;
- the relaxation of existing timelines for regulatory filings and submissions; and
- the introduction of new norms on investments and various operational matters.
This article provides an overview of some of the key developments of 2020.
At the beginning of 2020, the IRDAI issued norms on the standard covers, sum insured and policy wordings for a standard individual health insurance product (the so-called 'Arogya Sanjeevani policy'), which general and health insurers must now offer.(1) Thereafter, with the worsening of the initial COVID-19 outbreak, the IRDAI advised insurers to design appropriate health insurance products to cover risks caused by COVID-19. While there have been many other developments in the health insurance space (discussed separately below), the IRDAI issued the following guidance in relation to health insurance products:
- General and health insurers were asked to devise comprehensive health insurance policies(2) to enable all employers and organisations to comply with the directions issued under the Ministry of Home Affairs' 15 April 2020 order regarding the containment of the COVID-19 pandemic and the extension of lockdown measures.
- Insurers can offer COVID-19-related short-term health insurance policies until March 2021.(3)
- In July 2020 general and health insurers were informed that they must offer standardised individual health insurance products covering COVID-19 – namely, the Corona Rakshak(4) and Corona Kavach(5) products.
The IRDAI issued the Guidelines on Standard Individual Term Life Insurance Product (Saral Jeevan Bima) of 15 October 2020, pursuant to which the IRDAI issued norms on the non-linked, non-participating, individual, pure-risk life insurance product which all life insurers must offer from 1 January 2021 (for further details please see "Standard life insurance products: new regulatory requirements").
Proposed insurance products and working groups
In addition to introducing standard products in the insurance market, the IRDAI issued exposure drafts and invited stakeholder comments on standardised versions of products – namely, the personal accident product,(6) the standard vector-borne diseases health policy(7) and the standard travel insurance product.(8) It remains to be seen whether the proposed standard products will be notified in their present form.
The IRDAI also constituted working groups in respect of:
- drone technology (ie, remotely piloted aircraft systems in light of their fast-growing use scenarios);(9)
- surety bond offerings by general insurers, due to the cash-flow issues witnessed in the Indian banking sector;(10)
- a standard cyber liability insurance product for small business and individuals;(11) and
- existing tariff-based insurance products in the engineering retail segment.(12)
The recommendations and comments of these working groups are expected in 2021; it will be interesting to see the form in which these insurance products are ultimately notified.
The regulatory regime applicable to motor insurance business saw various developments in 2020 (for further details please see "Motor insurance: recent regulatory changes"). Most notably, the withdrawal of the long-term motor package cover offered for three years (for new cars) or five years (for new two-wheelers), with effect from 1 August 2020,(13) owing to implementation concerns. Further, in light of the Supreme Court's decision in MC Mehta v Union of India,(14) the IRDAI expressly clarified that not holding a valid pollution under control (PUC) certificate is not a valid reason for denying any claim under a motor insurance policy.(15)
In relation to reinsurance arrangements by Indian insurers, the IRDAI issued the Guidelines on Filing of Reinsurance Arrangements with the IRDAI of 31 January 2020, which prescribed conditions for the submission of Indian insurers' annual reinsurance programmes and clarified the accounting treatment applicable to all 'alternative risk transfer' agreements.(16) The IRDAI also issued the Circular on Capital Gearing Treaties of 30 March 2020, pursuant to which insurers were:
- prohibited from entering into fresh capital gearing treaty arrangements (ie, carried out purely for improving solvency margin); and
- required to phase out any such existing arrangements.
Policy issuance and related compliance
The IRDAI exempted insurers from issuing physical copies of policy documents and proposal forms for the financial year 2020 to 2021(17) and allowed life insurers to obtain customer consent without requiring wet signatures on proposal forms.(18) In this context, the IRDAI also issued norms on video-based identification processes as an optional electronic and consent-based identification or know-your-customer process.(19)
COVID-19-related notifications
The IRDAI has issued various instructions in light of and to reduce the impact of the COVID-19 pandemic on policyholders and insurers (for further details please see "COVID-19: regulatory updates"), including with regard to:
- setting up helplines and providing applicable disclosures;(20)
- offering settlement options under unit-linked policies;(21)
- the admissibility of life insurance claims;(22)
- the settlement of COVID-19-related claims(23) (including hospitalisation treatment and the use of make-shift or temporary hospitals(24)) and the provision of cashless facilities;(25)
- ensuring the availability of adequate capital and rationalising the expenses of management for the financial year 2020 to 2021;(26)
- the maintenance of business continuity plans and the role of crisis management committees in monitoring the current situation on a real-time basis;(27)
- rescheduling payments under term loans(28) and collecting premium in instalments;(29) and
- relaxing timelines for grace periods,(30) regulatory filings,(31) public disclosures(32) and other compliance matters.(33)
On 20 October 2020 the IRDAI issued the Exposure Draft on Insurance Regulatory and Development Authority of India (Insurance Advertisements and Disclosure) Regulations 2020, which proposes to, among other things, bring the existing IRDAI (Insurance Advertisements and Disclosure) Regulations 2000 into conformity with the Master Circular on Insurance Advertisements, as updated on 31 August 2019.
Based on various representations from the Life Insurance Council and the General Insurance Council, in August 2020 the IRDAI permitted insurers to classify investments in preference shares and equity shares as approved investments between 1 April 2020 and 31 March 2021.(34) Further, insurers were also directed to undertake at least 10% of their total secondary market trades in the corporate bonds through the request for quote (RFQ) platform available on the BSE and the National Stock Exchange.(35) The IRDAI also directed insurance intermediaries to submit an undertaking(36) confirming compliance with the norms on investment from countries which share a land border with India,(37) which now requires prior government approval (for further details please see "FDI in insurance intermediaries – update").
On 5 November 2020 the IRDAI also proposed the introduction of the IRDAI (Manner of Determination of Compensation to Shareholders on Merger of an Insurer under a Scheme Prepared under Section 37A) Regulations 2020, which concern the determination of compensation for shareholders and members whose rights have been adversely affected.
In relation to the submission of data for regulatory inspections, on 26 November 2020 the IRDAI issued the IRDAI (Minimum Information Required for Investigation and Inspection) Regulations 2020, which will enter into force on 23 May 2021 (for further details please see "Minimum information for investigation and inspection by IRDAI"). The regulations stipulate the minimum information and records to be maintained by insurers, intermediaries and insurance intermediaries and steps to be taken towards the digitisation of all physical records,(38) in order to enable the IRDAI's investigating officers to effectively undertake their duties and functions. Further, these entities were directed to maintain and update a board-approved policy in relation to the maintenance of records and information.
Miscellaneous operational norms
The IRDAI also issued guidance on various operational matters concerning insurers:
- The IRDAI made it mandatory for insurers to obtain a legal entity identifier on or before 31 July 2020, per the procedure prescribed by the Reserve Bank of India.(39)
- The IRDAI issued norms on the Standards for Hospitals in the Provider Network – Disclosure of Quality Parameters of 10 June 2020 and the Guidelines on Public Disclosures by Insurers on the Qualitative and Quantitative Parameters of the Health Services Rendered to Policyholders of 10 June 2020 in relation to hospital-related disclosures to be made by insurers and third-party administrators.
- In relation to the Insurance Information Bureau's (IIB's) central database of licensed insurance salespersons (the ENVOY portal), the IRDAI stipulated that all salesperson identifiers be shifted from Aadhar (ie, a unique identification number) to permanent account number details.(40)
- The IRDAI issued clarifications in relation to the transfer of shares by insurers, the calculation of the threshold limits, the requirement of the IRDAI's approval in case of a pledge and the suspension of voting rights (for further details please see "IRDAI Circular on Transfer of Shares of Insurers – clarifications and further questions").
- The IRDAI also notified a panel of actuaries(41) for insurers to use, subject to the conditions prescribed by the IRDAI(42) and valid up to 31 August 2023.
- On 1 December 2020 the IRDAI amended various provisions of the IRDAI (Insurance Surveyors and Loss Assessors) Regulations 2015 by way of the IRDAI (Insurance Surveyors and Loss Assessors) (Amendment) Regulations 2020, including the applicable code of conduct and the reporting requirements with which insurers must comply.(43)
Changing landscape of health insurance business
Standardisation in health insurance
In early June 2020, based on comments from stakeholders on the exposure draft of the Guidelines on Standardisation of General Clauses in Health Insurance Policy Contracts of January 2020, the IRDAI notified the final guidelines(44) stipulating standardised general clauses for indemnity-based health insurance policies (excluding personal accident and domestic and overseas travel matters), such as the disclosure to information norm, the claim settlement, cancellation and the renewal of a policy. Further, the Guidelines on Standardisation in Health Insurance of 29 July 2016 were superseded by the Master Circular on Standardisation of Health Insurance Products of 22 July 2020, which compiles all standardisation norms issued up to 31 March 2020.(45)
Product construct norms
In June 2020 the IRDAI issued various norms expanding and clarifying the construct and scope of coverage under health insurance policies, such as in relation to insurance coverage for persons with:
- a disability;
- HIV/AIDS; or
- a mental illness (for further details please see "Health insurance cover for mental illnesses").(46)
The IRDAI also prescribed norms on telemedicine(47) and the proportionate deduction of associate medical expenses.(48)
In August 2020 the scope of the definition of 'pre-existing disease' set out under the standardisation guidelines was amended.(49) More recently, the IRDAI required insurers to include a benefit illustration in respect of every health insurance product offering individual and family floater options.(50)
Health insurance amendment regulations
The IRDAI (Health Insurance) (Amendment) Regulations 2019 introduced certain amendments to the existing IRDAI (Health Insurance) Regulations 2016, including:
- modifying the provisions on Ministry of Ayurveda, Yoga & Naturopathy, Unani, Siddha and Homoeopathy treatment;
- accepting renewal premiums; and
- modifying wellness norms for offering discounts on third-party services and merchandise.
Wellness benefits in health insurance
Pursuant to comments from stakeholders on the draft guidelines (for further details please see "Wellness benefits in health insurance: proposed guidelines"), the IRDAI issued the Guidelines on Wellness and Preventive Features of 4 September 2020, which focused on insurers' provision of wellness and preventive features and benefits. The wellness guidelines continue to encourage and reward policyholders which meet the health and lifestyle conditions and criteria set out under their health insurance policy.
Migration and portability
The IRDAI issued the Guidelines on Migration and Portability of Health Insurance Policies of 2 January 2020, which stipulate that insurers offering indemnity-based health insurance policies must provide for the portability and migration of policies in accordance with the norms stipulated thereunder. In addition to these norms, the IRDAI separately issued various norms on the portability of group health insurance policies issued to account holders of various banks(51) and specific norms for Corona Rakshak and Corona Kavach products.(52)
While a majority of COVID-19-related notifications are scheduled to lapse by March 2021, several insurance regulatory developments remain on the table. Notably, 2021 could witness the introduction of various new standardised products in the cyber, health, travel and engineering space, which insurers will be expected to offer in addition to their existing products, as well as an updated advertisement framework.
Endnotes
(1) Guidelines on Standard Individual Health Insurance Product of 1 January 2020.
(2) Providing Mandatory Medical Insurance Coverage to Workers as Part of the National Directives of the Ministry of Home Affairs of 16 April 2020.
(3) Guidelines on Introduction of Short-Term Health Insurance Policies Providing Coverage for COVID-19 Disease of 23 June 2020.
(4) Guidelines on COVID Standard Benefit-Based Health Policy of 26 June 2020 applicable to all insurers.
(5) Guidelines on COVID Standard Health Policy of 26 June 2020 applicable to general and health insurers.
(6) Guidelines on Standard Personal Accident Product of 9 December 2020.
(7) Standard Vector-Borne Disease Health Policy of 13 November 2020.
(8) Guidelines on Standard Travel Insurance Policy of 28 December 2020.
(9) Working Group for Insurance of Remotely Piloted Aircraft System and Drone Technology on 24 June 2020.
(10) Working Group to Study the Suitability of Offering of Surety Bond by Indian Insurance Industry of 1 July 2020.
(11) Working Group to Study Cyber Liability Insurance of 19 October 2020.
(12) Working Group for Revisiting the Retail Business of Engineering Tariff of 5 November 2020.
(13) Withdrawal of Long-Term Package Cover Offering Both Motor Third-Party Insurance and Own Damage Insurance for Three Years or Five Years of 8 June 2020.
(15) PUC Certificate at the Time of Renewal of Insurance of Vehicle – Directions given by the Supreme Court in WP(C) 13029/1985 in MC Mehta v Union of India of 20 August 2020 and the Press Release Regarding Valid PUC Certificate at the Time of Renewal of Motor Vehicle Insurance of 26 August 2020.
(16) Accounting Treatment of the Alternate Risk Transfer Agreements of 8 December 2004.
(17) Issuance of Electronic Policies of 4 August 2020; Issuance of Electronic Policies and Dispensing with Physical Documents and Wet Signature on the Proposal Form in Respect of Health Insurance Policies of 10 September 2020 and Issuance of Electronic Policies and Dispensing with Physical Documents and Wet Signature on the Proposal Form of 10 September 2020.
(18) Dispensing with Physical Signature on Proposal Forms of 11 November 2020.
(19) Video-Based Identification Process of 21 September 2020.
(20) COVID-19-Related Instructions of 30 March 2020.
(21) Global Pandemic COVID-19-Related Instructions to Life Insurers of 4 April 2020 and related FAQs on Settlement Options under Unit-Linked Life Insurance Plans of 7 April 2020.
(22) COVID-19 Global Pandemic-Related Instructions to Life Insurers of 23 March 2020.
(23) Guidelines on Handling of Claims Reported Under Corona Virus of 4 March 2020.
(24) Guidelines on Settlement of Claims on Treatment at 'Makeshift or Temporary Hospitals' as Permitted by Government of 16 July 2020.
(25) Norms on Settlement of Health Insurance Claims of 18 April 2020 and Provision of Cashless Facility to the Policyholders of 14 July 2020.
(26) Prudent Management of Financial Resources of Insurers in the Context of COVID-19 Pandemic of 13 April 2020 and 24 April 2020.
(27) COVID-19-Related Instructions of 30 March 2020.
(28) Rescheduling of Term Loans in the Context of Outbreak of COVID-19 of 8 April 2020 permitted insurers to grant a moratorium of three months towards payment of instalments falling due between 1 March 2020 and 31 May 2020; COVID-19 - Rescheduling of Term Loans of 7 July 2020 extended the period further for loans falling due between 1 June 2020 and 31 August 2020; Group Credit Life Schemes – Modifications to Align the Coverage with the Moratorium Announced by Reserve Bank of India of 10 July 2020.
(29) Norms on Collection of Health Insurance Premium During COVID-19 Crisis of 21 April 2020.
(30) Global Pandemic COVID-19-Related Instructions to Life Insurers of 4 April 2020; Extension of Grace Period up to 31 May 2020 of 9 May 2020.
(31) COVID-19-Related Instructions of 30 March 2020; Additional Time Allowed for Filing Regulatory Returns of 4 April 2020; To Ensure Proper Service to Policyholders and Customers of 23 March 2020; Additional Time Allowed for Filing Regulatory Returns to All Insurance Intermediaries of 9 April 2020; Additional Time Allowed for Filing Quarterly Return – Q4-2019-20 – Regulatory Returns to All Insurance Intermediaries of 13 May 2020; Relaxation from Submission of Hard Copy of Regulatory Returns of 4 August 2020.
(32) Sub: Extension of Time Limit Applicable to Public Disclosures on Websites of 4 June 2020 extended the timeline for compliance under Public Disclosures by Insurers of 28 January 2010 by an additional 30-day period ending 31 March 2020.
(33) Extension of Timeline for Review and Updation of Stewardship Policy Based on the Revised Guidelines on Stewardship Code for Insurers in India of 30 April 2020, pursuant to which the IRDAI has extended the timelines on the subject matter to 31 May 2020; Relaxation of Timelines for Certain Provisions of the IRDAI (Reinsurance) Regulations 2018 of 28 March 2020 extended the filing to 31 May 2020; Extension of Timelines to Comply with the Standards and Benchmarks for the Hospitals in the Provider Network of 24 July 2020 by one year.
(34) Dividend Criteria for Equity Investment under 'Approved Investment' of 21 August 2020.
(35) Implementing RFQ Platform for Investments in Corporate Bonds/Commercial Papers of 25 September 2020.
(36) Foreign Investment in Insurance Intermediaries of 18 May 2020.
(37) Press Note 3 of 17 April 2020 and Foreign Exchange Management (Non-Debt Instruments) (Second Amendment) Rules 2020.
(38) Maintenance of Records under IRDAI (Minimum Information Required for Investigation and Inspection) Regulations 2020 of 8 December 2020.
(39) Legal Entity Identifier Code of 5 June 2020.
(40) Central Database of Licensed Insurance Salespersons in India (ENVOY) at IIB of 30 June 2020.
(41) Panel of Actuaries of 31 August 2020.
(43) Guidelines for All General Insurance Companies for Submission of Reports of 2 December 2020.
(44) Guidelines on Standardisation of General Terms and Clauses in Health Insurance Policy Contracts of 11 June 2020.
(45) The standardisation guidelines include norms issued under the Guidelines on Standardisation in Health Insurance, the Guidelines on Standardisation of Exclusions in Health Insurance Contracts and the Guidelines on Standard Individual Health Insurance Product.
(46) Disclosure of Underwriting Philosophy of Offering Insurance Coverage to Persons with Disability and People Affected with HIV/AIDS and Mental Illness Diseases of 2 June 2020.
(47) Guidelines on Telemedicine of 11 June 2020 and Telemedicine Practice Guidelines of 25 March 2020 issued by the Medical Council of India.
(48) The Modified Guidelines on Product filing in Health Insurance Business-Norms on Proportionate Deductions of 11 June 2020 were issued further to the Exposure Draft on Modified Guidelines on Product Filing in Health Insurance Business-Norms on Proportionate Deductions of 17 March 2020.
(49) Master Circular on Standardisation of Health Insurance Products – Corrigendum of 28 August 2020.
(50) Disclosure of Benefit/Premium Illustration for Health Insurance Policies Issued on Floater Basis of 28 December 2020.
(51) Additional Norms on Portability under Health Insurance Policies of 7 October 2020.
(52) Norms on Renewability, Portability and Migration of Standard COVID-Specific Products of 13 October 2020.
