Greater disclosures, segment-wise reporting on the anvil for insurance sector

On general insurance side, this would lead to greater curbs on discounting practices in areas like fire and group health insurance

Insurance companies will now be required to not only disclose more details about the product returns in the life policies that are being sold, but also have segment-wise reporting on the general insurance side to ensure that there is no cross-subsidisation of products. In the future, solvency requirements for some products.

Regulatory officials said that while the new norms will only be made applicable from the next financial year onwards, this would require insurers to not only give greater details about the products being sold and the exact returns on an annual basis, on the general insurance side this would lead to greater curbs on the discounting practices in areas like fire and group health insurance.

"We want to ensure that there are no product or products getting more preference than others. We will look into these segments, the products sold, premiums as well as the incurred claim ratio to ascertain whether the pricing is adequate or not," an official said.

Insurance Regulatory and Development Authority of India (IRDAI) has said that if a general insurer projects an incurred claim while filing a product and if the actual claim is lower than that by 10 per cent over three years, they may be directed to reduce premiums.

Further it has said that any violation in expenses would lead to Restriction on performance incentive to Managing Director (MD) / Chief Executive Director (CEO) / Whole-Time Directors (WTD) and Key Management Persons (KMPs).

Insurers have said that this would look to a crack-down in areas where there has been discrepancy in premiums. "There have been cases where future premiums are not in tandem with the claims in the last year. This needs to stop, especially in areas like group health," said the chief executive of a mid-size private general insurer.

Similarly, a committee on review of life insurance regulations set up by Insurance Regulatory and Development Authority of India (IRDAI) that there has to be transparent disclosures about products at point of sale.

It has suggested that there should be a combination of better governance of the with profits business, appropriate documentation and transparent disclosure to the policyholder at point of sale, post point of sale and periodic (annual) statements rather than an artificial imposition of reduction in yield (RIY) which would be difficult to implement in practice.

Company executives have said that this would mean that in products like participatory products, the disclosures would be much higher.

"Certain terms will have to be defined at the sale stage itself so that the customer understands what they are buying. However, since not many of them are savvy, they may not be able to understand how the yield reduction works," said the chief actuary at a large private insurer.

Similarly, a general insurance committee was also set up to review regulations. It has said that Premium Deficiency Reserve (PDR) is recommended to be estimated for all lines of business.