Tag Archives: insurance

covid specific health insurance policy

IRDAI has extended the time upto which covid specific health insurance policies can be issued, upto 31st March, 2022. Their circular dated 13th September, 2021 extends the said timelines.

https://irdai.gov.in/ADMINCMS/cms/Circulars_Layout.aspx?page=PageNo4562

Re: Extension of timelines for sale and renewal of short term Covid specific health insurance policies

1.  Reference is invited to the short term Covid specific health insurance policies permitted to be offered by all Insurers.

2.  In partial modification of Clause 2 of Circular ref.no: IRDAI/HLT/REG/CIR/061/03/2021 dated 24.03.2021, all insurers are permitted to offer and renew short term Covid specific health policies up to 31.03.2022.

3.  Accordingly, Corona Kavach Policies offered as per Guidelines on Covid Standard Indemnity based Health Policy of Circular ref no. IRDAI/HLT/REG/CIR/163/06/2020 dated 26.09.2020 and Corona Rakshak Policies offered as per Guidelines on Covid Standard benefit based Health Policy of Circular ref no. IRDAI/HLT/REG/CIR/164/06/2020 dated 26.09.2020 are also permitted to be offered and renewed by all insurers up to 31.03.2022.

4.  All other terms and conditions remain valid as specified under the respective guidelines.

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title insurance

IRDAI has vide its circular dated 8th September, 2021 recommended to general insurance companies to consider providing title insurance policies to real estate developers and promoters and also home buyers to mitigate the loss, if any due to bad or defective title to the property.

https://irdai.gov.in/ADMINCMS/cms/Circulars_Layout.aspx?page=PageNo4558

Title insurance is a form of indemnity insurance that protects a potential owner of a property against financial loss from defects in title to real property. The policy is a retrospective one where the insured is protected against losses arising from the events that occurred prior to the date of issuing the policy.

2.    There are a few Title Insurance products in the Indian marketcurrently. However, considering the requirements of legal protection for promotors in the early stages of development of the project during financial appraisal, registration and approval with RERA authorities and safeguarding the interests of individual buyers after taking over the physical possession of property, there is aneed to expand the current title insurance products suitable to promotors/ developers and retail property buyers.

3.    In order to ensure that the general insurers offer basic Title Insurance covers for legal liabilities of promotors/developers in case of any loss caused to allottees duetodefective title of the property, protection for individual buyers for the purchased units in projects and to facilitate easy marketability of these products, the Authority had constituted a Working Group to suggest, inter alia, product construct and policy wording for two new products in addition to the existing products.

4.    Accordingly, the Working Group hassuggested product structure, coverage and policy wordings for the following products.

(a)  Promoter Legal Expenses (Defence Cost) Policy: This cover will indemnify the insured against legal defence costs only against suits challenging the Title of the project.

(b)  Allottee/Individual Buyer Retail Policy: This cover is designed to indemnify the insured against loss from a defect on title of property. The policy may be opted by the individual buyer and financiers of the property at the time of the possession.

The policy wordings developed by the Working Group for the above products are given in the Annexure.

5.    The main objectives of new Title Insurance products are to provide cover to;

(a)  promoters/developers, preferring to optfor a minimum legal defence cost;

(b)  end usersi.e., allottees/individual buyers/financiersat the time of possession/handing over of the property unit for protection against any legal suits in future.

6.    All general insurers are, therefore,encouraged to file these products as per the procedure required under the extant product filling guidelines. The insurers may also design and filesimilar products, keeping in view the minimum coverage as specified in the given policy wording. The filing of the said product/s may be carried out at the earliest to respond to the requirements ofpromoters/developers and retail property buyers.

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fee structure IFSC insurance offices

IFSCA circular dated 24th May, 2021 laying down the fee structure for insurance offices in International Financial Services Centre. Details as follows.

a) Application Fee: USD 1000 (USD One thousand only);
b) Registration Fee: One-time non-refundable fee of USD 5000 (USD Five
thousand only);
c) Annual Fee: USD 5000 (USD Five thousand only);
d) Turnover fee: USD 6,500 (USD Six thousand five hundred only) or onetwentieth of one percent of the total gross premium written by the IIO,
whichever is higher.

  1. Periodicity for payment of Annual Fee and Turnover fee:
    a) The applicable Annual Fee for every financial year shall be paid within 30 days from the beginning of the financial year; and
    b) The applicable Turnover Fee for every financial year shall be paid on or before 30th day of September of the succeeding financial year.
  2. Manner of payment of fee:
    The fee mentioned in this Circular shall be remitted to the following bank account of the Authority (as per details available in the circular)
  3. The above fee structure is applicable with effect from 01st day of October 2020 and the fee is payable on financial year basis.
  4. The Annual fee for Financial year 2020-21 and 2021-22 shall be paid within one month of issuance of this Circular.
  5. The Annual fee and Turnover fee for Financial year 2020-21 shall be paid on prorata basis.

https://ifsca.gov.in/Viewer/Index/177

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insurance companies – foreign investment

Insurance Regulatory Development Authority (IRDA) has made few changes to the Indian Insurance Companies (Foreign Investment) Rules, 2015. Some of the salient features are enumerated below.

Rule 4 has been amended: Rule 4 hitherto said “

An Indian Insurance Company shall ensure that its ownership and control shall remain at all
times in the hands of resident Indian entities

Now the amended version reads as follows:

“4. (1) In an Indian Insurance Company having foreign investment,—
(a) a majority of its directors,
(b) a majority of its Key Management Persons, and
(c) at least one among the chairperson of its Board, its managing director and its Chief Executive Officer, shall be Resident Indian Citizens.
Explanation.—For the purposes of this rule and rule 9, the expression “Key Management Person” shall have the same meaning as assigned to it in guidelines made by the Authority on corporate governance for insurers in India.
(2) Every Indian Insurance Company having foreign investment, existing on or before the date of commencement of the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2021, shall within one year from such commencement, comply with the requirements of the provisions of sub-rule (1).
4A. In an Indian Insurance Company having foreign investment exceeding forty-nine per cent.,—
(a) for a financial year for which dividend is paid on equity shares and for which at any time the solvency margin is less than 1.2 times the control level of solvency, not less than fifty per cent. of the net profit for the financial year shall be retained in general reserve; and
(b) not less than fifty per cent. of its directors shall be independent directors, unless the chairperson of its Board is an independent director, in which case at least one-third of its Board shall comprise of independent directors

Rule 5 which presently allowed FDI proposals in the insurance sector under automatic route upto 49% has been amended to provide for automatic approvals upto 74%.

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distribution of mutual funds/ insurance – IFSC

IFSCA has issued a circular dated 3rd May, 2021 giving guidelines to Finance Company/ Finance Unit in IFSC for distribution of mutual funds and insurance products. Read on.

  1. This circular shall apply to all FC/FU as the case may be, registered with the Authority under section 3 of IFSCA (Finance Company) Regulations, 2021 and who intends to undertake the above mentioned activities. Further, the circular shall remain applicable as amended by the Authority from time to time.

B. General Guidelines:

  1. The following guidelines shall be adhered to for undertaking activities as specified in the circular:
    (i) The activities shall be carried out on fee basis, without any risk participation.
    (ii) All employees dealing with mentioned activities shall possess the requisite qualification as per industry best practices. There shall be a system of continuous development and training (internal as well as external) of such employees so that they may understand the complexity of the product.
    (iii) There shall be standardized system of assessing the need/ suitability of products for a customer and the process of initiation/ transaction as well as the functions of the marketing and operational staff shall be segregated.
    (iv)There shall be a Board approved policy encompassing the model of distribution such investment products to be adopted, issues of customer appropriateness, suitability, customer compensation, grievance redressal arrangements and marketing and distribution of such products (which shall, inter alia specifically consider the issue of addressing mis-selling).
    (v) The FC/FU shall not follow any restrictive practices or link the sale of its investment products to any other products offered by it.
    (vi)It shall be prominently stated in all publicity material, if any, distributed by the FC/FU that the purchase by a FC/FU’s customer of any investment products is purely voluntary, and is not linked to availment of any other facility from the FC/FU.
    (vii) The third party product issuer shall be a regulated financial entity.
    (viii) There shall be a Code of Conduct for the sales personnel who shall adhere to the same.
    (ix)The fact that the FC/FU is only acting as an agent shall be clearly brought to the notice of the customer.
    (x) No incentive (cash or non-cash) shall be linked directly or indirectly to the sale/income received from marketing/distribution services of such investment products. The staff of the FC/FU shall not be permitted to receive any incentive (cash or non-cash) directly from the third party issuer. FC/FU must ensure that there is no violation of the above in the incentive structure to staff.

(xi)FC/FUs shall disclose in the ‘Notes to Accounts’ to their Balance Sheet, the details of fees/remuneration received in respect of marketing and distribution function undertaken by them.
C. Guidelines on distribution of mutual funds units

  1. In addition to the general guidelines as above, an FC/FU shall also adhere to the following guidelines while undertaking distribution of mutual fund products:
    (i) The investors’ applications for purchase/sale of mutual fund units shall be forwarded to the mutual funds/registrars/transfer agents.
    (ii) The purchase of units shall be at the customers’ risk without the FC/FU guaranteeing any assured return.
    (iii) No mutual fund units shall be acquired from the secondary market or bought back from a customer for selling it to other customers.
    (iv)Extension of credit facility to individuals against the security of mutual fund units shall be in accordance with the extant instructions on advances against shares/debentures and units of mutual funds.
    (v) A FC/FU holding custody of mutual fund units on behalf of its customers shall keep the investments of the customers distinct from its own investments. FC/FUs shall put in place adequate and effective control mechanisms in this regard.
    D. Guidelines on distribution of insurance products
  2. In addition to the general guidelines as above, an FC/FU shall also adhere to the following guidelines while undertaking distribution of insurance products:
    (i) FC/FU shall necessarily undertake a customer need assessment prior to sale of insurance products.
    (ii) The FC/FU shall comply with provisions of IRDAI (International Financial Services Centre Insurance Intermediary Offices) Guidelines, 2019 No. IRDA/RI/GDL/MISC/012/01/2019, dated January 16,2019 and any other Regulation/ Circular/Guidelines issued by the Authority from time to time.
    (iii) It shall be ensured that performance assessment and incentive structure for staff is not violative of IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations ,2016 as amended from time to time

Finance Company and Finance Unit derive their meanings from the main act i.e. The International Financial Services Centre Authority Act, 2019 which stipulates that finance company is a financial institution set up in IFSC to carry on business in financial services in IFSC in securities, mutual funds, insurance, deposits, credit arrangements etc. Finance Unit is the branch unit of the said financial institution set up in accordance with these regulations.

For more details please go to https://ifsca.gov.in/

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insurance ombudsman rules

https://pib.gov.in/PressReleasePage.aspx?PRID=1702099

The Government on 2nd March 2021 notified comprehensive amendments to the Insurance Ombudsman Rules, 2017, with a view to improve the working of the Insurance Ombudsman mechanism to facilitate resolution of complaints regarding deficiencies in insurance services in a timely, cost-effective and impartial manner.

The amended rules have enlarged the scope of complaints to Ombudsmen from only disputes earlier to deficiencies in service on the part of insurers, agents, brokers and other intermediaries. Further, insurance brokers have been brought within the ambit of the Ombudsman mechanism, by empowering the Ombudsmen to pass awards against insurance brokers as well.

Under the amended rules, the timeliness and cost-effectiveness of the mechanism has been substantially strengthened. Policyholders will now be enabled for making complaints electronically to the Ombudsman and a complaints management system will be created to enable policyholders to track the status of their complaints online. Further, the Ombudsman may use video-conferencing for hearings. To enable access to relief through the Ombudsman mechanism even when there is vacancy in the office of a particular Ombudsman, provision has been made for giving additional charge to another Ombudsman, pending the filling of the vacancy.

A number of amendments have been made for securing the independence and integrity of the Ombudsman selection process, while also building in safeguards to secure the independence and impartiality of the appointed persons while serving as Ombudsmen. Further, the selection committee will now include an individual with a track record of promoting consumer rights or advancing the cause of consumer protection in the insurance sector.

The Ombudsman mechanism was administered by the Executive Council of Insurers, which has been renamed as the Council for Insurance Ombudsmen.

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policy holders’ signatures

IRDAI has vide its circular dated 5th August, 2020 dispensed with the need for physical wet signatures on insurance forms on a temporary basis upto 31st December, 2020 due to the covid pandemic.

Instead they have put in place a system to obtain policy holders consent via OTP system with audit trail and maintaining copy of the e-consent with them.

1.    Life Insurers are allowed to obtain the customer’s consent without requiring wet signature on the hard copy of the proposal form, for the business solicited by insurance agents / intermediaries subject to following:

a.    The completed proposal form shall be sent to the prospect on his/ her registered e-mail ID or mobile number in the form of an e-mail or a message with a link as the case may be.

b.    The prospect, if he / she wishes to consent to the proposal, may do so by clicking the confirmation link or by validating the OTP shared. The Insurer shall maintain verifiable, legally valid evidence for the proposer’s consent received for the fully completed proposal form. Further, the insurer shall not accept any payment of moneys towards proposal deposit till the receipt of consent of the proposer.

c.    In all such cases, the agent / intermediary shall confirm that only the approved sales material has been used during the solicitation process. They shall also certify the authenticity of the e-mail ID and/or mobile number of the prospect.

2.    The Insurers shall be responsible for:

a.    Providing to the insurance agents / intermediaries approved digital sales material and ensuring that only such material is used while soliciting the business;

b.    Authenticating the e-mail IDs / mobile numbers of the prospects by conducting de-duplication of such data and other such means;

c.    Ensuring the suitability of the product being purchased;

d.    Carrying out pre-issuance verification calls in respect of all such proposals.

This system is to be put in place only for pure risk products not involving any savings element.

Copy of IRDA circular can be found at https://www.irdai.gov.in/ADMINCMS/cms/Circulars_Layout.aspx?page=PageNo4210

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insurance claims

IRDA has issued a circular dated 16th July, 2020 wherein they have recognised make shift or temporary hospitals erected during the covid pandemic by the respective governments as recognised hospitals and claims to be allowed in respect thereto. Further where any network hospital provider has made arrangements for such make shift or temporary hospitals, such hospitals shall also be considered for cash less claims. 
This is a very important advisory from IRDA in respect of claims during covid pandemic. 
Gist of the circular is as below:

   Reference is invited to IRDAI circular Ref. No: IRDAI/HLT/REG/CIR/054/03/2020 dated 04th March, 2020, specifying guidelines on handling of claims reported under Covid-19.

2.        In view of increase in number of COVID-19 cases, in order to leverage on the extant healthcare systems put in place, it is important to recognise the make-shift or temporary hospitals permitted by Government for settlement of health insurance claims for insurance companies.

3.        In the above backdrop, in order to ensure that the costs of treatment of COVID – 19 are covered as per the terms and conditions of policy contract, a make-shift or temporary hospital permitted by Central / State government shall be regarded as a hospital or network provider and insurers shall settle the claims as per the following norms.

a)      Where a policyholder who is diagnosed as Covid-19 positive is admitted into any such make-shift or temporary hospital on the advice of a medical practitioner or appropriate Government authorities, notwithstanding the definition of hospital specified in the terms and conditions of policy contract, the treatment costs shall be settled by insurers. 

b)      Where any network provider has set up any such make-shift or temporary hospital, such make-shift or temporary hospital shall be regarded as the extension of the network provider and cashless facility shall be made available.  

4.        Insurers are advised to expedite settlement of all such claims in accordance to the applicable regulatory framework.

5.        All insurers are also advised to incorporate the above norms in claim guidelines and inform to all the TPAs immediately.

6.        These guidelines shall come in to force with immediate effect.

7.        These guidelines are issued under the powers vested with Regulation 27 (vi) of IRDAI (Health Insurance) Regulations, 2016 read with Section 34 (1) of Insurance Act, 1938.

Copy of the IRDA circular can be found here

https://www.irdai.gov.in/ADMINCMS/cms/Circulars_Layout.aspx?page=PageNo4189

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Insurance – Covid relief

Govt. has given relief in case of motor vehicle 3rd party insurance policies and health insurance policies, if the renewal date falls between 25th March 2020 to 14th April, 2020, then they can make payment of their renewal policies upto 21st April, 2020.

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Insurance FDI – sector specific conditions

RBI has issued a circular dated 8th April, 2015 which is basically reiterating the DIPP Press Note no. 3(2015) series. The sector specific conditions are as follows:

RBI circular is available at this link i.e. http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=9652&Mode=0

The extant FDI policy for Insurance sector has since been reviewed and further liberalized. Accordingly, with immediate effect, FDI in Insurance sector shall be permitted up to 49% subject to the revised conditions specified in the Press Note 3 (2015 Series) dated March 2, 2015. Also, a new activity viz. “Other Insurance Intermediaries appointed under the provisions of Insurance Regulatory and Development Authority Act, 1999 (41 of 1999)” has been included within the definition of ‘Insurance’.

3. Besides, the salient changes over the existing regime include:

  1. Foreign investment in Indian insurance company shall be limited up to forty-nine percent of the paid up equity capital;
  2. Foreign direct investment up to 26 percent shall be under automatic route and beyond 26 percent and up to 49 percent shall be with Government approval;
  3. Foreign investment in the sector is subject to compliance of the provisions of the Insurance Act, 1938 and the condition that companies bringing in FDI shall obtain necessary license from the Insurance Regulatory & Development Authority of India for undertaking insurance activities.
  4. An Indian insurance company shall ensure that its ownership and control remains at all times in the hands of resident Indian entities;
  5. Foreign portfolio investment in an Indian insurance company shall be governed by the provisions of Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000 and provisions of the Securities Exchange Board of India (Foreign Portfolio Investors) Regulations.
  6. Any increase of foreign investment of an Indian insurance company shall be in accordance with the pricing guidelines specified by Reserve Bank of India under the Foreign Exchange Management Act, 1999.
  7. Terms ‘Control’, ‘Equity Share Capital’, ‘Foreign Direct Investment’ (FDI), ‘Foreign Investors’, ‘Foreign Portfolio Investment’, ‘Indian Insurance Company’, ‘Indian Company’, ‘Indian Control of an Indian Insurance Company’, ‘Indian Ownership’, ‘Non-resident Entity’, ‘Public Financial Institution’, ‘Resident Indian Citizen’, ‘Total Foreign Investment’ will have the same meaning as provided in Notification No. G.S.R 115 (E), dated 19th February, 2015

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Banks entering insurance business

RBI has issued guidelines on Banks entering into insurance business. These guidelines can be viewed at

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=9489&Mode=0

Gist of the guidelines are given below:

Guidelines for Banks undertaking Insurance Broking and Agency Business Banks may undertake insurance agency or broking business departmentally and/or through subsidiary, subject to the following stipulations:
1. Board Approved Policy
A comprehensive Board approved policy regarding undertaking insurance distribution, whether under the agency or the broking model should be formulated and services should be offered to customers in accordance with this policy. The
policy will also encompass issues of customer appropriateness and suitability as well as grievance redressal. It may be noted that as IRDA Guidelines do not permit group entities to take up both corporate agency and broking in the same group even through separate entities, banks or their group entities may undertake either insurance broking or corporate agency business.
2. Compliance with IRDA guidelines
a) The IRDA (Licensing of Corporate Agents) Regulations, 2002/ IRDA (Licensing of Banks as Insurance Brokers) Regulations, 2013 and the code of conduct prescribed by IRDA, as amended from time to time, as applicable, should be complied with by banks undertaking these activities.
b) The deposit to be maintained by an insurance broker as per the IRDA (Licensing of Banks as Insurance Brokers) Regulations, 2013, as amended from time to time, should be maintained with a scheduled commercial bank other than itself.
3. Ensuring Customer Appropriateness and Suitability While undertaking insurance distribution business, either under the corporate agency or broking model under the relevant IRDA Regulations, banks must keep the following in view:
a) All employees dealing with insurance agency/ broking business should possess the requisite qualification prescribed by IRDA.
b) There should be a system of assessment of the suitability of products for customers. Pure risk term products with no investment or growth components that are simple and easy for the customer to understand will be deemed universally
suitable products. More complex products with investment components will require the bank to necessarily undertake a customer need assessment prior to sale. It should be ensured that there is a standardized system of assessing the needs of the customer and that initiation/transactional and approval processes are segregated.
c) Banks should treat their customers fairly, honestly and transparently, with regard to suitability and appropriateness of the insurance product sold.
4. Prohibition on Payment of Commission/Incentive directly to Bank Staff
There should be no violation either of Section 10(1)(ii) of the BR Act, 1949 or the guidelines issued by IRDA in payment of commissions/brokerage/incentives. This may be factored in while formulating a suitable performance assessment and
incentive structure for staff. Further, it must be ensured that no incentive (cash or non-cash) should be paid to the staff engaged in insurance broking/corporate agency services by the insurance company.
5. Adherence to KYC Guidelines
The instructions/ guidelines on KYC/AML/CFT applicable to banks, issued by RBI from time to time, may be adhered to, in respect of customers (both existing and walk-in) to whom the services of insurance broking/agency are being provided.
6. Transparency and Disclosures
a) The bank should not follow any restrictive practices of forcing a customer to either opt for products of a specific insurance company or link sale of such products to any banking product. It should be prominently stated in all publicity material distributed by the bank that the purchase by a bank’s customer of any insurance products is purely voluntary, and is not linked to availment of any other facility from the bank.
b) Further, the details of fees/ brokerage received in respect of insurance broking/agency business undertaken by them should be disclosed in the ‘Notes to Accounts’ to their Balance Sheet.
7. Customer Grievance Redressal Mechanism
A robust internal grievance redressal mechanism should be put in place along with a Board approved customer compensation policy for resolving issues related to services offered. It must also ensure that the insurance companies whose products are being sold have robust customer grievance redressal arrangements in place. Further, the bank must facilitate the redressal of grievances.
8. Penal Action for Violation of Guidelines
Violation of the above instructions will be viewed seriously and will invite deterrent penal action against the banks.
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Insurance Amendment Bill

The Union Cabinet has approved the amendments to Insurance Laws Amendment Bill 2008. Hitherto the insurance companies were allowed foreign investment of upto 26%. Now it will be a composite cap of 49% foreign investment which includes FDI and foreign portfolio investment.

Management of insurance companies will remain in Indian’s hands.

Investment above 26% will still require approval of the Foreign Investment Promotion Board.

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FDI in insurance sector – revised guidelines

The Department of Industrial Policy & Promotion, New Delhi (DIPP) has vide its press release no. 2/2014 dated 4/2/2014 revised the FDI limits in the insurance sector in the country. Hitherto, FDI in insurance was allowed upto 26% in the automatic route, subject however to the conditions that the companies bringing in FDI will obtain the necessary license from the sector regular i.e. IRDA. Under the old guidelines, only FDI was allowed in the insurance sector. FII and NRI investment was not allowed. 

The revised guidelines allows 26% by way of FDI or FII or NRI investment on automatic route. Further the guidelines are relaxed not only for insurance companies, but also for insurance brokers, Third Party Administrators (TPAs) and Surveyors & Loss Assessors. The other conditions of obtaining license from IRDA still continues. Bank promoted insurance companies also need to comply with sectoral guidelines in the FDI policy related to the banking sector. 

The revised guidelines can be found at this link viz. http://dipp.nic.in/English/acts_rules/Press_Notes/pn2_2014.pdf

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