IRDAI 2024: Regulatory Round-Up

Introduction

With the IRDAI's vision of "Insurance for All by 2047" driving the regulatory overhaul, 2024 has been a pivotal year for the insurance sector, particularly for Insurers.

Following a comprehensive review of the regulatory framework and a shift toward a principle-based regime, IRDAI replaced 37 existing regulations with 7 consolidated regulations and introduced 2 new regulations. Key updates are discussed below.

Expenses of Management and Commission Regulations

The IRDAI introduced the IRDAI (Expenses of Management, including Commission, of Insurers) Regulations, 2024, repealing the recently updated 2023 norms¹. While the changes primarily consolidate existing provisions, the new framework emphasise self-governance by offering Insurers greater flexibility to:

• Determine commission amounts payable to intermediaries for insurance distribution.
• Manage overall expenses within an overarching limit by removing regulatory caps for each category of insurance products.
• Implement Board-approved policies for commission structures and expense management.

Further details on these changes can be accessed here.

Policyholders' Protection and Allied Matters

The IRDAI (Protection of Policyholders' Interests, Operations, and Allied Matters of Insurers) Regulations, 2024, along with master circulars dated 19 June 2024² and 5 September 2024³ repeal and consolidate the previous norms related to policyholder protection, advertisements, outsourcing, premium receipt, nomination and assignment, and place of business.

These regulations shift toward self-regulation within IRDAI's oversight, mandating Insurers to adopt Board-approved policies on:

• Protection of policyholders' interests.
• Electronic issuance of policies (with physical issuance upon request).
• Group underwriting practices.
• Claim settlement timelines.
• Grievance redressal.
• Advertisement compliance.
• Outsourcing and place of business operations.

Notably, Insurers no longer need to file advertisements with IRDAI or submit compliance certificates. Instead, designated Key Managerial Personnel (KMPs) or senior management members must oversee advertisement compliance by forming an "Advertisement Committee".

For outsourcing by Insurers, the revised norms update the list of activities prohibited from outsourcing, and expand the responsibilities of Insurers' internal Outsourcing Committee, requiring effective internal controls. Further details on these changes can be accessed here.

Additionally, Insurers are encouraged to adopt a "phygital" (physical + digital) presence for broader market outreach.

Insurance Products Regulations

The IRDAI (Insurance Products) Regulations, 2024, consolidate norms on product design for life, general, and health insurance. This principle-based approach mandates Insurers to establish a Board-approved Product Management Committee and policies covering:

• Product design and pricing.
• Underwriting and advertisement.
• a "Customer Information Sheet" accompanying every insurance policy, explaining the basic features.
• Overall product governance.

General Insurance

IRDAI has removed the requirement for the IRDAI's prior approval of general insurance products and de-notified tariff wordings for fire, motor, engineering, miscellaneous, and marine insurance, allowing Insurers to develop their own wordings.

The master circular dated 11 June 2024⁴ introduces key changes:

• General Insurance Council will now appoint surveyors/loss assessors through a tech-based random selection system.
• Consolidated norms on motor, surety, and trade credit insurance.

Health Insurance

The master circular of 29 May 2024⁵:

• Removes the requirement to incorporate standardized definitions and conditions in policy wordings.
• Encourages insurers to achieve 100% cashless claim settlements, limiting reimbursements to exceptional cases.

Life Insurance

The regulations now recognize "index-linked" life insurance products, where benefits are linked to publicly available indices. The master circular of 12 June 2024⁶ introduces:

• Minimum sum assured requirements based on age.
• Revised surrender value computations.
• New conditions for premium reduction.
• Mandatory loan facility for savings insurance policies.

While standardized wordings for most products have been repealed, those for "Saral Jeevan Bima," "Saral Pension," "Arogya Sanjeevini," and "Corona Kavach" remain in effect.

Corporate Governance of Insurers

The IRDAI (Corporate Governance for Insurers) Regulations, 2024, and master circular of 22 May 2024 consolidate norms on Board composition, KMP appointments, auditor selection, conflict of interest, and Board committee responsibilities. The norms applicable to FRBs are specified separately in the IRDAI's "Master Circular on Reinsurance 2024" of 31 May 2024. Further details on these norms can be accessed here.

For the first time, IRDAI mandates insurers and Foreign Reinsurance Branches (FRBs) to establish:

• Board-approved Environmental, Social, and Governance (ESG) frameworks.
• Board-approved Climate Risk Management frameworks.

However, detailed implementation guidelines remain pending.

Further details on these requirements can be accessed here.

Collateralized Reinsurance

New reinsurance norms require insurers (Indian cedants) placing business with Cross-Border Reinsurers (CBRs) to secure collateral via:

• Irrevocable Letters of Credit from CBRs, or
• Premium/fund withholding by the cedant.

Exemptions apply where:

• Premiums are retroceded (including those by FRBs).
• Cessions pertain to government schemes (e.g., PMFBY, PMJAY, PMJJBY, PMSBY).
• Total ceded premiums to CBRs are below Rs. 75 crores , provided the CBR maintains a credit rating of 'A-' or higher.

This requirement is effective from FY 2025-26.

Further details on this requirement can be accessed here.

Other Key Developments

• Insurers' Structural Changes: The IRDAI (Registration, Capital Structure, Transfer of Shares, and Amalgamation of Insurers) Regulations 2024 and the accompanying master circular of 15 May 2024⁷ consolidate the norms on registration, permissible capital structure, transfer of shares, listing of equity shares of Insurers on stock exchange, and amalgamation of Insurers.
• Actuarial, Finance & Investment Functions: The IRDAI (Actuarial, Finance, and Investment Functions of Insurers) Regulations 2024 and the accompanying master circular of 17 May 2024⁸ repeal and consolidate the norms in relation to an Insurer's appointed actuary, asset and liability valuation, solvency, investments, and financial reporting.
• Rural, Social & Motor TP Obligations: The IRDAI (Rural, Social Sector, and Motor Third Party Obligations) Regulations 2024 and the accompanying master circular of 10 May 2024⁹ consolidate and repeal the norms in relation to Insurers' obligations towards rural and social sector and motor third party and outline minimum insurance business thresholds under the Insurance Act, 1938.
• Registration of FRBs & Lloyd's India: The IRDAI (Registration and Operations of FRB and Lloyd's India) Regulations 2024 to repeal and consolidate previous norms for their functioning.
• Bima Sugam Insurance Marketplace: The IRDAI (Bima Sugam-Insurance Electronic Marketplace) Regulations, 2024, establish a non-profit insurance e-marketplace for policy sales, servicing, claims, and grievance redressal.
• Submission of Returns: The IRDAI's "Master Circular on Submission of Returns" of 14 June 2024 consolidates all regulatory filing requirements for insurers and reinsurers.

Insurance Laws (Amendment) Bill, 2024

The Finance Ministry released a draft "Insurance Laws (Amendment) Bill, 2024" on 26 November 2024, proposing:

• 100% Foreign Direct Investment in Indian Insurance Companies.
• Expanded scope of insurance business.
• Perpetual licensing for intermediaries.

Our article discussing the key changes proposed under the Draft Bill in detail can be accessed here.

Concluding Remarks

2024 marks a significant phase of regulatory transformation, streamlining compliance and increasing Insurer autonomy. While these reforms primarily target Insurers, potential regulatory changes for intermediaries may also be on the anvil in 2025.

Footnotes

1. The regulations of 2023 are: (a) the IRDAI (Payment of Commission) Regulations 2023, (b) the IRDAI (Expenses of Management of Insurers transacting Life Insurance Business) Regulations 2023, and (c) the IRDAI (Expenses of Management of Insurers transacting General or Health Insurance Business) Regulations 2023.

2. IRDAI's "Master Circular on Operations and Allied Matters of Insurers" of 19 June 2024.

3. IRDAI's "Master Circular on Protection of Interest of Policyholders" of 5 September 2024.

4. IRDAI's "Master Circular on General Insurance Business" of 15 June 2024.

5. IRDAI's "Master Circular on Health Insurance Business" of 29 May 2024.

6. IRDAI's "Master Circular on Life Insurance Products" of 12 June 2024.

7. IRDAI's "Master Circular on Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers, 2024" of 15 May 2024.

8. IRDAI's "Master Circular on Actuarial, Finance and Investment Functions of Insurers" of 17 May 2024.

9. IRDAI's "Master Circular on Rural, Social Sector and Motor Third Party Obligations" of 10 May 2024.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.