commission to NEDs – insurance companies

IRDAI (Insurance Regulatory Development Authority of India) has vide its circular dated 30th January, 2023 clarified that insurance companies can pay profit related commission to non executive directors in its Board, subject to some conditions being met. Gist of those conditions are as follows:

3. As a step towards further simplifying the processes, the Insurers are hereby permitted to pay profit related commission to non-executive director(s) including the non-executive director(s) appointed under section 48A of the Insurance Act, 1938, under the deemed approval mechanism, subject to the following conditions:
   a. The insurer has reported positive profit after tax for the period for which the said commission is proposed to be paid.
   b. The Board of the insurer has passed the resolution approving such payment.
   c. The amount of payment of remuneration in the form of profit related commission to each of the Non-Executive Director shall not exceed the limits specified in the Guidelines on Remuneration of Non-Executive Directors and Managing Director /Chief Executive Officer / Whole-time Directors of Insurers, as amended from time to time.
   d. Disclosures with regard to said payment shall be made in the financial statements for the respective financial year.
   e. The insurer shall comply with all other applicable laws in this regard.

for copy of the circular, please go to IRDAI site.

insurance liaison office

IRDAI (Insurance Regulatory Development Authority of India) has issued for setting up of a liaison office in India by insurance companies incorporated outside India. Details as follows:

The Authority (IRDAI) had laid down framework for approval of opening of Liaison Office in India by Insurance Companies registered outside India (Overseas Insurer), vide circular ref: 30/IRDA/CIR/Lia Off/Dec-05 dt. 07.12.2005 and the Guidelines for closure of Liaison Office established in India by Overseas Insurer, issued vide ref: IRDA/024/Closure-FLO/2007-08 dt. 17.07.2007. The stipulations/ directions have been reviewed and the following guidelines are issued on “Establishment and Closure of Liaison Office in India by an Insurance Company registered outside India”. These guidelines shall be effective from the date of issue and shall supersede all the earlier instructions/guidelines issued on the subject by the Authority.

1. Liaison Office

A “Liaison Office” (LO) would mean a place of office to act as a channel of communication between the Principal place of business or Head Office (HO) by whatever name called of an Overseas Insurer and entities in India but which does not undertake any commercial/ trading/ soliciting/ industrial activity, directly or indirectly, and maintains itself out of foreign remittances received from the Overseas Insurer through normal banking channels.

2. Eligibility norms for opening a Liaison office:

The Overseas Insurer applying for opening of LO should have a financially sound track record. A profit making track record during the immediately preceding three financial years in the home country and net worth of not less than USD 65 million shall be the minimum requirement for applying for opening a Liaison office in India. (Net worth shall mean Total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or Chartered Accountant or any Registered Accounts Practitioner by whatever name called of the home country).

3. Application and Approval process:

a)    The Overseas Insurer desirous of opening a Liaison office shall apply to the Insurance Regulatory and Development Authority of India in Form IRDAI-FIC-1 (Annexure I), along with the following documents. A processing fee of 6000 USD (non-refundable) by way of DD/Pay Order or through online transfer in favour of Insurance Regulatory and Development Authority of India shall be paid along with the application.

                      i.        Copy of Certificate of registration of the Overseas Insurer (Certificate by home country insurance regulator).

                    ii.        Copy of Certificate of Incorporation of the Overseas Insurer (Certificate by home country authority).

                   iii.        Details of subsidiaries and associate companies.

                   iv.        Copies of Memorandum and Articles of Association or any other charter document.

                    v.        Copy of latest Audited Financial statements.

                   vi.        Certificate from the home country insurance regulator that the applicant is duly authorized as an insurer and is permitted to open a Liaison office in India.

                  vii.        A Letter of Comfort from applicant Overseas Insurer confirming to provide necessary financial support to Liaison office (Annexure II).

                 viii.        A Letter / copy of Board resolution of the applicant Overseas Insurer confirming the authorization provided to the Authorized official for signing and submitting Form IRDAI-FIC-1.

b)    The Authority shall, after exercising due diligence in respect of the applicant Overseas Insurer’s background and satisfying itself regarding adherence to the eligibility criteria for establishing LO, grant approval for opening of LO or reject the application. An applicant whose application for grant of approval for opening of Liaison Office is rejected by the Authority, may approach the Authority for review of its decision within 30 days from the date of receipt of the communication.

c)    The Authority, before granting approval for opening of LO, may seek the views of Ministry of External Affairs, in respect of an application received from Overseas Insurer incorporated in a country, which shares land border with India.

d)    The validity of an approval granted by the Authority shall be for a period of three years. An Overseas Insurer may request the Authority for extension of the approval for another one year. The Authority may consider such request, provided the LO has complied with all the terms and conditions stipulated in these guidelines and communicated by the Authority in the initial approval letter. The application for extension has to be submitted with all the information as given in IRDAI-FIC-1 format mentioning “Application for Extension of validity of Liaison Office”, at least two months before the date of expiry of the validity of the first approval, along with a processing fee (non-refundable) of USD 2500

e)    The permission granted for opening / extension of LO shall be subject to such additional terms and conditions as may be stipulated by the Authority from time to time.

f) An Overseas Insurer which has been granted approval by the Authority for opening of LO in India shall establish such office within six months from the date of approval of the Authority. In case such office is not established within a period of six months, the approval granted by the Authority shall be deemed to have been withdrawn.

g) Overseas Insurers which have opened/started Liaison Offices in India within a period of three years prior to the date of these guidelines may apply for extension of approval for a further period of one year in terms of these guidelines.

h) Overseas Insurers which have been already granted an extension of approval to continue their Liaison offices and have been operating their LOs for more than 3 years as on the date of these guidelines shall close the LO within a period of six months in terms of these guidelines.

4. Permitted activities for a Liaison Office of Overseas Insurer in India:

a)    Representing the Overseas Insurer in India.

b)    Carrying out market research/ feasibility study in the field of insurance.

c)    Acting as a communication channel between the Overseas Insurer and entities in India.

5. Conditions for Approval:

a)    The LO shall not carry on any activity other than the activity for which approval has been granted by IRDAI.

b)    The entire expenses of the LO in India will be met exclusively out of the inward foreign remittances received from the Overseas Insurer through normal banking channels.

c)    The LO in India shall not borrow or lend any money from/ to any person in India nor shall it accept deposits in India.

d)    The LO in India shall not acquire, hold, (otherwise than by way of lease for a period not exceeding three years) transfer or dispose of any immovable property in India.

e)    The LO in India shall not enter into any contracts, except to the extent required for the purpose of the normal functioning of the LO for which the approval is granted by IRDAI.

f)     The LO in India will not have any signing/ commitment powers, except to the extent required for normal functioning of the office, on behalf of the Head Office.

g)    The LO in India shall obtain Permanent Account Number (PAN) from the Income Tax Authorities on setting up their office in India.

h)    The LO in India shall register with the Registrar of Companies (ROCs) if such registration is required under the Companies Act, 2013.

i)     The LO in India and the Overseas Insurer shall be required to comply with the terms and conditions of the General Permission granted by RBI under the Foreign Exchange Management Act, 1999 and any other law in force, as amended from time to time.

j)     The LO in India shall have to strictly obey and respect the laws in force in India and there shall be no compromise or excuse for ignorance of the Indian legal system in any manner.

k)    Principal Officer of LO in India shall act as a Nodal officer and shall be responsible for ensuring compliance of these guidelines and any other directions issued by the Authority from time to time. Name, Address, Contact No. and E-mail Id of the Principal Officer shall be informed to the Authority within 15 days from the date of appointment. Any change in the Principal Officer / change in contact details of Principal Officer shall be informed to the Authority within 15 days from the date of such change.

l)     The officials of a Liaison office of Overseas Insurer shall not participate in the management of any other entity in India.

m)  In case of any regulatory action initiated by the home country insurance regulator on the Overseas Insurer, LO shall inform the details to IRDAI within 15 days from the date of action initiated.

n)    The approval for Liaison Office granted to an entity shall not be transferable to another entity under any circumstances including on account of acquisitions/mergers.

o)    Change in the name of the existing LO may be permitted by the Authority, if an application to this effect is filed along with the Board resolution and relevant documents/certificate from the home country insurance regulator.

p)    Where change in name is requested on account of acquisitions or mergers involving change in ownership, the acquired entity or new entity is required to apply afresh by closing the existing LO. At any point of time, not more than one LO under the same management of the Overseas Insurer shall operate in India.

q)    The activities/ affairs of LO may be verified/ examined by IRDAI by carrying out an inspection/investigation as and when found necessary.

r)     Any adverse findings reported by an auditor or noticed by the HO in respect of the LO shall be reported to the Authority within 15 days of such findings.

6. Books and Records to be maintained by LO:

a)    LO shall maintain only one bank account for its receipts and payments. If the existing LOs have opened multiple bank accounts as on the date of these guidelines, such accounts shall be closed within 3 months or seek specific approval from IRDAI justifying the reasons to have multiple bank accounts.

b)    Proper books of accounts and records reflecting the funds received from HO and expenses incurred by the LO shall also be maintained.

c)    A Balance Sheet, Statement of Income and Expenditure and a Statement of Receipts and Payments (Cash Flow Statement) signed by an independent Chartered Accountant and the Principal Officer of the Liaison Office in India shall be furnished to the Authority within 60 days from the end of every financial year.

7. Annual Activity Certificate by LO:

a) The LO shall submit Annual Activity Certificate (Annexure III), from an independent Chartered Accountant or the Company Secretary certifying that

      i.        the LO has undertaken only those activities that have been permitted by the Authority,

    ii.        the expenses of LO are met by way of approved means, i.e., only from the remittances received from HO for the said purpose,

   iii.        there are no receipts from HO other than for the expenses of LO,

   iv.        the credits to the bank account maintained by LO represents the funds received from HO through normal banking channels for meeting the expenses of LO and any legitimate receivables (Refund of security deposits, Refund of taxes, duties, etc. received from tax authorities, if any, which were paid from the said bank account) arising in the process of normal operations of the LO and

    v.        the debits to the bank account maintained by LO represents the expenses incurred / security deposits made / taxes, duties paid by the LO in the process of normal operations of the LO.

b) The Annual Activity Certificate shall be furnished to the Authority by the LO within 60 days from the end of financial year along with a statement showing details of the research activities/studies undertaken and the information/reports shared with the HO during the reporting financial year by the LO, duly certified by the Principal officer of the LO.

c) All Liaison offices existing on the date of these guidelines shall be liable to furnish the returns/reports/certificates to the Authority as specified in these guidelines.

8. Closure of LO

a) Requests for closure of Liaison Office shall be submitted to the Authority in form IRDA-FIC-2 (Annexure IV), at least two months before the date of expiry of the validity of the approval.

b) The LO shall, at least two months before the closure of its operations in India, publish a public notice informing the proposed closure of its operations in India, in at least one English daily newspaper circulating in the whole or substantially the whole of India and in one newspaper published in the regional language of the state where the LO is situated.

c) The application for closure of Liaison Office shall be submitted along with the following documents:

i) Copy of IRDAI’s permission for establishing the Liaison office in India.

ii) Copy of the public notices issued in the newspapers informing the proposed closure of LO’s operations in India.

iii) An independent Chartered Accountant’s certificate:

1.    Indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the LO and indicating the manner of disposal of assets;

2.    Certifying that all liabilities in India such as taxes/duties, arrears of gratuity and other benefits to employees, rent, etc. of the office have been either fully met or adequately provided for;

3.    Certifying that no proceeds accruing from sources outside India have remained un-repatriated to India

iv)Confirmation from the Overseas Insurer that no legal proceedings in any court in India are pending against the Liaison Office and there is no legal impediment to the closure/ remittance.

v) A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 2013, in case of winding up of the LO in India, wherever applicable.

d) Approval for closure and remittance of proceeds shall be granted provided the Liaison Office has submitted the Annual Activity Certificate for all the years for which it was in operation in India. The remittances shall be made subject to the terms and conditions of RBI / FEMA / CBDT directions in force from time to time.

e) The Authority shall grant approval for Closure of an LO of an Overseas Insurer and shall also intimate the RBI regarding Closure of the LO.

f) If the Overseas Insurer intends to open a branch office (FRB) or form a joint venture/subsidiary for insurance operations in India, the existing LO in India, if any, of the Overseas Insurer shall be closed down at the time of obtaining the approval for opening of the branch office (FRB) / joint venture entity / subsidiary from the Authority.

g) Overseas Insurer having LO in India and also a joint venture partner in insurance company in India on the date of issue of these guidelines, shall close the LO within six months from the date of issue of these guidelines. Application for closure of LO has to be submitted to the Authority along with the required documents, at least two months before the end of the six months’ period.

9. Action in case of default or non-compliance:

a.    If any LO, which is required under these guidelines, or other instructions/guidelines issued by the Authority from time to time, –

              i.        to furnish any document, statement, account, return or report to the Authority, fails to furnish the same;

            ii.        does not cooperate the inspection/investigating Authority appointed by IRDAI/RBI/Govt. of India; or

           iii.        to comply with the directions, fails to comply with such directions;

           iv.        fails to comply with the terms and conditions of approval granted by the Authority;

the Authority may, at any time, withdraw the approval granted to LO. The Authority shall seek an explanation and provide an opportunity of being heard to the LO, before withdrawal of such approval.

b.    The Authority may also direct the Overseas Insurer to remove the Principal Officer of the LO in India and share the action initiated against the LO of the Overseas Insurer with the home country insurance regulator.

third party administrators

IRDAI (Insurance Regulatory Development Authority of India) has vide its adjudication order dated 27/9/2022 not renewed the licence of one third party administrator due to failure to not meet minimum business standards as specified by the IRDAI.

Minimum business requirements are laid down in the IRDAI (TPA- Health Services) Regulations 2016 https://www.irdai.gov.in/ADMINCMS/cms/Uploadedfiles/Regulations/Consolidated/IRDAI%20TPA%20consolidated%20Reg%20may%202020.pdf

On the basis of failings to meet the minimum business requirements as required by the regulations, the TPA licence has not been renewed.

Once the licence is not renewed, then the TPA has to do the following actions.

Copy of the adjudication order can be found here

https://irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4817&flag=1

common directorship in insurance companies

IRDAI (Insurance Regulatory and Development Authority of India) has clarified vide its circular dated 2nd September, 2022 that directors representing insurance agent, intermediary or insurance intermediary can be on the board of the insurance company (common directorship) subject to some conditions to be fulfilled. They are.

 i.    The proposed director shall not be working in the capacity of the Chief Insurance Executive / Specified Person or any other officer responsible for soliciting insurance business for or on behalf of the insurance agent, intermediary or insurance intermediary while holding the position of director in the insurance company.

              ii.    There should be no conflict of interest or prejudice against the interest of the policyholders as a result of such appointment.

             iii.    Insurer shall not pay any remuneration to non-executive directors without prior approval of the Authority (IRDAI). However, insurers are permitted to pay sitting fees, as per applicable norms.

             iv.    The disclosure requirement as laid down under the Corporate Governance Guidelines for Insurers in India, IRDA (Preparation of Financial Statement and Auditor’s Report of Insurance Companies) Regulations, 2002 and any other extant applicable laws shall be complied with.

              v.    A resolution is passed approving such appointment by the Board of insurance company/ agent/intermediary/insurance intermediary.

             vi.    The common director shall recuse himself/herself from the discussion and voting on any matter/discussion pertaining to:

1.    Any area having potential conflict of interest;

2.    Insurer/Agent/Intermediary/Insurance intermediary where she/he is holding common directorship.

            vii.    The number of directorships held by the common director shall not exceed, at any point of time, the maximum number of directorships specified under the extant law including the Companies Act, 2013.

           viii.    The Insurer/Agent/Intermediary/Insurance intermediary shall comply with all other applicable laws.

b.    An individual, already acting or proposed to act as Executive Director / Whole-Time Director on the Board of the Insurer/Agent/Intermediary/Insurance intermediary, shall not be appointed as nominee/ common director.

c.    The common director may be appointed as Chairperson on the Board of the insurance company / agent / intermediary / insurance intermediary subject to necessary safeguards, to be put in place at all the times, to protect the interest of policyholders and to avoid the conflict of interest as may arise due to such appointment.

4.    The Insurers shall file a certificate on an annual basis, duly certified by the CEO, confirming compliance with the provisions of this circular on financial year basis. The compliance shall be filed with Authority not later than 30^th April of the succeeding financial year.

reduced insurance compliance

Advisory from IRDAI for reducing the compliance burden on life insurance companies

IRDAI, in its continuous endeavour towards promoting ease of doing business for insurance companies in India, has reviewed and rationalized the regulatory returns to be filed by the Insurance Companies.

In its latest circular dated 10.06.2022, IRDAI has reduced the number of off-line returns being submitted by Life Insurers from 40 to only 4 whereas the number of online returns would come down from 8 to 5. Three separate certification requirements have also been consolidated into one.

This comes after the similar relaxations extended to General insurers and Health insurers vide circulars dated 12.05.2022 and 23.05.2022 respectively. IRDAI has also discontinued submission of hard copies of any reports, returns or other documents related to actuarial valuation or reinsurance vide circular dated 11.05.2022.

It is expected that reduced compliance burden will enable insurers to better focus their efforts and time in reaching out to every Indian with the ultimate goal of improving coverage and penetration.  

https://irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4737&flag=1

insurance ombudsman

IRDAI circular dated 26th May, 2022 to all insurance companies advising them to strictly comply with the compliance deadlines on the orders of the Insurance Ombudsman as per the Insurance Ombudsman Rules 2017.

Insurers have to adhere to the timelines of the awards settlements and in case they have gone in appeal against any award, then they have to inform the complainant accordingly and also the respective Insurance Ombudsman who heard the case.

https://irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4717&flag=1

Start from Here

Sean French takes his time building up the narrative to this story. Initially i thought this was a difficult book to get through. But when he does get around to the main story, it just explodes brilliantly.

Mark Foll is an unambitious man with a low paid job in an insurance company. He seeks some fun on the job which is why his boss puts him with Giles Buckland in the claims investigation department. Life suddenly seems interesting with insurance frauds staring him in the face.

Both Mark and Giles are sent to Marson Greem a village which houses Marshco a waste management company and also houses several cases of cancer patients in the village, all ostensibly from a discharge from the waste plant. Their mandate is just to go there, look around, observe things and come back and report to the company. Marshco is a major client of the Wortley insurance company for which they work.

Mark and Giles end up doing more than just looking around, which is where the narrative goes beyond the mundane and becomes almost a thriller. A comic strain pervades throughout the narrative with Mark probing more despite Giles being a past scientist. An interesting comparison with cluster studies during the London bombing during the World War makes the claims of the activists more plausible and negotiable for them. Goodreads 5/5

IFSC – insurance business

In the IFSC Registration of Insurance Business Regulations, the IFSCA has amended the same by providing for certificate of compliance from Cost Accountant in practice in addition to certificate from either CS or CA. That is, either one of the three professional members are authorised to give a certificate of compliance with the requirements of registration of insurance business under IFSC.

Similar amendments has been brought about in the Insurance Intermediary regulations to provide for certificate from either of CA/CS/CMA in practice to confirm that application for registration meets with the guidelines specified by the IFSCA.

Both the notifications are available in the IFSC site.

penalty on angel financial

IRDAI has vide its order dated 22nd December, 2021 levied a penalty of Rs.2.7 million on Angel Financial Advisors Private Limited for selling insurance through its holding company Angel Broking Private Limited. The appropriate portion of the order is reproduced hereunder:

4. Charge No. 1:

Violation of Para 3(ii)(a) of Code of Conduct under Regulation 26 of IRDAI (Registration of Corporate Agents) Regulations, 2015 which envisages that no corporate agent shall solicit or procure insurance business without holding a valid registration/certificate.

Proposal forms were carrying the name and stamp of M/s Angel Broking Pvt. Ltd which is a holding company of the Corporate Agent and engages in selling other financial/capital market instruments to its customers. Hence the said proposals were not solicited by the authorized/specified persons of CA but the CA had received commission from the Insurers against that Insurance business.

5. Submission of CA:

The CA submitted that the insurance business is exclusively carried out by CA and by no other entity of the Group. Angel Broking Pvt. Ltd. (ABPL) has not solicited any insurance business.

With regard to the proposal forms bearing the stamp of ABPL as Corporate Agent the CA submitted that the stamp of ABPL was wrongly affixed on some of the proposal forms by a sub-staff and the same form was used to solicit business. Except for this technical / human error there is absolutely no other reason for affixing the stamp of ABPL. Further, upon observing that the stamp of ABPL is affixed on the forms, the name of ABPL was written on the proposal forms by the same sub-staff.

As soon as CA observed that the stamp of ABPL was wrongly affixed on the proposal forms, the CA has segregated stamps of its company & ABPL to avoid repetition of the error. This has also cured the possible error of writing the wrong name looking at the stamp affixed on the proposal form. The CA has sensitised its office staff to be careful and refrain from using the stamps of group companies or writing their names, failing which suitable actions may be initiated. It may be noted that all the policyholders who have bought policies, were logged-in through registered SPs of company and not ABPL.

During the personal hearing the CA submitted that there is only a thin demarcation at the premises between the location of CA and the Brokers and unless the stamp is affixed on any document, it will not be known to whom it relates. They further submitted that the policy in question was indeed solicited by Specified Person only but affixing of rubber stamp of another entity i.e. Angel Broking on the document is unintentional.

6. Decision:

A sample of 40 (Forty) proposals were examined during the inspection, out of which 21 proposals pertained to life insurance and 19 proposals of health insurance. Majority of these proposals were solicited by Angel Broking which is evident because the rubber stamp of “Angel Broking” is affixed on the proposals.

The submission of the CA that “the rubber stamp of ABPL was wrongly affixed on some of the proposal form by a sub-staff” is not tenable, as out of 21 life proposals examined, 16 are solicited from different locations across India which are located miles apart and it defies logic that at all these locations the sub-staff has “wrongly” affixed the rubber stamp. During the hearing, it was also shown to the CA that the signatures of the persons signing as SPs are differing at different proposals. The CA did not have suitable answer to such signature discrepancies. Out of the above 21 life proposals, in 15 cases the stamp of M/s. Angel Broking is clearly visible.

Out of 19 health proposals, 17 are solicited by unlicensed entity Angel Broking. In all these proposals, at the space meant for agent name and signature under the para ‘agents declaration’, it was mentioned as Angel Broking with no mention or signature of the SPs involved in the solicitation process. Also in the proposal forms, the advisor code & name was referred as Angel Broking and channel type was recognized as a “Partnership”.

Hence it is clear that the solicitation has been done only by Angel Broking and unlicensed individuals engaged by it and hence the CA has violated Para 3(ii)(a) of Schedule III (Code of Conduct) under Regulation 26 of IRDAI (Registration of Corporate Agents) Regulations, 2015.

Therefore, by virtue of powers vested in it under Section 102(b) of the Insurance Act, 1938, Authority imposes on the CA, a penalty of an amount of Rs.27 Lakh (Rupees Twenty- seven Lakh) which has been arrived at on the basis that 17 health policies solicited in 12 different dates and 15 life policies solicited in 15 different dates (at the rate of Rs. One Lakh per day for 27 days), by Angel Broking and where there is no involvement of licensed Specified Persons.

The CA is further directed to ensure that only licensed individuals are allowed for solicitation of insurance business in order to ensure compliance of Para 3(ii)(a) of Schedule III (Code of Conduct) under Regulation 26 of IRDAI (Registration of Corporate Agents) Regulations, 2015.

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.

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.

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.

2. 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.
3. 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)
4. The above fee structure is applicable with effect from 01st day of October 2020 and the fee is payable on financial year basis.
5. The Annual fee for Financial year 2020-21 and 2021-22 shall be paid within one month of issuance of this Circular.
6. The Annual fee and Turnover fee for Financial year 2020-21 shall be paid on prorata basis.

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

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%.

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.

3. 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:

4. 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

5. 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
6. 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/

insurance ombudsman rules

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

The Government on 2^nd 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.