For several years, stakeholders in the Indian insurance sector have wanted the foreign direct investment (FDI) limit for Indian insurers to be increased to 74% in parity with the FDI limit applicable to the private banking sector. The finance minister recently announced that the FDI cap for Indian insurers will be increased from 49% to 74%. The increase in FDI for insurers is a key development at a time when new investments in the insurance space have been limited.
In 2020 a complaint was brought against General Insurance Corporation of India (GIC) Re before the Competition Commission of India (CCI), stating that GIC Re had enhanced reinsurance rates through the implementation of certain circulars and endorsements and incorporated a contagious disease exclusion. The CCI has dismissed the complaint, holding that the allegations of GIC Re's abuse of a dominant position and imposition of excessive and unfair pricing are without basis.
Entities engaged in insurance business must follow additional norms regarding foreign investment as specified by the Insurance Regulatory and Development Authority of India. This article answers commonly asked questions in relation to foreign investment in insurers in light of the extant insurance statutory and regulatory framework.
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, 2020 was a busy year for the Indian insurance sector. This article provides an overview of some of the key developments.
The Insurance Regulatory and Development Authority of India (IRDAI) has powers under the Insurance Act to inspect and investigate insurers and insurance intermediaries. The IRDAI recently issued the IRDAI (Minimum Information Required for Investigation and Inspection) Regulations 2020. The regulations stipulate the minimum information and records that insurers, intermediaries and insurance intermediaries are required to maintain and the general norms applicable thereto.
The Insurance Regulatory Development Authority of India (IRDAI) recently issued the Guidelines on Standard Individual Term Life Insurance Product. The guidelines aim to introduce a plain, individual term life insurance product with simple features and standard terms and conditions that would meet an average customer's requirements. All life insurers must now offer the prescribed standard product on or before 1 January 2021 with the IRDAI's requisite approval.
In order to clarify issues pertaining to the pledge and transfer of shares of insurers by promoters and shareholders, the Insurance Regulatory Development Authority of India recently issued the Circular on the Transfer of Shares of Insurers. This article summarises the key clarifications set out in the circular.
Owing to rising concerns around mental healthcare in India and the legislative push to recognise the crucial role that medical insurance plays in the treatment of mental disorders globally, the Insurance Regulatory and Development Authority of India has introduced certain measures for the insurance sector aimed at including the treatment of mental illness in the coverage offered under insurance policies. This article summarises the key developments.
Despite the relaxation of the foreign investment limits for insurance intermediaries, insurance intermediation remains a regulated activity. In this respect, the Insurance Regulatory Development Authority of India recently issued guidelines on the repatriation of dividends by insurance intermediaries with a majority foreign investment and a circular mandating the submission of an undertaking by insurance intermediaries.
In order to address the ever-changing COVID-19 pandemic in India, the government has issued various notifications, including a nationwide closure of all public and private establishments (except for essential service providers), which have had a direct impact on the normal functioning of entities, including those in the insurance sector. This article provides an overview of the key notifications and guidelines issued by the Insurance Regulatory and Development Authority of India with respect to the COVID-19 pandemic.
The Indian motor insurance framework underwent a variety of key developments in 2019, including the introduction of standalone own damage cover, the extension of the present insurance framework on ads to point-of-sales persons and registered automobile dealerships and the notification of an amendment to the Motor Vehicles Act 1988.
Health insurance products have seen an improved uptake recently and there appears to be a significant focus on rewarding policyholders for preventive and wellness habits, with a specific focus on forthright disclosures made in policy documents and advertising material. With changes introduced under amendment regulations and the expected issuance of draft mediclaim guidelines, it appears that a more comprehensive wellness regime will shortly be introduced to the Indian insurance market.
The Insurance Regulatory Development Authority of India (IRDAI) recently notified the Indian Insurance Companies (Foreign Investment) Amendment Rules 2019 and the IRDAI (Insurance Intermediaries) (Amendment) Regulations 2019, which have introduced additional conditions with which insurance intermediaries that have a majority shareholding of foreign investors must comply. The regulations have brought much-needed clarity, but the insurance industry's reaction remains to be seen.
Since 2015, foreign investment in insurers and insurance intermediaries has been capped at 49%. However, many felt that this parity in the foreign direct investment (FDI) limits was unfair, as – unlike insurers – insurance intermediaries are not custodians of policyholders' money. Thus, the recently notified Indian Insurance Companies (Foreign Investment) Amendment Rules 2019 have effectively increased the limit on FDI in insurance intermediaries to 100%.
The Insurance Regulatory and Development Authority (IRDAI) recently issued the IRDAI (Regulatory Sandbox) Regulations 2019, which aim to facilitate the creation of a regulatory sandbox in which to test new business models, processes, proposals and applications in order to strike a balance between the orderly development of the insurance sector and the protection of policyholders' interests. Although insurance players are calling the sandbox a game changer, it remains to be seen how much it will be used.
In a recent case, the National Consumer Disputes Redressal Commission (NCDRC) provided some useful guidance in relation to a claim assessment by an Insurance Regulatory and Development Authority licensed surveyor. The NCDRC dismissed the insured's contentions, stating that, among other things, the insured had failed to provide the relevant documentation to the surveyor. Thus, the insured had been unable to take advantage of his own wrongdoing.
The account aggregator ecosystem was introduced to solve the problems of data portability in the insurance sector, among others. However, the question of whether the business model is viable will largely hinge on the successful implementation of the consent architecture envisaged under the Master Directions Non-Banking Financial Company – Account Aggregator (Reserve Bank) Directions and the terms of the contractual arrangements which are entered into with the various regulated entities.
The Insurance Regulatory and Development Authority recently issued the Exposure Draft on Insurance Regulatory and Development Authority of India (Conflict of Interest) Guidelines 2019, which seek to provide guidance on the conflicts of interest that arise between insurers and other insurance companies or intermediaries which have the same directors.
The Supreme Court recently ruled in a case between Reliance Life Insurance and the wife of an insured party who had died of a heart attack. Reliance had repudiated the respondent's claim due to the suppression of material facts by the insured, who had failed to provide details of a second policy with another insurer. In its decision, the Supreme Court considered the nature of the disclosure made by the insured and the validity of the ground for repudiation of the claim.
The Insurance Regulatory and Development Authority recently issued the Report of the Committee on the Regulatory Sandbox in the Insurance Sector in India, which proposes to establish a sandbox environment in the insurance sector. According to the report, the sandbox will facilitate innovation in the Indian insurance sector and provide an ecosystem to foster the experimentation required to increase insurance penetration in the market and benefit policyholders. However, reservations remain.