Insurance News Details

IRDAI issues exposure draft on EoM for insurers based on RRC recommendations

(15-Nov-23   18:56)

The Insurance Regulatory and Development Authority of India (IRDAI), based on the recommendation of the Regulation Review Committee (RRC), has issued a draft Disclosure on the Expenses of Management (EoM) including a commission for both life and non-life insurance companies.

The RRC recommended merging the Commission and EOM regulations into a single regulation instead of maintaining separate ones.

IRDAI had directed the Councils to constitute an RRC comprising representatives from all stakeholder groups to improve ease of doing business and simplifying regulations by moving towards a principles-based regime in order to make them more effective.

The RRC recommended IRDAI (EoM, including commission, of insurers) Regulations 2023 after repealing three separate regulations.

The three repealed regulations are, i) Insurance Regulatory and Development Authority of India (EoM of Insurers transacting General or Health Insurance Business) Regulations, 2023; ii) Insurance Regulatory and Development Authority of India (EoM of Insurers transacting Life Insurance Business) Regulations, 2023, iii) And, Insurance Regulatory and Development Authority of India (Payment of Commission) Regulations, 2023.

In the draft, the regulator said that life insurers should not spend an amount exceeding 5% of all single premiums received during the year on policies granting immediate annuity, deferred annuity, 10% of all single premiums received during the year on group pure risk policies.

The draft has upheld and continues to propose a 30% and 35% limit on EoM for general insurers and standalone health insurers, respectively.

The exposure draft has also changed the limit of all individual risk policies from 10% set earlier to 14%. The limit was 15% of all premiums received on one-year renewable group policies, except for group fund-based policies.

The draft states that the allowance for the group fund-based policies would be based on the average of Assets under Management (AUM) of the policies at the beginning and at the end of the financial year.

For AUM up to Rs 10,000 crore, the allowable EoM will be 1%, whereas, for amounts more than Rs 10,000 crore, the allowable EoM will be 0.80%.

IRDAI had come up with an exposure draft on the EoM for life and non-life insurers in 2022. The draft released on Tuesday is based on the recommendations from the RRC.

?The main objective of the proposed draft regulations is to enable and provide flexibility to the insurers to manage their expenses, including commissions, within the overall limits as specified by the Authority to optimally utilise their resources for enhancing benefits to policyholders and to improve insurance penetration,? the regulator noted.

The new regulations are expected to come into force from April 1, 2024, and will remain in force for three years thereafter.

The regulator has given a deadline till December 6, 2023 for stakeholders to give their comments and suggestions on the same.

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