Irdai issues new outsourcing guidelines for insurers
- US stocks flat, investors await Fed decision on policy rates
- Drug price regulator fixes ceiling price of 39 more drug formulations
- Jimmy Kimmel rips Republican health bill for failing ‘Kimmel test’
- Bihar govt orders probe as canal wall awaiting Nitish inauguration collapses
- UK fund sells Bank of Baroda shares worth Rs1,115 crore
Mumbai: The sectoral watchdog Irdai has issued new guidelines on outsourcing activities by insurers by clearly defining the areas of work that should be done in- house and those which can be handed out to third-parties.
The regulator said the regulations dated 20 April but put on the Gazettee of India on 5 May, is aimed at ensuring that insurers follow prudent practises on management of risks arising out of outsourcing so as to prevent negative systemic impact on one hand and to protect the interests of the policyholders on the other. The move is also to ensure sound and responsive management practises for effective oversight and adequate due diligence while outsourcing activities by insurers, it added.
Accordingly, the new regulations ban insurers from outsourcing investments and related functions to third parties, apart from not allowing fund management, including NAV calculations, compliance with AML and product design.
Insurers are also expected to do all actuarial functions and enterprise-wide risk management in house, apart from decision making on underwriting and claims functions excluding procedural activities related to payment of survival benefit claims in life insurance, policyholders grievances redressal, decision to appoint insurance agents, surveyors, loss assessors and finally approving advertisements.
Irdai said the new regulations called Outsourcing of Activities by Insurers Regulations of 2017, will come into force from the date of their publication in the official Gazette and supersede the guidelines issued earlier. However, these norms are not applicable to re-insurers but are applicable to all insurers registered with the Insurance Regulatory and Development Authority.
If an insurer is engaged in both direct insurance as well as reinsurance business, these regulations are applicable only in respect of direct insurance business of such insurers, it added. It defines ‘outsourcing’ as use of third-party services to perform activities that would normally be undertaken by the insurer but does not include services such as legal services, banking services, courier services, medical examination, and forensic analysis.
The new regulations also make it mandatory on the board of the insurer to put in place an outsourcing policy and also set up an outsourcing committee comprising key management persons of the insurer, including the chief risk officer, chief financial officer and chief of operations.