The Insurance Regulatory and Development Authority of India (Irdai) will come out with specific norms on the issue of ‘management control’ by December.
The norms would be part of the corporate governance guidelines, which will also explain ethical practices for the sector.
Irdai chairman TS Vijayan said on Friday: “All
financial sector regulators have their own definition of ‘management control’ and this is why we
will come out with our
own guidelines for better clarity.”
Vijayan was addressing the CII Insurance Summit here. Talking about management control after the FDI limit was hiked to 49% from 26%, he said Irdai will come up with guidelines soon and put it under the corporate governance structure.
“The Act clearly says that being a major shareholder, the management control should be with the Indian partner. However, we are working on it and the final guidelines will come up shortly on the same. We will bring the guidelines under corporate governance structure,” he said.
The regulator is also looking to remove sub-limits in the commission structure, but will retain the overall permissible expenses limit for insurers.
“Instead of looking at commission on a standalone basis, we are looking at a cap on expenses and, commissions — higher or lower — should be within that cap,” said Vijayan.
Commission structures in insurance vary from product to product.
The Insurance Act, passed earlier this year, has allowed foreign reinsurers to set up branches in India. Irdai said around seven to eight reinsurers have expressed interest to set shop in India. Vijayan also said Irdai is working on the final guidelines for reinsurers, which will come out by October.
Going forward, the insurance industry could see ‘use-and-file’ system for insurance products as opposed to ‘file-and-use’ currently. A committee, which was formed to address the issue, has submitted its final report and it is under evaluation.
“We will allow the use-and-file system, provided the outline of products is well defined and they are easy to understand for customers,” said Vijayan. Irdai will also bring in final regulations on Ulips by December. Recently, the
regulator, in its draft regulations, mandated 25% of the Ulip funds to be invested in Central government securities.