Regulatory updates

In March 2023, the Insurance Regulatory and Development Authority of India (IRDAI) had amended regulations related to Expenses of Management (EoM) and payment of commissions, in order to strike a balance between operational flexibility and oversight by capping the EoM limits at the company level (from the erstwhile segmental level) for general and health insurance segments.

Currently, IRDAI is undertaking efforts to comprehensively review and consolidate the regulations for ensuring a more efficient regulatory framework for the insurance sector. In this regard, on 22 January 2024, IRDAI issued the first consolidated regulation, IRDAI (Expenses of Management, including Commission of Insurers) Regulations, 2024 (the Consolidated Regulation). Some of the key aspects are discussed below:

• Expense limits and business plans: Specific limits on EoM for general, health and life insurance businesses have been outlined. Further, insurers are required to formulate Board-approved policies for expenses and commissions, thereby emphasising cost-effectiveness and policyholder benefits.
• Compliance and reporting: It has been specified that insurers must ensure compliance with the expense limits. Detailed reporting structures, including the preparation of returns of EoM and Board-approved returns on commission payments have been outlined
• Segment-wise monitoring and compliance: Reporting segments have been defined for life insurers, ensuring a more detailed analysis of performance. Also, insurers exceeding expense limits may face various actions – including charges to profit and loss, restrictions, warnings, or even managerial changes.

Effective date: The provisions of the Consolidated Regulation would come into effect from 1 April 2024.

To access the text of the Consolidated Regulation, please click here