Insurance Regulatory Round-up: 2020
With the widespread impact of the COVID-19 pandemic and several regulatory changes being introduced (as well as proposed) by the Insurance Regulatory and Development Authority of India (IRDAI), 2020 has been a relatively busy year for the Indian insurance sector.
The year saw the introduction of standardized/tariff products for various lines of business, significant amendments to prevailing IRDAI guidance, streamlining of various guidance pertaining to health insurance business, consolidation of the advertisement regime, relaxation of existing timelines for regulatory filings and submissions, as well as new norms on investments and various operational matters. A brief overview of some of the key notifications is below.
Standardised Health Insurance
At the beginning of 2020, the IRDAI issued norms on the standard covers, sum insured and policy wordings for a standard individual health insurance product (christened, the Arogya Sanjeevani Policy), which General and Health Insurers were required to mandatorily offer1. Thereafter, with the worsening of the initial COVID-19 outbreak, the IRDAI advised Insurers to design appropriate health insurance products covering risks arising out of COVID-19. While there have been a lot of other developments in the health insurance space (discussed separately below), the IRDAI issued the following guidance in relation to health insurance products:
- General and Health Insurers were asked to devise comprehensive health insurance policies2 in order to enable all employers and organisations to comply with the directions issued under the Ministry of Home Affairs' Order of 15 April 2020 regarding the containment of the COVID-19 pandemic and extension of lockdown measures.
- Insurers were allowed to offer COVID-19 related short-term health insurance policies until March 20213.
- Subsequently, in July 2020, General and Health Insurers were directed to mandatorily offer standardised individual health insurance products covering COVID-19, namely Corona Rakshak product4 and Corona Kavach product5.
On the life insurance side, the IRDAI also issued the "Guidelines on Standard Individual Term Life Insurance Product, "Saral Jeevan Bima" of 15 October 2020, pursuant to which the IRDAI issued norms on the non-linked non-participating individual pure risk life insurance product which all Life Insurers are required to mandatorily offer from 1 January 20216.
Proposed Insurance Products & Working Groups
In addition to introducing standard products in the insurance market, the IRDAI also issued exposure drafts and invited stakeholder comments on standardised versions of products, namely 'Personal Accident'7, 'Standard Vector Borne Diseases Health Policy'8, and 'Standard Travel Insurance Product'9. It remains to be seen whether the proposed standard products will be notified in their present form.
The IRDAI has also constituted working groups in respect of (i) drone technology, ie, remotely piloted aircraft systems (RPAS) in light of their fast growing use scenarios10; (ii) 'Surety Bond' offerings by General Insurers, due to the cash flow issues witnessed in the Indian banking sector11; (iii) a standard 'Cyber Liability Insurance' product for small business and individuals12; and (iv) existing tariff based insurance products in the engineering retail segment13. The recommendations and comments of these working groups are expected in 2021, and it will be interesting to see the form in which these insurance products are ultimately notified.
Motor Insurance Products
The regulatory regime applicable to motor insurance business saw various developments in the past year14, and notably, the withdrawal of the long term motor package covers offered for three years (for new cars) or five years (for new two-wheelers), with effect from 1 August 202015, owing to implementation concerns. Further, the IRDAI expressly clarified that not holding a valid PUC certificate is not a valid reason for denying any claim under a motor insurance policy16, in light of the Supreme Court's decision in MC Mehta v Union of India17.
In relation to reinsurance arrangements by Indian Insurers, the IRDAI issued the "Guidelines on filing of Re-insurance arrangements with the IRDAI" of 31 January 2020, which prescribed conditions for the submission of the annual reinsurance programmes of Indian Insurers, and clarified the accounting treatment applicable for all 'alternative risk transfer' agreements18.The IRDAI also issued a circular on "Capital Gearing Treaties" of 30 March 2020, pursuant to which Insurers were prohibited from entering into fresh capital gearing treaty arrangements (ie, carried out purely for improving solvency margin), and required to phase out any such existing arrangements.
Policy Issuance & Related Compliance
The IRDAI exempted Insurers from issuing physical copies of the policy document and proposal form for the financial year 2020-2119, and allowed Life Insurers to obtain customer consent without requiring wet signature on the proposal form20. In this context, the IRDAI also issued norms on Video Based Identification Process as an optional electronic and consent based identification/KYC process21.
COVID-19 Related Notifications
The IRDAI has issued various instructions in light of and to brace the impact of the COVID-19 circumstances on policyholders as well as Insurers22, inter alia, in relation to:
- Setting up of helplines and providing applicable disclosures23;
- Offering settlement options under unit linked policies24;
- Admissibility of life insurance claims25;
- Settlement of COVID-19 related claims26 (including hospitalization treatment and use of make-shift or temporary hospitals27) and provision of cashless facilities28;
- Ensuring availability of adequate capital and rationalising expenses of management for the financial year 2020-2129;
- Maintenance of business continuity plan and role of crisis management committee in monitoring the current situation on a real time basis30;
- Rescheduling of payments under term loans31 and collection of premium in instalments32; and
- Relaxation of timelines for grace period33,regulatory filings34, public disclosures35, and other compliance36.
On 20 October 2020, the IRDAI issued the "Exposure Draft on Insurance Regulatory and Development Authority of India (Insurance Advertisements and Disclosure) Regulations, 2020" which proposes to, inter alia, bring the existing IRDA (Insurance Advertisements and Disclosure) Regulations 2000 in conformity with the Master Circular on Insurance Advertisements, as updated on 31 August 2019.
Investment Related Norms
Based on various representations from the Life and General Insurance Councils, in August 2020, the IRDAI permitted Insurers to classify investments in preference shares and equity shares as approved investments for the period 1 April 2020 to 31 March 202137. Further, Insurers were also directed to undertake at least 10% of their total secondary market trades in the corporate bonds through Request for Quote (RFQ) platform available on BSE/NSE38. The IRDAI also directed insurance intermediaries to submit an undertaking39 confirming compliance with the norms on investment from countries sharing a land border with India40, which now requires prior government approval.
On 5 November 2020, the IRDAI also proposed the introduction of the IRDAI (Manner of Determination of Compensation to Shareholders on Merger of an Insurer under a Scheme Prepared under Section 37A) Regulations 2020, for determination of compensation to shareholders and members whose rights have been adversely impacted.
Maintenance of Data
In relation to the submission of data for regulatory inspections, the IRDAI issued the IRDAI (Minimum Information Required for Investigation and Inspection) Regulations 202041 on 26 November 2020, which come into force on 23 May 2021. The regulations stipulate the minimum information and records to be maintained by Insurers, intermediaries and insurance intermediaries and steps to be taken towards digitisation of all physical records42, in order to enable the IRDAI's investigating officer to effectively undertake his/her duties and functions. Further, these entities were also directed to maintain and update a board approved policy in relation to the maintenance of records and information.
Miscellaneous Operational Norms
The IRDAI also issued guidance on various operational matters concerning Insurers:
- The IRDAI made it mandatory for the Insurers to obtain a Legal Entity Identifier (LEI) on or before 31 July 2020, per the procedure prescribed by the RBI43.
- The IRDAI also issued norms on "Standards for hospitals in the provider network - Disclosure of Quality Parameters" of 10 June 2020 and the "Guidelines on Public Disclosures by Insurers on the qualitative and quantitative parameters of the health services rendered to policyholders" of 10 June 2020 in relation to hospital related disclosures to be made by Insurers and TPAs.
- In relation to the Insurance Information Bureau's central database of licensed insurance salespersons (ENVOY portal), the IRDAI stipulated that all salesperson identifiers be shifted from Aadhar to PAN details44.
- The IRDAI issued clarifications in relation to the transfer of shares by Insurers, calculation of the threshold limits, requirement of the IRDAI's approval in case of pledge, and suspension of voting rights45.
- The IRDAI also notified a 'Panel of Actuaries'46 for Insurers to utilise, subject to the conditions prescribed by the IRDAI47, and valid up to 31 August 2023.
- On 1 December 2020, the IRDAI amended various provisions of the IRDAI (Insurance Surveyors and Loss Assessors) Regulations 2015 by way of the IRDAI (Insurance Surveyors and Loss Assessors) (Amendment) Regulations 2020, including but not limited to the applicable Code of Conduct, and the reporting requirements to be complied with by Insurers48.
Changing Landscape of Health Insurance Business
Standardization in Health Insurance
In early June 2020, based on comments from stakeholders on the exposure draft re "Guidelines on Standardization of General Clauses in Health Insurance Policy Contracts" of January 2020, the IRDAI notified the final guidelines49 stipulating standardised general clauses for indemnity based health insurance policies (excluding Personal Accident and Domestic/Overseas Travel) such as disclosure to information norm, claim settlement, cancellation and renewal of a policy. Further, the "Guidelines on Standardization in Health Insurance" of 29 July 2016 were superseded by the "Master Circular on Standardization of Health Insurance Products" of 22 July 2020 (Standardization Guidelines) which compiles all standardisation norms issued up to 31 March 202050.
Product Construct Norms
In June, the IRDAI issued various norms expanding and clarifying the construct and scope of coverage under health insurance policies, such as in relation to insurance coverage for persons (i) with disabilities; (ii) affected with HIV/AIDS; and (iii) affected with mental illness51. The IRDAI also prescribed norms on telemedicine52, and proportionate deduction of 'associate medical expenses'53.
Later in August, the scope of the definition of "Pre-Existing Disease" set out under the Standardization Guidelines was amended54. More recently, the IRDAI has required Insurers to include a benefit illustration in respect of every health insurance product offering individual and family floater options55.
Health Insurance Amendment Regulations
The IRDAI (Health Insurance) (Amendment) Regulations 2019 introduced certain amendments to the existing IRDAI (Health Insurance) Regulations 2016, including: (a) modifying provisions on AYUSH treatment; (b) acceptance of renewal premium; and (b) modifying wellness norms for offering discounts on third party services/merchandise.
Wellness Benefits in Health Insurance
Pursuant to comments from stakeholders on the draft guidelines56, the IRDAI issued the "Guidelines on Wellness and Preventive Features" of 4 September 2020 (Wellness Guidelines) which is aimed at provision of wellness and preventive features/benefits by Insurers. The Wellness Guidelines continue to encourage and reward policyholders who meet the health and lifestyle conditions and criteria set out under their health insurance policy57.
Migration and Portability
The IRDAI issued the "Guidelines on Migration and Portability of health insurance policies" of 2 January 2020 (Portability Guidelines), which stipulate that Insurers offering indemnity-based health insurance policies are required to provide for 'portability' and 'migration' of policies in accordance with the norms stipulated thereunder. In addition to these norms, the IRDAI also separately issued various norms on portability of group health insurance policies issued to account holders of various banks58, and specific norms for Corona Rakshak and Corona Kavach products59.
While a majority of COVID-19 related notifications are scheduled to lapse by March 2021, several insurance regulatory developments remain on the anvil. Notably, the coming year could witness the introduction of various new standardised products in the cyber, health, travel and engineering, which Insurers will be expected to offer in addition to their existing products, as well as an updated advertisement framework.
1 "Guidelines on Standard Individual Health Insurance Product" of 1 January 2020.
2 "Providing mandatory medical insurance coverage to workers as part of the National Directives of MHA, GOI" of 16 April 2020.
3 "Guidelines on introduction of short term health insurance policies providing coverage for COVID-19 disease" of 23 June 2020.
4 "Guidelines on COVID Standard benefit based health policy" of 26 June 2020 applicable to all insurers.
5 "Guidelines on COVID Standard Health Policy" of 26 June 2020 applicable to General and Health Insurers.
6 Please see our article of 22 October 2020 on the subject matter, available at: https://www.mondaq.com/india/insurance-laws-and-products/996810/standard-life-insurance-product-new-regulatory-requirements.
7 "Guidelines on Standard Personal Accident product" of 9 December 2020.
8 "Standard Vector Borne Disease Health Policy" of 13 November 2020.
9 "Guidelines on Standard Travel Insurance Policy" of 28 December 2020.
10 "Working Group for insurance of Remotely Piloted Aircraft System (RAPS)/ Drone Technology" on 24 June 2020.
11 "Working Group to study the suitability of offering of Surety Bond by Indian Insurance Industry" of 1 July 2020.
12 "Working Group to Study Cyber Liability Insurance" of 19 October 2020.
13 "Working Group for revisiting the retail business of Engineering tariff" of 5 November 2020.
14 "Master Circular on Recent Developments in Motor Insurance Products" of 9 June 2020. Please see our article of 28 March 2020 on the subject matter, available at: https://www.mondaq.com/india/insurance-laws-and-products/909332/motor-insurance-recent-regulatory-changes.
15 "Withdrawal of Long Term Package cover offering both Motor Third Party Insurance and Own Damage Insurance for three years or five years" of 8 June 2020.
16 "PUC certificate at the time of renewal of Insurance of Vehicle - Directions given by Hon'ble Supreme Court of India in WP(C) No.13029 of 1985 in the matter of M.C. Mehta Vs. Union of India" of 20 August 2020 and "Press Release regarding valid PUC certificate at the time of renewal of motor vehicle insurance" of 26 August 2020.
17 WP No 13029 of 1985.
18 "Accounting treatment of the Alternate Risk Transfer Agreements" of 8 December 2004.
19 "Issuance of Electronic Policies" of 4 August 2020; "(a) Issuance of Electronic Policies and (b) dispensing with physical documents and wet signature on the proposal form in respect of health insurance policies" of 10 September 2020 and "(a) Issuance of Electronic Policies and (b) dispensing with physical documents and wet signature on the proposal form" of 10 September 2020.
20 "Dispensing with physical signature on proposal forms" of 11 November 2020.
21 "Video Based Identification Process (VBIP)" of 21 September 2020.
22 Please see our article of 23 April 2020 on the subject matter, available at: https://www.mondaq.com/india/insurance-claims/922208/covid-19-insurance-regulatory-updates.
23 "COVID-19 related instructions" of 30 March 2020 (March Circular).
24 "Global Pandemic COVID-19 related Instructions to Life Insurers" of 4 April 2020 and related "FAQs on Settlement options under Unit Linked life insurance plans (ULIPs)" of 7 April 2020.
25 "COVID-19 Global Pandemic Related Instructions to Life Insurers" of 23 March 2020.
26 "Guidelines on handling of claims reported under Corona Virus" of 4 March 2020.
27 "Guidelines on settlement of claims on treatment at 'make-shift or temporary hospitals' as permitted by Government" of 16 July 2020.
28 "Norms on settlement of health insurance claims" of 18 April 2020 and "Provision of cashless facility to the policyholders" of 14 July 2020.
29 "Prudent management of financial resources of insurers in the context of COVID-19 pandemic" of 13 April 2020 and 24 April 2020.
30 March Circular.
31 "Rescheduling of Term Loans in the context of outbreak of COVID-19" of 8 April 2020 permitted Insurers to grant a moratorium period of three months towards payment of instalments falling due between 1 March 2020 and 31 May 2020; "COVID-19 - Rescheduling of Term Loans." of 7 July 2020 extended the period further for loans falling due between 1 June 2020 and 31 August 2020; "Group Credit Life Schemes - Modifications to align the coverage with the moratorium announced by Reserve Bank of India" of 10 July 2020.
32 "Norms on collection of Health Insurance Premium during COVID-19 crisis" of 21 April 2020.
33 "Global Pandemic COVID-19 related Instructions to Life Insurers" of 4 April 2020; "Extension of grace period up to 31 May 2020" of 9 May 2020.
34 March Circular; "Additional Time allowed for filing Regulatory Returns" of 4 April 2020; "To ensure proper service to policyholders and customers" of 23 March 2020; "Additional time allowed for filing Regulatory Returns to all insurance intermediaries" of 9 April 2020; "Additional time allowed for filing Quarterly Return - Q4-2019-20 - Regulatory Returns to all insurance intermediaries" of 13 May 2020; "Relaxation from Submission of Hard Copy of Regulatory Returns" of 4 August 2020.
35 "Sub: Extension of time limit applicable to Public Disclosures on websites" of 4 June 2020 extended the timeline for compliance under "Public Disclosures by Insurers" of 28 January 2010 by additional 30 days for period ending 31 March 2020.
36 "Extension of timeline for review and updation of stewardship policy based on the Revised Guidelines on Stewardship Code for insurers in India" of 30 April 2020, pursuant to which the IRDAI has extended the timelines on the subject matter to 31 May 2020; "Relaxation of timelines for certain provisions of the IRDAI (Re-insurance) Regulations, 2018" of 28 March 2020 extended the filing to 31 May 2020; "Extension of timelines to comply with the Standards and Benchmarks for the Hospitals in the Provider Network" of 24 July 2020 by one year.
37 "Dividend Criteria for Equity Investment under "Approved Investment"" of 21 August 2020.
38 "Implementing RFQ platform for Investments in Corporate Bonds/Commercial Papers" of 25 September 2020.
39 "Foreign Investment in insurance intermediaries" of 18 May 2020.
40 Press Note 3 of 17 April 2020 and Foreign Exchange Management (Non-Debt Instruments) (Second Amendment) Rules 2020.
41 Please also see our article of 11 December 2020 on the subject matter, available at: https://www.mondaq.com/india/insurance-laws-and-products/1015474/minimum-information-for-investigation-and-inspection-by-irdai.
42 "Maintenance of records under IRDAI (Minimum Information Required for Investigation and Inspection) Regulations 2020." Of 8 December 2020.
43 "Legal Entity Identifier (LEI) Code" of 5 June 2020.
44 "Central Database of Licensed Insurance Salespersons in India (ENVOY) at IIB" of 30 June 2020.
45 "Transfer of Shares of the Insurance Companies" of 23 July 2020. Please see our article of 6 August 2020 on the subject matter, available at: https://www.mondaq.com/india/shareholders/973098/irdai-circular-on-transfer-of-shares-of-insurers-clarifications-and-further-questions.
46 "Panel of Actuaries" of 31 August 2020.
48 "Guidelines for all General Insurance Companies for submission of Reports" of 2 December 2020.
49 "Guidelines on Standardization of General Terms and Clauses in Health Insurance Policy Contracts" of 11 June 2020.
50> The Standardization guidelines include norms issued under "Guidelines on Standardization in Health Insurance", "Guidelines on Standardization of Exclusions in Health Insurance Contracts" and "Guidelines on Standard Individual Health Insurance Product".
51 "Disclosure of underwriting philosophy of offering Insurance coverage to Persons with Disability (PWD) and people affected with HIV/AIDS and Mental Illness diseases" of 2 June 2020.
52 "Guidelines on Telemedicine" of 11 June 2020 and "Telemedicine Practice Guidelines" of 25 March 2020 issued by the Medical Council of India.
53 The "Modified Guidelines on Product filing in Health Insurance Business-Norms on Proportionate Deductions" of 11 June 2020 were issued further to the "Exposure Draft on Modified Guidelines on Product filing in Health Insurance Business-Norms on Proportionate Deductions" of 17 March 2020.
54 "Master Circular on Standardization of Health
Insurance Products - Corrigendum" of 28 August 2020
ore recently, ded regulations.epsect of sed nd related gudance vidual, corporate l of a policy, cal order as a matter fo good p.
55 "Disclosure of benefit/premium illustration for
Health insurance policies issued on floater basis" of 28
ore recently, ded regulations.epsect of sed nd related gudance vidual, corporate l of a policy, cal order as a matter fo good p.
56 "Draft Guidelines on Wellness and Preventive Features/Benefits" of 7 November 2019. Please see our article of 6 December 2019 on the subject matter, available at: https://www.mondaq.com/india/insurance-laws-and-products/872544/wellness-benefits-in-health-insurance-proposed-guidelines.
57 Please see our article of 2 October 2020 on the subject matter, available at: https://www.mondaq.com/india/insurance-laws-and-products/990592/wellness-and-preventive-features-in-health-insurance-irdai-guidelines.
58 "Additional Norms on portability under Health Insurance policies" of 7 October 2020.
59 "Norms on Renewability, Portability and Migration of Standard COVID Specific products" of 13 October 2020.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.