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Title: Exposure Draft
Reference No.: --
Date: 28/09/2015
IRDAI (Expenses of Management of Insurers transacting Non-life and Health
Insurance Laws (Amendment) Act 2015 has carried out amendments to the sections 40B and 40C. By the virtue of the amendment in these sections, the rule 17E and 17F prescribed by the Central Government have become defunct and Authority has been empowered to frame regulations governing the expenses of management.
In view of the above, it has necessitated to frame regulations on Expenses of Management for Insurers transacting Non-life and Standalone Health Insurance Business. The draft regulations are attached. The draft contains, amongst the others, the following.
1. Expense of Management includes remuneration / commission to the agents/ insurance intermediaries and other expenses debited to Revenue Account. However it does not include charge to Profit such as Income Tax, Wealth Tax etc.
2. Board approved policy for allocation and apportion of the Expense of Management within various segments.
3. Certification from one of statutory auditors on compliance of the Regulations and the allocation. Auditor also needs to certify that allocation and apportion of expense is in accordance with the board approved policy.
4. Provides for prohibited expenses.
5. Returns to be signed by CFO and CEO and to be adopted by the Board on the recommendation of Audit Committee
6. Powers of the Authority to exempt for initial period of five years
7. Further Powers of the Authority to allow higher expenses provided that the excess should be debited to shareholders’ fund
8. Transitory Provisions: Insurers to have option for FY 2015.16 either to comply with the regulations or to the erstwhile rules.
9. It has ensured that there should not be any arbitrage in the allowance of EoM on health portfolio of Nonlife Insurer and Health insurer.
10. Miscellaneous class of Business: The segment is classified under Corporate / Group and Retail.
11. Health classified into three broad categories (i) Health Retail, (ii) Health Group, and (iii) Health Govt Scheme
All are requested to offer their valuable comments/suggestions on the proposed regulations. The comments/suggestions should reach by 11th October, 2015 in the format attached to the undersigned by e-mail at rksharma at irda dot gov dot in with a copy to Dr. Mamta Suri, HOD-F&A at mamta at irda dot gov dot in
R K Sharma
Joint Director
