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PwC’s Insurance InsightsAnalysis of regulatory changes and impact assessment for August 2018

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The rise of InsurTech Preface Key guidelines issued by the Authority in August 2018 Contact us

InsurTech in Life Insurance

Beginnings of InsurtechInsurtech is fast becoming one of the leading technologies that is changing the function of the entire financial services industry. Industries are now having to quickly adapt to these new technologies. New forms of business models, applications and processes and products are being created as a result of Insurtech. In the case of the insurance industry, there is great scope and usage for these new technologies. These technologies will help insurers to better assess risks, and accordingly charge premiums to customers. It will also help certain processes taking place within the current system to be more efficient.

In the case of life insurance, health information plays a very important role while assessing the risk of a person. There is a possibility of using wearables to measure the health and fitness of the insured person. Indicators such as heart rate, blood pressure and exercise habits are all indicators that can be measured by wearables. These methods can help improve the assessment of the risk of life insurance. The challenge for insurance companies is to build business models that will allow them to monitor the data from these wearables throughout the product life-cycle as well as provide attractive products to customers at the same time.

With the advent of digital technology, there is a possibility for insurance companies to enter markets that were previously quite difficult to do so. Insurers will now be able to tap into segments such as younger and lower income segments, and also reduce their costs.

Insurtech has been primarily triggered off due to rise of Financial Technology (Fintech). These technologies have helped improve customer acquisition, retention, operations as well as client communication. There are different sources from which innovations in Insurtech have developed. With the modern generation linked to the advent of the internet, the expectation is that engagement with service providers should be through that medium. Insurers are constantly looking for better and more efficient channels t0 communicate with customers, and IT provides them a good medium to conduct business. This is making insurers adapt to the changing environment through the use of technology. This change is removing several existing activities in the traditional product life-cycle model of insurance.

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Role of technology Way aheadTechnology has played a major role in the shaping of Insurtech. Many insurers are keen to continue to invest in technologies as they fear the risk of disruption if they do not have the latest technology available. The future for insurers suggests that innovation will now become a leading part of the overall strategic agenda and that it will also be in line with the objectives of the company. Different types of technology have already started having an impact on the way insurance companies connect with their consumer base. In case of India, mobile devices have become a very essential part of the lives of people. The expectations that people have from financial services, including insurance companies, is that the consumer experience they get should be almost of the same value as they would get when browsing social networking applications. This is requiring the entire financial service industry to quickly adapt to the rapidly changing environment and the expectations of consumers.

Blockchain is one of the key technologies that have been developed in Insurtech, and has been key in assessing risk and improving products. Blockchain is a digital ledger that stores active transaction data without intermediate control by using a consensus system to validate transactions. The application of Blockchain in the insurance industry are considerable. It can be used to allow for improving detection of fraudulent behaviour such as identity theft, damage claims or even misrepresented injury. Blockchain can also be used to monitor claims history and confirm customer authenticity. With this significant applicability that Blockchain has, once the technology is fully integrated into the working systems of the insurance companies, it is expected to have a significant impact on the way insurance companies are being run.

The importance of Insurtech and its impact on insurance companies is clear. It will have a significant impact not only on business structures of insurance companies but also on the ways that insurers will be able to communicate with their customer base. This will open up new markets that were previously very difficult to do so due to monetary and logistical reasons. Consumers will now have to start interacting differently with insurance companies. More importantly, these rapid changes in technology will also require the regulator to also fully understand how these new technologies and innovations within Insurtech work. By understanding the technicalities, this will lead to regulations that will continue to have the benefit of the policyholder in mind.



In July 2018, the insurance sector witnessed a significant increase in the amount of premiums collected. LIC continues to dominate the life insurance market. Presented below is a brief overview of the general and life insurance sectors, in terms of premium collection, market share, number of policies issued, as well as the growth in investments of general insurers.

• The figures clearly depict the dominance of the public sector in terms of premium collection, number of policies issued and market share in both life and general insurance.

• Within the life insurance market, the market share of LIC saw a significant increase to 70% as compared to 67% during the previous month. LIC continues to remain the leading life insurance provider of the country.

• Within the general insurance market, there has been growth in revenues earned for companies. Private and public sector general insurers both continue to enjoy the large market share for general insurance.

• In the general insurance category, although the market is dominated by public and private sector insurers, standalone private health insurers have had a 38% increase in the amount of premiums collected for FY2018. In July 2017, the premium collected was 2003 crores INR, which increased to 2755 crores INR in July 2018. On the other hand, specialised PSU insurers have also witnessed a significant increase of 35% in premium collected—from 767 crores INR in July 2017 to 1036 crores INR in July 2018.

• The Investment Portfolio of the general insurance industry has increased from 40, 388 crores INR in 2007-08 to 1, 79,371 crores INR in 2016-17, growing at a CAGR of 18.0% p.a.

Life insurance sector

0.005000.00

10000.0015000.0020000.0025000.0030000.0035000.0040000.0045000.00

Upto 31st July 2017 Upto 31st July 2018

Private life insurers LIC

Premium in Crore (INR)

Market share up to 31st July 2018

30

70

Private life insurers LICSource: IRDAI



General insurance sectorNew business premium (in crore INR) Number of policies/schemes

Market share up to July 2018 Investment Portfolio (INR Crores)

0.00

10000.00

20000.00

30000.00

40000.00

50000.00

Private and public sector general insurers

Stand-alone privatehealth insurers

SpecialisedPSU insurers

Pre

miu

m in

cro

re IN

R

General insurers

For July 2017 For July 2018Up to 31st July 2017 Up to 31st July 2018

92%

6%

2%

Private and public sector general insurers

Stand-alone private health insurers

Specialised PSU insurers

Source: IRDAI

Source: IRDAI

Source: Indian Non-Life Insurance Industry Yearbook 2016-17

For July2017

For July2018

Up to31st July 2017

Up to31st July 2018

Private lifeinsurers

505209.00 552868.00 1721606.00 1797462.00

LIC 1459224.00 1584779.00 5125173.00 5136077.00

0.001000000.002000000.003000000.004000000.005000000.006000000.00

Private life insurers LIC

40388 42164 4889162743

77103

105888120854

139887154783

179371

020000400006000080000

100000120000140000160000180000200000

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

2015-2016

2016-2017

Investments (INR Crores)



Title: Appointment of Common/Nominee Director(s) on the Board of Insurance Company2

Date of Issue: 30 August 2018

Introduction

Our point of view

According to the above circular, the authority has received requests from insurance companies seeking approval for new appointments and/or continuation of appointment of Common or Nominee Director(s) representing insurance agents or intermediary or insurance intermediary on the Board of their companies.

The insurers are required to ensure the following:

1. The proposed director should 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 working as the director of the insurance company.

2. With this appointment, there should be no conflict of interest against the interest of the policyholder arising.

3. Without prior approval of the authority, no remuneration should be payable to non-executive directors.

4. The disclosure requirement as laid down under the Corporate Governance Guidelines, IRDAI Regulations 2002 and any other applicable laws should be complied with.

This is a good initiative that has been launched by the regulator. By enforcing insurers to conduct proper due diligence for new directors representing insurance agents, the regulator is looking after interests of the policyholder. Conducting this due diligence will ensure that interests of all the respective parties will be taken care of.

Ref no: IRDA/ F&A/ CIR/MISC/141/08/2018

Applicability: Chairman and CEO s of all insurance companies

Along with the application form, the following documents should also be included:

1. Brief profile of the director

2. Resolution for such an appointment

3. Certificate from Managing Director or CEO that conditions laid down in the above paragraph are complied with




Our point of view

According to the above circular, due to heavy rains and floods in Kerala and Karnataka, policyholders have found it difficult to make timely payments of renewal premiums, which might have already become due for payment. There is a possibility that coverage of these policies could lapse due to non-payment of premiums.

The insurers have been instructed to extend the existing grace period of 15 or 30 days to 60 days for payment of premiums due during the period of 15 July 2018 to 30 September 2018 for Kerala and the flood affected districts of Karnataka.

With the unforeseen circumstances that have affected these two regions, this is a very good initiative taken by the regulator. It allows people who have been hit by the floods, more time to make insurance payments. This allows affected policyholders to recover from the damages and slowly get back to normal life.

Title: Natural calamity—relaxation of grace period for payment of renewal premium3

Date of issue: 29 August 2018

Ref no: IRDA/ACT/CIR/MISC/138/08/2018

Applicability: Chairman and CEOs of all life insurance companies




According to the above circular, there has been a partial change to the items for which optional cover may be offered by insurers, which were stated as per Annexure 1 of Chapter III of the ‘Guidelines on standardisation of Health insurance business’, circular number: IRDA/HLT/REG/CIR/146/07/2016 dated 29 July 2016.

Below are the following items that are deleted from the list:

Reference Number Item

61 Dental treatment expenses that do not require hospitalisation

62 Hormone replacement therapy

64 Infertility/Subfertility/Assisted conception procedure

65Obesity (including Morbid Obesity) treatment if excluded in policy

66 Psychiatric and Psychosomatic disorders

67 Corrective Surgery for Refractive Error

68 Treatment of Sexually Transmitted diseases

73Any expenses when the patient is diagnosed with retro virus or suffering from HIV/AIDS etc. is detected directly or indirectly

74 Stem cell implantation/ Surgery and Storage

177 Aesthetic Treatment/ Surgery

Title: Modified guidelines on items for which optional cover may be offered by insurers’4


Ref no: IRDAI/HLT/GDL/CIR/136/08/2018

Applicability: All insurance companies

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According to the above circular, due to reports of loss of human life and loss of belongings in Kerala and certain districts in Karnataka, the regulator has advised insurers to take the following actions immediately:

1. Initiate any immediate action to ensure that all reported claims are registered, and eligible claims are settled expeditiously.

2. In cases where difficulty is experienced in obtaining a death certificate due to non-recovery of body etc., the process followed in 2015 Tamil Nadu floods may be considered.

3. A suitably simplified process or procedure, including relaxations in the usual requirements wherever feasible may be considered to expedite claims settlement.

4. Details of offices or special camps set up for the purpose may be publicised in the press and electronic media to enable immediate filing of claims.

5. Progress report on the claims settled for the state of Kerala and certain districts in Karnataka should be submitted to the regulator on a weekly basis.

Introduction

Title: Guidelines on settlement of Insurance Claims of victims of recent Floods in the state of Kerala & Guidelines on settlement of Insurance Claims of victims of recent Floods in the state of Kerala-Extension of the circular provisions to flood affected districts of Karnataka5

Date of Issue: 17 August 2018 and 20 August 2018

Ref no: IRDA/LIFE/Kerala Floods/2018-19 and IRDA/LIFE/Karnataka Floods/2018-19

Applicability: CEO/Chairman of all life insurers

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According to the above circular, due to loss of life and property in Kerala and Karnataka, including Kodagu, the regulator has advised insurers to take immediate steps to reduce hardships of the affected insured population of these states by allowing for immediate registration and settlement of eligible claims.

Below are the steps required as mentioned by the regulator:

1. Nomination of a senior officer who will act as a nodal officer for the state and will be responsible for coordinating the settlement of all eligible claims that are reported in Kerala.

2. In case of non-recovery of body and there are any death claims and death certificate are difficult to get, then process used for Tamil Nadu or Jammu and Kashmir floods can be used.

3. Details of offices or special camps set up for the purpose may be publicised in the press, electronic media to enable immediate filing of claims.

4. All claims should be surveyed immediately, and claim payments should be disbursed as soon as possible.

5. An adequate number of surveyors should be engaged immediately in the affected districts.

6. Insurers should launch extensive awareness campaigns in the state, highlighting measures that are being taken by up by them.

All non-life insurers are required to submit information relating to insurance claims in Kerala and Karnataka including Kodagu on a daily basis.

Introduction:

Title: Guidelines on insurance claims of victims of recent floods (August 2018) in Kerala and guidelines on insurance claims of the victims of recent floods (August 2018) in Karnataka6

Date of Issue: 17 August 2018 and 20 August 2018

Ref no: IRDA/NL/GDL/MISC/132/08/2018 & IRDA/NL/GDL/MISC/131/08/2018

Applicability: CEOs and CMDs of all non-life insurance companies and stand-alone health insurance companies

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With reference to the Mental Healthcare Act 2017, every insurer will now make provision for medical insurance for treatment of medical illness on the same basis as is available for treatment of physical illness. All insurance companies are required to comply with the aforesaid provisions of this act with immediate effect.

This is another good initiative undertaken by the regulator to mandate all insurers to make provisions for medical insurance for treatment of medical illnesses. With the growing emphasis on mental health and healthy lifestyles, the regulator is ensuring that all types of health issues are being looked after. Now policyholders can take insurance for mental health issues as well, which will ultimately benefit them in the long run.

Introduction

Our point of view

Title: The Mental Healthcare Act, 20177


Ref no: IRDA/HLT/MISC/CIR/128/08/2018

Applicability: All insurers





Basis the IRDAI (Insurance Services by Common Service Centers (CSC)) Regulations, 2015, which allows common public service centres to distribute insurance products. However, it is observed that the above regulations are specific to common service centres that have been established under the e-Governance plan M/s CSC E-governance Services India Ltd.

There have been requests from different entities such as mee-seva from Telangana wanting to distribute insurance products under the current insurance CSC model. There have also been similar such state-level entities that have been started by state governments to promote various consumer services and business-to-consumer services.

With the view that the 2015 regulations are outdated, a review is therefore, required to be undertaken to allow the state government-sponsored entities to participate in the distribution of insurance products, also being able to streamline the regulatory framework.

Background

Proposal

Title: Exposure Draft on IRDAI (Insurance Services by Common Public Service Center)8


Applicability: All insurers



Basis the Supreme Court judgement on Writ Petition No. 295 of 2012, which states that:

1. General insurance companies are mandatorily required to issue three-year, third party insurance cover for new cars and new five year third party insurance cover for two wheelers as a separate product or as part of a comprehensive insurance product.

2. GIC and IRDA have to ensure that the legacy insurance data is also shared with the MoRTH as soon as possible for its integration with Vahan data.

3. IRDA has to ensure that all general insurers follow its directions dated 1 January 2018, advising general insurers to make available third party insurance for all proposers on online channels. Moreover, general insurers are required to liaise with police authorities to facilitate issue and the renewal of third-party insurance cover and ensure its easy availability.

With regards to the above judgement, the IRDA has decided to issue the necessary guidance on the commission, remuneration and rewards that will be paid for long-term policies. After discussions, the following new products have been permitted to be launched in the general insurance market in the country:

1. Five years long-term, stand-alone motor third party insurance policy for new two wheelers

2. Three years long-term, stand-alone motor third party insurance policy for new private cars

This is another good initiative by the regulator. By making it mandatory for third party motor insurance, the regulator is looking after the interests of the policyholder. By also introducing new policies, it is allowing policyholders to choose from a wide range of products that meets their individual requirements.

Introduction

Our point of view

3. Five years long-term motor package insurance policy for new two wheelers

4. Three years long-term motor package insurance policy for new private cars

5. Bundled cover with one year term for own damage and five years motor third party insurance policy for new two wheelers

6. Bundled cover with one year term for own damage and three years motor third party insurance policy for new private cars.

Title: Circular on Payment of Commission, remuneration, rewards and distribution fees under long-term motor insurance policies9


Ref no: IRDA/INT/CIR/Comm/139/08/2018

Applicability: All insurers, insurance intermediaries, insurance agents




This is in regard to Chapter II Licensing Procedure Reg 3 and Reg 4 of the IRDAI (Insurance surveyors and Loss Assessors Regulations), 2015, which includes the fit and proper criteria for consideration of the application by the authority and granting of license. The fit and proper criteria norms shall be applicable to both individual and corporate license holders.

Furthermore, (Insurance surveyors and Loss Assessors Regulations), 2015 mandates the individual or corporate surveyor and loss assessors to bring to the notice of the Authority any sort of change in the information or particulars provided at the time of issuance of license, within a period not exceeding fifteen days from the date of occurrence, that has a bearing on the license granted by the authority.

Introduction

Title: Disclosure of information or details under Fit & Proper norms under Reg. 13(1) (b) of IRDAI (Insurance surveyors and Loss Assessors Regulations), 201510


Ref no: IRDA/SUR/CIR/MISC/118/08/2018

Applicability: All individual or corporate surveyors


It is advised that all individual or corporate surveyors and loss assessors furnish all the information or details in compliance with the above requirements and also the present status of proceedings, if any, along with details within fifteen days from the date of issuance of this circular in case if :

1. One is subject to any investigations or disciplinary proceeding or have been issued warning or reprimand by any regulatory authority; and/or

2. One has been subject to any investigation at the instance of Government department or agency; and/or

3. One at any point in time has been found guilty of violation of rules /regulations / legislative requirements by customs/excise/income tax/foreign exchange/other revenue authorities, if so give particulars.

Failure to furnish the above information/date will be treated as violation of the Surveyor Regulations, therefore, will attract necessary regulatory action.



Basis the said circular, IRDAI has brought to the notice of all concerned that any remittances towards annual fee/registration fee to be made to IRDAI bank accounts should be through the designated bank accounts only. The details are given below: In case any remittance is made to the above mentioned bank accounts violating

the prescribed format and done without sending the above mentioned confirmation mail will not be taken into account by IRDAI.

In addition to the above, it is necessary for the applicants to inform the Accounts Department of IRDAI that the remittance made in the above mentioned bank accounts should be in the prescribed format according to Annexure I. The same should be mailed to [email protected] with a copy marked to [email protected]. in, on the day of making the remittance.

Bank Account No. Nomenclature of the Account

Nature of payment Name of bank/ Bank branch/ IFSC

860120100001938 Insurers (General Insurers / Exempted Insurers)

1. Registration Fees2. Annual Fees3. Any other fees

which may be applicable from time to time

Bank of IndiaBasheer Bagh BranchBKID0008601

860120110000682 IRDAI PENALTY RECEIPTS

All penalties levied by the Authority on all regulated entities.

Bank of IndiaBasheer Bagh BranchBKID0008601

Implications

Title: Payments to IRDAI Bank Accounts11


Ref no: IRDA/NL/CIR/MISC/127/08/2018

Applicability: All general insurers/and state government insurance departments




Based on the circular, IRDAI decided to constitute a working group to update the norms for insurance surveyors. The 7-member working group has been constituted to address areas pertaining to licensing, renewal and Indian Institute of Insurance Surveyors and Loss Assessors (IIISLA) Membership in the context of the existing regulatory framework for surveyors and loss assessors. In view of the above, the main aim of constituting the working group is to revisit the existing IRDAI (Insurance Surveyors and Loss Assessors) Regulations for improvement or amendment in order to ensure alignment and clarity of the regulatory framework.

The objectives of the Working Group are as follows:

• Undertake holistic analysis of the prevailing regulatory framework in view of the requirements of the industry.

• Undertake study of the Memorandum of Association (MoA) and Articles of Association (AoA) of the IIISLA and give their recommendations to bring out alignment with the Surveyor Regulations.

• Address the issues related to the membership of IIISLA.

• Give recommendations in order to bring in more clarity vis-a-vis the areas of ambiguity in surveyor regulations.

Furthermore, the working group should submit a report with recommendations within six weeks from the date of this order.

Title: Constitution of Working Group for revisiting the Surveyor Regulations12


Ref no: IRDAI/SURV/ORD/MISC/121/08/2018

Applicability: To All




On the basis of the data collected on the unclaimed amount lying with the life insurers, it is inferred that most of the amounts under unclaimed accumulated amounts for purchasing annuity are pending because the matured amount is less than the minimum purchase price under the Immediate Annuity product available with the concerned Life Insurer.

Keeping this in view, a decision was taken by the authority to relax the provisions of Regulation 24 of IRDA (Non- Linked Insurance Products) Regulations, 2013 and Regulation 28 of IRDA (Linked Insurance Products) Regulations, 2013. In addition, it also permitted life insurers to pay accumulated amount, which is lying under the head ‘Unclaimed Amount’ to the concerned policyholders or beneficiaries in lump sum mode, under any of the following conditions, which is as per existing Tax Laws:

1. The accumulated amount lying unclaimed under the deferred pension policy is not adequate to buy minimum annuity amount stipulated under the applicable extant regulatory provisions as mentioned above.

2. The accumulated amount lying unclaimed under deferred pension policy is less than the minimum purchase price of the immediate annuity product available with the concerned life insurance company.

The said circular is issued in exercise of the powers vested under Section 14(2)(e) of the IRDA Act, 1999, Regulation 49 and Regulation 66 of the IRDA (Non-Linked Insurance Products) & IRDA (Linked Insurance Products) Regulations,2013 respectively and comes into force with immediate effect.

Title: Amounts lying under the Unclaimed Account as at 31.03.2018 for the purpose of purchasing immediate annuity13


Ref no: IRDA/ACT/CIR/MISC/120/08/2018

Applicability: All CEOs/Principal Officers of all Life Insurers




Varsha MehrotraConsultant [email protected]: +91 9769658574

Dnyanesh Pandit Director [email protected]: +91 9819446928

Saigeeta Bhargava Associate [email protected]: +91 9560518833

Yugal [email protected]: +91 9970163293

Vivek Iyer [email protected] Mobile: +91 9167745318

Joydeep K Roy [email protected] Mobile: +91 9821611173

Prateek [email protected]: +91 9840753109

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PwC’s Insurance Insights: Analysis of regulatory changes ...€¦ · Insurtech. In the case of...

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