Home / News / IRDAI increases limits for intermediaries, corporate agents can now distribute products of 9 insurers

The Insurance Regulatory and Development Authority of India (IRDAI) has increased the maximum number of tie-ups for Corporate Agents (CA) and Insurance Marketing Firms (IMF). Policyholders will now get wider choices and access to insurance plans through various distribution channels. The regulator, IRDAI, approved several norms during the meeting held at its headquarters in Hyderabad on Friday, 25 November 2022.

The regulator, said, “In order to enable the policyholders/prospects to have wider choice and access to insurance through various distribution channels and facilitate the reach of insurance to the last mile, the maximum number of tie-ups for Corporate Agents (CA) and Insurance Marketing Firms (IMF) have been increased. Now, a CA can tie up with 9 insurers (earlier 3 insurers), and IMF can tie up with 6 insurers (earlier 2 insurers) in each line of business of life, general and health for distribution of their insurance products. The area of operation of IMF has also been expanded to cover entire state in which they are registered."

Some of the other important proposals approved by the regulator are:

Registration of Indian Insurance companies: The amendments to regulations pertaining to the registration of Indian insurance companies are aimed at promoting ease of doing business and simplify the process of setting up an insurance company in India. Key highlights of the amendments are -

• Investment through Special Purpose Vehicle (SPV) has been made optional for Private Equity (PE) Funds enabling them to invest directly in insurance companies, providing more flexibility.

• Now, subsidiary companies are also allowed to be promotors of insurance companies (subject to certain conditions).

• Investments up to 25% of the paid up capital by single investor (50% for all investors collectively) will now be treated as ‘investor" and investments over and above that will only be treated as promoter". [Earlier the threshold was 10% for individual investor and 25% for all investors collectively]

• A new provision has been introduced to allow the promoters to dilute their stake up to 26%, subject to condition that the insurer has satisfactory solvency record for preceding 5 years and is listed entity.

• Indicative criteria for determination of ‘Fit and proper’ status of investors and promotors have been included

• Lock-in period of investments for investors and promotors has been stipulated on the basis of age of the insurer, said IRDAI.

Regulatory sandbox: The Regulatory sandbox is a framework which provides a testing environment to the companies to enable them to test their innovative products, technologies, etc., in a controlled regulatory setting. It promotes innovation and technological solutions in the industry. Certain amendments were also carried out in the Regulatory Sandbox Regulations to allow the insurers/intermediaries to do experimentation on an ongoing basis by increasing the experimentation period from ‘6 months’ to ‘upto 36 months and moving from the existing batch-wise (cohort approach) clearances/approvals to clearances/approvals on a continuous basis. A provision for review of rejected applications under sandbox has also been introduced as a part of amendments, said IRDAI.

Appointed Actuary: Appointed Actuaries (AA) play a pivotal role in an insurer’s operations. To ensure sufficient supply of Actuary professionals in the industry, the experience and qualification requirements have been made flexible. Maintenance of solvency by the insurers is a critical aspect of the health of an insurer and AA play a significant role in maintaining the solvency levels. The responsibility of AA has been enhanced by introducing provisions for identification, monitoring, reporting and recommending actions to be taken for the risks affecting the solvency position of the company. Obligations have also been placed on insurers to ensure that the AA can discharge his responsibilities appropriately.

Solvency norms for general insurers: To facilitate the insurers to efficiently utilize their capital and resources and to increase insurance penetration in Crop Insurance, the period for considering State/Central Government premium dues for calculating solvency position has been increased from 180 days to 365 days. The solvency factors related to crop insurance are also reduced to 0.50 from 0.70, which will release the capital requirements for insurers by around Rs. 1460 crore.

Solvency norms for life insurers: In order to enable efficient utilization of capital by life insurers, the factors for calculation of solvency provided in regulations are revised as follows:

• For Unit Linked Business (Without Guarantees) - reduced to 0.60% from 0.80%.

• For PMJJBY - reduced to 0.05% from 0.10%.

This will provide a relaxation in capital requirements by around Rs. 2000 crore.

Other forms of capital: In order to facilitate ease of raising other forms of capital viz., subordinated debt and/or preference shares, the requirement of prior approval from IRDAI is dispensed with. The amendments have also enhanced the limits for raising such capital (threshold limits increased from 25% to 50% of paid up capital & premium, subject to 50% of Net worth of company). This will enable companies to raise the required capital in timely manner. Amendments have been introduced for Board’s Oversight in raising such capital, said IRDAI.

Bhargav Dasgupta – MD & CEO of ICICI Lombard General Insurance Company, said, “These are path-breaking reforms that will improve ease of doing business, free up distribution models, encourage customer centric innovations and make the sector attractive for investment. The regulator has addressed a number of long pending issues of the industry in one stroke! The vision of the regulator to ensure insurance for all is truly inspirational, and these reforms will go a long way in achieving that objective"

Parthanil Ghosh, President of Retail Business, HDFC ERGO said, "The increase of maximum number of insurers for Corporate Agents and Insurance Marketing Firm tie-ups is another step from the regulator to further boost insurance penetration towards the regulator's motto of 100% insurance penetration by 2047. While this step will allow customers to have a wider choice of insurers and products, it is also expected to drive innovation in product development, enhanced usage of technology & data analytics leading to seamless customer experience and thereby increased level of financial protection for the customers of corporate agent/IMF"

ABOUT THE AUTHOR

Navneet Dubey

Navneet Dubey is a personal finance writer and artist. Over the past decade, he has written feature stories on insurance, financial planning, lending and borrowing.
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