The following article was earlier contributed in 2020 by Shailaja Lall, Ashish Teni and Anu Susan.
How is the writing of insurance contracts regulated in your jurisdiction?
Insurance business in India is highly regulated and is primarily governed by the Insurance Act, 1938 (Insurance Act), the Insurance Regulatory and Development Authority Act, 1999 (IRDA Act) and related rules and regulations. Insurance contracts must also comply with the Indian Contract Act, 1872. The insurance sector regulator is the Insurance Regulatory and Development Authority of India (IRDAI). All insurance contracts are required to be filed with the IRDAI. Certain products, such as health insurance products offered to individuals, life insurance products and retail general insurance products, may only be marketed with the prior approval of the IRDAI, whereas for certain commercial insurance products and group health insurance products, insurers are only required to make a filing with the IRDAI before introducing them to the market. The approach differs from product to product.
Standard formats for filing policy wordings of life insurance products has been prescribed by the IRDAI. For health insurance product wordings, the IRDAI has notified standard definitions for certain terms, which must be included by insurers while filing the policy wordings with the IRDAI.
Are types of insurers regulated differently (i.e. life companies, reinsurers?)
Yes, the regulations governing insurers and reinsurers are separate and distinct. With respect to different classes of insurers (life insurers, general insurers standalone health insurers and reinsurers), while some regulations (such as advertising restrictions and foreign investment limits) are common to all categories, on certain other matters (such as determination of solvency, capital requirements, amalgamations and transfer of business), the IRDAI regulates life, general, standalone health insurers and reinsurers differently.
Are insurance brokers and other types of market intermediary subject to regulation?
Yes, insurance intermediaries (such as insurance brokers, corporate agents, web aggregators etc.) are subject to separate IRDAI regulations, which prescribe registration norms, code of conduct, remuneration limits and compliance requirements for each type of intermediary. Distribution of insurance business without appropriate registration and use of unlicensed persons or entities to distribute insurance business in India are punishable offences.
Is authorisation or a licence required and if so how long does it take on average to obtain such permission? What are the key criteria for authorisation?
Yes, insurers, reinsurers and insurance intermediaries, require prior IRDAI registration before commencing their respective operations in India, through Indian entities. Foreign reinsurers can undertake reinsurance business in India through a branch office established in India. Syndicates of Lloyd’s of London can carry on reinsurance business through Lloyd’s India, through service companies incorporated in India, with prior IRDAI registration. Timelines for obtaining registration from the IRDAI depends on the type of insurance entity and vary on a case to case basis. No minimum statutory timelines have been prescribed by the IRDAI. For instance, the IRDAI would typically take 10 to 12 months to grant a final certificate of registration to an insurer and in case of insurance intermediaries, within a period of 2 to 4 months. Broadly, the IRDAI inter alia takes into account the following considerations, at the time of granting the requisite registration:
- satisfaction of minimum capital and net worth requirements;
- promoters/directors meeting the prescribed ‘Fit and Proper’;
- availability of necessary infrastructure with the applicant to effectively discharge its activities;
- financial condition of the promoters/investors investing in the entity; and
- overall interest of the policyholders.
Are there restrictions or controls over who owns or controls insurers (including restrictions on foreign ownership)?
Acquisition/ transfer of shares in insurance companies above certain thresholds requires prior IRDAI approval.
The aggregate foreign direct investment (FDI) in Indian insurance companies has been increased from 49% to 74%, pursuant to the Insurance (Amendment) Act, 2021. Prior to the amendment, Indian insurers were mandatorily required to be “Indian owned and controlled” at all times. With the amendment, foreign ownership and control of Indian insurance companies has been permitted, subject to certain conditions/safeguards to be confirmed by the Central Government. In this context, the Central Government, on April 15, 2021, published draft rules to amend the Indian Insurance Companies (Foreign Investment) Rules, 2015, prescribing some conditions for foreign investment in Indian insurance companies. These draft rules include, a requirement that:
- in an Indian insurance company which has foreign investment, a majority of the directors and key managerial personnel should be resident Indian citizens and at least one among the chairperson of its board, its managing director and its chief executive officer should be a resident Indian citizen;
- in an Indian insurance company where foreign investment exceeds 49%; (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 prescribed ‘control level of solvency’, at least 50% of the net profit for the financial year, is to be retained in the general reserve; (b) 50% of the board is to be comprised of independent directors, unless the board’s chairperson is an independent director, in which case at least 1/3rd of the board must comprise of independent directors.
Is it possible to insure or reinsure risks in your jurisdiction without a licence or authorisation? (i.e. on a non-admitted basis)?
No, India is an admitted jurisdiction and only an Indian insurer registered with the IRDAI can carry on insurance business in India. Further, a person cannot procure insurance for a property in India or an Indian registered ship, vessel or aircraft, from an offshore insurer, without prior IRDAI approval. If an individual/ entity resident in India requires any general insurance policy from an offshore insurer, then, prior approval of the Central Government is required.
A person resident in India cannot obtain a life insurance policy from an offshore insurer unless prior approval of the Reserve Bank of India (RBI) has been obtained. However, an individual resident in India may take or continue a health insurance policy from an offshore insurer, provided the remittance of insurance premium is within the limits set by the RBI.
Offshore reinsurers can participate in reinsurance business from India provided they are recognized by the IRDAI as ‘cross border reinsurers’ (CBRs). Alternatively, offshore reinsurers can set up a branch office in India (FRB) after obtaining requisite registration from the IRDAI.
Before a CBR can reinsure Indian risks, an Indian insurer must file the prescribed information on its behalf with the IRDAI. Notably, Indian insurance companies are required to follow an ‘order of preference’ for both non-life facultative and treaty reinsurance placements. Under the said arrangement, insurers must offer participation to Indian reinsurers, FRBs and International Financial Service Centre Insurance Offices, before approaching CBRs or other Indian insurance companies. Also, syndicates of Lloyd’s of London can register themselves with the IRDAI and conduct business through service companies incorporated in India under the aegis of Lloyd’s India.
Is a branch of an overseas insurer, insurance broker and/or other types of market intermediary in your jurisdiction subject to a similar regulatory framework as a locally incorporated entity?
Only foreign reinsurers are allowed to establish branches in India, for the purpose of underwriting reinsurance business, and they are subject to a similar regulatory framework as a locally incorporated entity. Similarly, syndicates of Lloyd’s of London are also able to underwrite reinsurance business in India, under a separate set of IRDAI regulations (which permitted establishment of Lloyd’s India). Under these regulations, a syndicate must obtain a joint registration from the IRDAI, along with a locally incorporated ‘service company’ which represents the syndicate.
Overseas insurers, insurance brokers or other types of market intermediaries are not permitted to establish branches in India or to participate in the Indian insurance market. If they desire to conduct direct insurance business in India, such overseas insurers or intermediaries are required to incorporate a company in India and obtain registration under applicable regulations of the IRDAI.
What penalty is available for those who operate in your jurisdiction without appropriate permission?
A person undertaking insurance business in India without obtaining appropriate registration is liable to a penalty of up to INR 250,000,000 (approx. US$ 3,340,094) and imprisonment up to 10 years.
An unregistered insurance intermediary is liable to a penalty of up to INR 10,00,000 (approx. US$ 13,360). Any entity which appoints an unregistered insurance intermediary to transact insurance business is liable to a penalty which may extend to INR 10,000,000 (approx. US$ 133,606).
How rigorous is the supervisory and enforcement environment? What are the key areas of its focus?
Insurance business in India is highly regulated and the overall supervisory and enforcement environment is fairly stringent. The IRDAI has wide powers, including the power to inspect, suspend or cancel the registration of an insurer/ insurance intermediary, under various circumstances, including, if the insurer/ intermediary makes a default in complying with, or acts in contravention of, any requirement of the Insurance Act, or of any rules, regulations, orders or directions issued thereunder, or if the insurer/ intermediary makes a default in complying with any direction or order of the IRDAI. The IRDAI’s key focus areas tend to be compliance with corporate governance and disclosure norms, distribution arrangements, outsourcing arrangements, protection of policyholder’s interests, excessive payouts to intermediaries, use of unlicensed persons, related party arrangements and availability of internal controls and infrastructure.
How is the solvency of insurers (and reinsurers where relevant) supervised?
Indian reinsurers, branch offices of foreign reinsurers and syndicates of Lloyd’s India, are required to comply with the solvency requirements as prescribed under relevant regulations All insurance companies are required to maintain a minimum solvency ratio of 150% at all times. Typically, shareholders of insurance companies are required to infuse capital to ensure compliance with solvency requirements at all times. The IRDAI closely monitors compliance with solvency requirements of all such entities and seeks periodic disclosures from them.
What are the minimum capital requirements?
- Indian Insurance Company – A life/ non-life insurer must have a minimum paid up equity capital of INR 100,00,00,000 (approx. US$ 13.3 million).
- An Indian reinsurer must have a minimum paid up equity share capital of INR 200,00,00,000 (approx. US$ 26.7 million).
- A foreign reinsurer must have a minimum net owned fund of at least INR 5000,00,00,000 (approx. US$ 668 million) for establishing FRB. Such reinsurers are also required to have a minimum assigned capital of INR 100,00,00,000 (approx. US$ 13.3 million) with the FRBs.
- Syndicates of Lloyd’s underwriting reinsurance through service companies in Lloyd’s India, are required to maintain, through such service company, an assigned capital of INR 5,00,00,000 (approx. US$ 668 thousand).
- Insurance Intermediaries
The minimum capital requirements of various Indian insurance intermediaries are as follows:
- Insurance Brokers
- Direct insurance brokers – INR 75,00,000 (approx. US$ 100 thousand).
- Reinsurance brokers – INR 4,00,00,000 (approx. US$ 534 thousand).
- Composite insurance brokers – INR 5,00,00,000 (approx. US$ 668 thousand).
- Insurance web aggregators – INR 25,00,000 (approx. US$ 33 thousand).
- Exclusive corporate agents – INR 50,00,000 (approx. US$ 66.8 thousand).
- Third party administrators – INR 4,00,00,000 (approx. US$ 534 thousand).
- Insurance Brokers
Is there a policyholder protection scheme in your jurisdiction?
The IRDAI has been set up with the twin objectives of policyholder protection and orderly development of the insurance industry. In view of this, policyholder protection is at the core of a majority of regulations, guidelines, circulars and directions issued by the IRDAI.
The IRDAI has prescribed a specific set of regulations for policyholder protection that governs various matters including matters to be stated in policies, claims and grievance redressal procedures, includes the following key measures:
- every insurer is required to have a board-approved policy for the protection of policyholders’ interests.
- prospectus of any insurance product should clearly state the product features, warranties, exceptions and conditions to product, allowable riders, its premium and benefits.
- all material information in respect of a proposed cover to be disclosed to the prospect to enable the prospect to decide on the cover that will be best suited to his/her interest.
- for ensuring transparency and to counter mis-selling, insurers should state the terms and conditions for claims and coverage terms explicitly and also disclose applicable policy exclusions.
Further, each insurer is mandatorily required to form a Policyholder Protection Committee to monitor policyholder protection measures implemented by the insurer.
If a policyholder or his representatives are not satisfied with the resolution of a grievance, they can contact the Insurance Ombudsman. All insurers are required to provide detailed addresses of all the Insurance Ombudsman in policy documents and on their website.
How are groups supervised if at all?
Indian insurers/ insurance intermediaries are not regulated on a group-wide level. The IRDAI takes into account the particular business undertaken by the entity in determining its regulatory requirements. Having said that, the IRDAI prescribes several requirements to avoid conflicts of interest between roles of group entities operating within the insurance sector. For instance, the IRDAI has prescribed a specific framework to be complied by insurance brokers and insurers belonging to the same corporate group.
In addition, arrangements of insurers with their promoters and related parties (who can also be an insurance intermediary) especially with respect to outsourcing of services are subject to more stringent supervision and disclosure requirements.
Do senior managers have to meet fit and proper requirements and/or be approved?
Yes, the IRDAI has prescribed detailed fit and proper criteria for directors/ partners and key managerial personal of insurers as well as insurance intermediaries under its various regulations. Under such criteria, individuals, inter alia, must disclose information such as prior professional experience, details of any prior adverse action/ notice by other regulators or governmental authorities along with details of any related business carried under another name/ organization.
For appointment of a CEO/ management director/ whole time director or appointed actuary, insurer must obtain prior IRDAI approval. For appointment of key managerial persons, insurers are required to intimate the IRDAI within 30 days of appointment/ vacation of a key managerial position.
To what extent might senior managers be held personally liable for regulatory breaches in your jurisdiction?
The IRDAI can initiate legal action against every person who, at the time when a company committed an offence, was in charge of and responsible for the conduct of its business. In addition, directors, managers, secretaries or other officers of a company can also be punished for offences committed by the company, if it is proven that the same was committed with their consent or connivance or is attributable to their neglect.
In case of certain violations, the IRDAI can also pass directions to remove managerial personnel or restrict payment of performance incentives to them.
Are there minimum presence requirements in order to undertake insurance activities in your jurisdiction (and obtain and maintain relevant licences and authorisations)?
Yes, direct insurance business can be undertaken only through Indian insurance companies, which are locally incorporated and registered with the IRDAI.
However, Indian insurers may place reinsurance business with overseas reinsurers (which do not have a presence in India), provided they satisfy the eligibility criteria prescribed by the IRDAI and are recognized by the IRDAI as ‘cross border reinsurers’ (through an online registration obtained by the Indian insurer/cedant).
Before a CBR can reinsure Indian risks, an Indian insurer must file the prescribed information on its behalf, with the IRDAI and obtain a Filing Reference Number (FRN). Notably, Indian insurance companies are required to follow an ‘order of preference’ for both non-life facultative and treaty reinsurance placements. Under the said arrangement, insurers must offer participation to Indian reinsurers, FRBs and International Financial Service Centre Insurance Offices, before approaching CBRs or other Indian insurance companies. Also, syndicates of Lloyd’s of London can register themselves with the IRDAI and conduct business through service companies incorporated in India under the aegis of Lloyd’s India.
Are there restrictions on outsourcing services relating to the business?
Yes, the IRDAI believes that outsourcing arrangements should not diminish the ability of a regulated entity to fulfil their obligations to clients/policyholders, which results in weakening of their internal controls, or impede effective supervision.
For Indian insurance companies, the IRDAI has prescribed comprehensive requirements on outsourcing of their non-core activities, including detailed diligence and disclosure requirements and requirement to have mandatory clauses in outsourcing contracts. Indian insurers are prohibited from outsourcing the core activities such as investment and related functions, fund management including net asset value calculations, compliance with anti-money laundering requirements, product design, actuarial functions and enterprise-wide risk management, decisions in underwriting and claims function etc.
Similarly, FRBs are also required to undertake their core functions of underwriting, claims settlement, investments and regulatory compliances.
For insurance intermediaries (such as insurance brokers etc.), the IRDAI has prohibited outsourcing of any of the functions prescribed under their respective regulations.
Are there restrictions on the types of assets which insurers or reinsurers can invest in or capital requirements which may influence the type of investments held?
Yes, there are restrictions on the types of assets which insurers or reinsurers can invest in. For instance, general insurers are required to ensure that 20% of their assets are invested in government securities and a further sum of at least 10% of its assets are invested in government securities or other approved securities.
Insurers are prohibited from investing their controlled funds/ assets, as the case may be, in the shares or debentures of private limited companies. Similarly, insurers are also prohibited from investing policyholders funds outside India.
How are sales of insurance supervised or controlled?
Only insurers, insurance agents and insurance intermediaries registered with the IRDAI are permitted to solicit, distribute or market insurance products in India. The IRDAI has prescribed detailed code of conduct, which the stakeholders are required to comply while selling insurance policies. Sale or solicitation of insurance business by unlicensed persons is strictly prohibited by the IRDAI.
Based on the nature of insurance product and market demand, the IRDAI comes up with specific set of regulatory framework. For instance, the IRDAI has promulgated a novel model for motor insurance business. Under the said model, automobile dealers can solicit motor insurance in accordance with detailed requirements to avoid unfair practices against policyholders and violation of insurance regulations. The IRDAI has also permitted sale of insurance by point of sales persons on behalf of insurers/ insurance intermediaries, who are not required to be employees of such regulated entities.
Further, the IRDAI on a regular basis conducts inspection of insurers as well as insurance intermediaries to review their status of compliance while selling insurance policies. If the IRDAI observes any violation of applicable laws, then, legal action is initiated against such entities.
To what extent is it possible to actively market the sale of insurance into your jurisdiction on a cross border basis and are there specific or additional rules pertaining to distance selling or online sales of insurance?
India is an admitted jurisdiction and only an Indian insurer registered with the IRDAI can carry on insurance business in India. Even the activity of distribution or marketing of insurance requires registration in India as an ‘insurance intermediary’, and only locally incorporated entities will be granted such registration.
IRDAI has promulgated a separate set of guidelines for sale of insurance through online or electronic modes. Every electronic platform used by insurers or insurance intermediaries for soliciting or servicing insurance business is required to be approved by the IRDAI. There are also specific rules pertaining to distance marketing activities of insurers/ insurance intermediaries (other than online modes) – for instance, requirements are prescribed for certification of tele callers soliciting insurance, periodic monitoring of their calls and use of standardized scripts.
Insurance brokers and web aggregators are subject to certain additional requirements under the IRDAI (Insurance Web Aggregators) Regulations, 2017 (Web Aggregator Regulations) for sale of insurance online. Such entities are, inter alia, not permitted to advertise any insurance or non-insurance product or service on their platforms.
Are consumer policies subject to restrictions? If so briefly describe the range of protections offered to consumer policyholders
Over the years, the Indian insurance regulator has significantly augmented the regulatory framework offering protection to policyholders and increasing transparency in retail insurance business. The range of protections offered to consumer policyholders include:
- wordings, rates, actuarial assumptions and distribution channels of all retail insurance products must be approved by the IRDAI before introduction of the product in the market;
- there are clear timelines prescribed on policy issuance, policy servicing and claim settlements;
- insurers are mandatorily required to provide a copy of the proposal form to policyholders;
- there are separate set of rules prescribed for insurance advertisements intended to avoid mis-selling and misinformation to consumers;
- insurers are required to offer a free look cancellation period (of 15 to 30 days, depending on the mode of solicitation) to consumers on all insurance products;
- insurers are expressly prohibited from rejecting retail insurance claims purely on technical grounds of delay in intimation;
- insurers as well as insurance intermediaries are required to have a grievance redressal machinery in place in the manner prescribed and there is a structured process set out by the IRDAI for redressal of customer grievances in a speedy and efficient manner;
- in case of any grievance/ delay in claim settlements, consumers have the facility to approach the IRDAI’s integrated grievance mechanism system, that links with the insurers’ complaint logging system to escalate grievances.
Are the courts adept at handling complex commercial claims?
Litigation before Indian courts continues to be plagued by delays and the judicial system faces numerous challenges hampering case disposal rate in the country, primarily owing to acute shortage of judges (when indexed to the population), and huge backlog of pending cases. In view of this, arbitration is often the preferred method chosen by the parties for resolving high value/ complex claims.
As part of the Indian Government’s firm resolve to promote ease of doing business in India, several significant reforms have been introduced in the Indian legal system in the past decade. For instance, the Parliament enacted the Commercial Courts Act, 2015 and set up specialized courts to exclusively adjudicate commercial disputes of a specified value. The legislation has significantly simplified the manner and approach to be followed in adjudication of commercial disputes, with the emphasis being on speedy and time bound adjudication.
In general, commercial insurance policies have an arbitration clause and accordingly, complex commercial insurance claims are resolved through arbitration process in India.
Is alternative dispute resolution well established in your jurisdictions?
Yes, arbitration, mediation, conciliation, judicial settlement and settlement through lok adalats are statutorily recognized means of alternative dispute resolution process in India.
In case of personal lines of insurance policies, the insured has an option to either approach the insurance ombudsman or in the absence of an arbitration clause, approach the civil courts or consumer forum, based on the nature of the dispute and money involved.
In case of commercial insurance policies, insurers generally prefer an arbitration clause in the policy wordings, as arbitration is a popular method of dispute resolution. Usually, in commercial insurance policies, disputes pertaining to liability of insurers are excluded under the arbitration clause and the parties are required to refer the dispute to relevant courts. However, if the dispute is on quantum, then, the parties are required to initiate the arbitration process for resolving the dispute, before approaching the Indian courts.
Is there a statutory transfer mechanism available for sales or transfers of books of (re)insurance? If so briefly describe the process.
Yes, the Insurance Act provides for the manner in which insurers may carry out amalgamation and transfer of insurance business. The procedure for obtaining prior approval of the IRDAI is as follows:
- The parties need to prepare a scheme that sets out the agreement under which the transfer or amalgamation is proposed to be effected, and containing the required provisions for giving effect to the scheme.
- Two months before submitting an application to the IRDAI, the parties are required to file a notice of intention with the IRDAI, along with a statement of the nature of transaction and the reasons thereof and the prescribed information.
- During the said period, the parties are required to keep the prescribed information open for inspection by the members and policyholders in the principal office and branch offices of the insurers.
- The IRDAI will issue a notice to the policyholders and will have a hearing to consider any objections to the proposed scheme. After considering the objections, the IRDAI, upon being satisfied that no substantial objection to the arrangement has been established, it will grant an in principle approval.
- After receipt of in principle approval, the parties are required to seek approvals from other regulators and undertake other legal processes such as filing of the scheme with the relevant courts, as prescribed. On completion of such processes, the parties are required to approach the IRDAI for the final approval.
- Once the scheme is finally approved by the IRDAI, the insurance business of an insurer may be transferred to, or amalgamated, or merged with the insurance business of the other insurer.
In addition to the foregoing, the IRDAI also has the power to prepare a scheme of amalgamation of an insurer with another insurer, if it is satisfied that such an amalgamation is necessary in the public interest or in the interest of policyholders to secure the proper management of an Insurer.
The IRDAI is also empowered to appoint an administrator to manage the affairs of a life insurer if it has reason to believe that the insurer is acting in a manner likely to be prejudicial to the interests of policyholders, after giving an opportunity to the insurer to be heard. The administrator is required to act under the direction and control of the IRDAI and must file a report, as soon as possible, stating, inter alia, if he/ she recommends transfer of the business of the insurer to some other insurer.
Upon filing of the report, the IRDAI may take appropriate action as above for promoting interests of life insurance policyholders in general.
What are the primary challenges to new market entrants?
Given the low insurance penetration in India, there is enormous potential for growth of insurance and reinsurance business in India. Some of the key challenges faced are:
- Until very recently, for Indian insurance companies, the FDI limit was capped at 49%. Further, an Indian insurance company was required to be “Indian owned and controlled” in the manner prescribed, at all times. In March, 2021, the Insurance (Amendment) Act, 2021 increased such limit to 74%, subject to certain conditions to be prescribed by the Central Government. The Central Government, on April 15, 2021, published a draft of the Indian Insurance Companies (Foreign Investment) (Amendment) Rules, 2021, for inviting suggestions from stakeholders which may be affected by these rules, and indicated that the rules will be taken for publication in the Official Gazette, after the next 15 days. The ‘safeguards’ or conditions, as finalized, will have an impact on decisions of foreign investors in relation to entering the market or increasing their investment in Indian insurance companies.
- Regulatory changes are frequently introduced by the IRDAI, which require market players to amend business models and this leads to a lot of uncertainty in the market.
- Minimum capital requirements to be complied with by insurance intermediaries are on higher side and acts as a barrier for new entrants.
- Absence of any coordination and harmonization across different regulators such as the RBI, the IRDAI, the SEBI and others. If the regulatory authorities can mutually discuss common issues and regulations are issued only after such harmonization has taken place, then, entrants will be aware of the requirements for participating in the Indian insurance sector.
- In addition to market challenges, Indian insurance market is a highly regulated market. The cost of compliance can pose a significant challenge to new entrants.
To what extent is the market being challenged by digital innovation?
The Indian insurance market co-exists in an economy being continually disrupted by digital innovation. Insurers as well as insurance intermediaries are implementing artificial intelligence, automation, advanced data analytics and blockchain processes for enhancing buyers’ experience and for reducing their own expenses Even, traditional insurance players are either building their own innovation labs or collaborating with insuretech firms to explore the prospects. To foster innovation in the country’s insurance space, Indian policymakers have also begun trying new regulation models to support ideas that have never been tried before.
Recently, the IRDAI has implemented a regulatory sandbox environment under which 33 innovative proposals, mostly driven by digital innovation, have been selected for testing before an open market roll-out. The fact that the insurance regulator received 173 proposals clearly demonstrates the extent of disruption, which the Indian insurance market will witness in the areas of underwriting, product design, claim settlement and insurance distribution. Various insurers and intermediaries have entered into the Indian insurance market with a specific focus on digital insurance product and processes. Industry players and the regulator continue to re-look at the old way of doing things, in the interest of policyholders and development of the insurance market.
How is the digitization of insurance sales and/or claims handling treated in your jurisdiction, for example is the regulator in support (are there concessions to rules being made) or are there additional requirements that need to be met?
Yes, the IRDAI has promulgated a separate set of guidelines for sale of insurance through online or electronic modes. All electronic platforms used by insurers and insurance intermediaries for soliciting and servicing insurance business should be approved by the IRDAI and the entities must operate within the contours of the prescribed framework.
Distance marketing activities of insurers/ insurance intermediaries (other than online modes) are also highly regulated – for instance, there are requirements prescribed for certification of tele callers soliciting insurance, periodic monitoring of their calls and use of standardized scripts. Insurance brokers and insurance web aggregators are subject to certain additional requirements under the Web Aggregators Regulations, for sale of insurance online. Such entities are, inter alia, not permitted to advertise any insurance or non-insurance product or service on their platforms.
There has been a continued shift towards encouraging digitization in the industry. In 2016, the IRDAI introduced regulations to govern ‘e-proposals’ and ‘e-insurance policy’. Policyholders can open e-insurance accounts, to safeguard their insurance policy documents in electronic format, and access their entire insurance portfolio on a single platform.
The digitization of insurance sales saw a push in the wake of the pandemic, as the IRDAI, by way of various circulars and notifications encouraged insurers and intermediaries to interact with policyholders through digital means.
To what extent is insurers' use of customer data subject to rules or regulation?
Insurer’s use of customer data is subject to specific rules and regulations prescribed by the insurance regulator as well as provisions of the Information Technology Act, 2000 (“IT Act”) and the rules issued thereunder.
In case of health insurance, the IRDAI prohibits insurers from parting with information collected in proposal forms with any third party, except statutory authorities or in accordance with the IRDAI’s instructions or for the purpose of underwriting or claim settlement. Insurers cannot insert any clauses/ conditions in proposal forms obligating prospects to part with information pertaining to their proposals.
In addition to the above, a new data protection law is expected to be enacted in India, in order to provide a dedicated national legislation on the same (i.e. the Personal Data Protection Bill, 2019). The said bill prescribes that data fiduciaries, which are notified as “significant data fiduciaries” have to conduct data protection impact assessments, data audits, etc. Accordingly, it is expected that insurers could be subject to greater scrutiny with respect to handling of customer data in the future.
To what extent are there additional restrictions or requirements on sharing customer data overseas/on a cross-border basis?
The restrictions under the primary legal framework for data protection in India (the IT Act and rules issued thereunder), will also be applicable when sharing of customer data overseas. Restrictions under the IT Act among others, entail the requirement to take consent of the customer for the transfer of their data to any third party, including entities beyond the borders of the country.
There is a strict mandate, across regulations governing insurers/ intermediaries, to ensure that at least original customer data/ records are maintained in India. Records (including those held in electronic mode) of an insurer pertaining to all the policies issued and all claims made in India, must be held in data centres located and maintained in India. While insurers may outsource certain services to service providers overseas, all original policyholder records must continue to be maintained in India.
Over the next five years what type of business do you see taking a market lead?
The Indian health insurance sector, particularly in light of the pandemic, is slated for expansion in the next five years in view of rising awareness and increasing efforts by insurers to offer attractive health insurance products, along with permissible wellness services which complement the product. Motor insurance, home insurance and liability insurance are other promising areas. On the commercial insurance front, over the next five years, we expect an increase of insurance products that will protect businesses/ organizations from losses due to pandemics or similar perils, as well as cyber insurance.