Incurred claim ratio will lead to premium reduction: Irdai

The Insurance Regulatory and Development Authority of India (Irdai) has said 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 might be directed to reduce premiums.

Insurers have been asked to ensure the deviation between the actual incurred claim ratio and the incurred claim ratio projected at the time of filing of the product under file-and-use guidelines should not be more than 10 per cent. Where the deviation is more than 10 per cent, an exception report has to be filed by the insurers.

In its draft guidelines on expenses of management for non-life insurers and standalone health insurers, Irdai said no upfront payments, whether direct or indirect, is allowed in respect of current and future business volumes to insurance intermediaries. It added that Irdai, upon the representation received from a newly registered insurer, in accordance with the provisions of the Act, exercise forbearance for a period not more than five years.

The regulator said the insurer should ensure that its expenses are within the allowable limit on the segmental basis. Any violation would lead to restriction on performance incentive to managing director/chief executive director/whole-time directors and key management persons. Further, excess will be charged to the shareholders’ fund and there would also be restriction on opening of new places of business.

Further, there could be graded penal action and Irdai would prohibit the insurer from transacting business in a particular segment and could also lead to removal of managerial personnel.