IRDAI to announce host of new norms from October

Insurance Regulatory and Development Authority of India (IRDAI) is set to bring out a host of new norms to conform to the new insurance act which was passed law makers in the budget session. These norms are likely to be implemented from as early as December 2015.

The Insurance Laws (Amendment) Act 2015 has made fundamental changes in the way insurance is manufactured, sold and brought. Among other areas, regulations on claim rejection, expense management and solvency ratio will be brought out.

For speedier execution and finalisation of new norms, three committees on life, non-life and health have been constituted. These committees have industry members who deliberate and bring out appropriate recommendations in their report on these issues.

"Now that the regulatory body has all whole-time members in place, it is ensuring all the new laws are brought out on time so that we have adequate time to adapt to the new norms," said the chief executive of a large private life insurer.

There are expected to be differing views in areas of expense management and claims rejection. While the new Act says that no claim (even if fraudulent) can be rejected after three years, insurers have said that fraudsters will take advantage of these norms.

Similarly, a new compensation and incentive structure will be brought out for agents that will impact the outgo from customer premiums. While the regulator had earlier said that fixed remuneration would reduce attrition of agents, insurers have said that this may not be suitable.

Sources said that draft norms on agent commissions will be brought out in the next few weeks.

By December, final laws on Indian management and control will be finalised. This will decide as to how an Indian insurance company will be run, who its board and top management would be composed of and what are the rights given to both JV partners.

Several foreign JV partners had expressed discontent on restriction of their rights in board appointment and voting for strategic decisions. Insurers said the regulator will take a middle path to ensure that rights of both partners in an insurance venture are protected.

New norms and impact on policyholders:
No claim rejection after 3 years. After 3 years of a policy being in force, claims cannot be rejected under any circumstances. Hence customers wouldn't have to wait for claim to be approved.

Agent remuneration to be more balanced: Agent commission which is deducted heavily from first year premium will be more balanced towards 2nd, 3rd and 4th year. More customer premium will go towards their saving/investment component.
Solvency ratio higher for some products: Since insurers would have to maintain higher capital for products like group health, this would result in higher premiums.