Indian regulator announces major regulatory overhaul

IRDAI consolidates 34 regulations into six and adds two — including for country's upcoming digital marketplace, Bima Sugam.

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Indian regulator announces major regulatory overhaul
Indian regulator announces major regulatory overhaul
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Indian regulator announces major regulatory overhaul

Key APAC insurance developments – delivered free each weekday.

(Re)in Summary

• The IRDAI announces eight principles-based regulations following 125th Authority meeting.
• 34 existing regulations are consolidated into six with introduction of two new regulations, including for upcoming online market place, Bima Sugam.
• Regulations cover: Rural, Social Sector, and Motor Third Party Obligations; Bima Sugam; Registration, Capital Structure, Transfer of Shares & Amalgamation; Corporate Governance; Products; Registration and Operations of Foreign Reinsurers Branches & Lloyd’s; Actuarial, Finance, and Investment.
• Regulation are part of ongoing efforts that align with ‘Insurance for All by 2047’ strategy, which also include issuing of more insurance licenses and promotion of India as an attractive reinsurance hub.

The Insurance Regulatory and Development Authority of India (IRDAI) on Friday announced a major regulatory revamp, following its 125th Authority meeting on 19 March.

The regulatory body has approved eight principle-based consolidated regulations aimed at enhancing the insurance sector’s operational efficiency and consumer protection.

This regulatory overhaul replaces 34 existing regulations with six and introduces two new ones, as the regulator moves toward simplifying and streamlining the insurance industry’s regulatory framework.

In an announcement, the IRDAI said, “These regulations encompass pivotal domains such as safeguarding of policyholders’ interests, rural and social sector responsibilities, electronic insurance marketplace, insurance products and operation of foreign reinsurance branches, as well as aspects of registration, actuarial, finance, investment and corporate governance.”

The eight

One of the key regulations introduced is the IRDAI’ Rural, Social Sector, and Motor Third Party Obligations Regulations, 2024. This not only revises compliance and measurement standards for insurers’ statutory obligations in rural and motor third-party areas, but also notably extends the scope of social sector obligations.

The extension now encompasses cardholders and beneficiaries under various schemes, broadening the reach and impact of insurers’ responsibilities in the social sector.

Another significant regulation is the new Bima Sugam – Insurance Electronic Marketplace Regulations, 2024.

Bima Sugam is an upcoming digital insurance marketplace aimed at enhancing insurance penetration. Draft regulations released in February show it will operate as a not-for-profit entity, serving as a comprehensive platform for buying, selling, and managing insurance policies, with a focus on transparency, efficiency, and consumer accessibility.

The Registration, Capital Structure, Transfer of Shares & Amalgamation Insurers regulations streamline industry processes such as registration and share transfer, to foster growth.

In parallel, the IRDAI Corporate Governance for Insurers Regulations provides rules around transparency, accountability, and ethical conduct within insurance companies. By setting these standards, it aims to boost trust and confidence among all stakeholders to ensure the operations of insurers align with the highest governance principles.

Additionally, new Insurance Products Regulations will merge six regulations into a unified framework to facilitate the development of innovative insurance products and ensure regulatory compliance.

The IRDAI Registration and Operations of Foreign Reinsurers Branches & Lloyd’s India Regulations, 2024, aims to promote the systematic development of the reinsurance sector in India.

The regulator introduced new Actuarial, Finance, and Investment Functions of Insurers rules, which consolidates nine existing regulations, focuses on enhancing the efficiency of insurers’ actuarial, finance, and investment functions.

Lastly, the IRDAI’s Protection of Policyholders’ Interests and Allied Matters of Insurers Regulations, 2024, aims to ensure the fair treatment of individuals during the solicitation and sale of insurance policies. This includes safeguarding the interests of policyholders from the initial engagement through to the ongoing management of their policies.

The regulations set standards for insurers and distribution channels to adhere to, ensuring that the processes for selling insurance and handling policyholder interactions are conducted with transparency, fairness, and integrity.

Toward 2047

The comprehensive review involved extensive consultations with various stakeholders, including the insurance industry, experts, and the public, ensuring a broad consideration of perspectives in shaping the revised framework.

“These regulations emphasise the adoption of standard procedures and best practices by insurers and distribution channels to fulfil their obligations towards policyholders, including grievance redressal and policyholder-centric governance,” The IRDAI said.

“Additionally, the regulations aim to promote prudent practices in risk management related to outsourcing activities by insurers. The regulations ensure that the opening or closing of places of business by insurers, both domestically and internationally, is conducted in a manner that prioritises the interests of policyholders,” the regulator added.

The IRDAI’s initiative is the latest in a series of efforts to help further foster innovation, competition, and sustainable growth in the insurance sector, aligned with its “Insurance for All by 2047” strategy.

In January, it announced the consolidated regulation on insurer Expense Management, which aimed to streamline and clarify the industry’s expense management and lay the groundwork for the latest comprehensive regulatory overhaul.

The regulator on Friday also announced it had approved the registration of a new health insurance player, Galaxy Health. The approval marks the sixth registration across the insurance industry’s life, health, and non-life segments, following years of inactivity.

The regulator has also been showcasing India’s prominence as an international reinsurance hub, having sent delegations internationally on a number of trips in 2023, to woo more reinsurance capacity into the country as it attempts to support its rapidly growing insurance market.

However, despite its efforts, India still has gaps to fill. For example, its cyber insurance market is projected to grow at a 27-30% compound annual growth rate, according to a Deloitte study. However, reinsurance capacity constraints are limiting expansion, with reinsurers cautious due to a lack of detailed risk assessment data and significant rate differences between India and Western markets.

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