ANNUAL REPORT 2007-08
in a desired format for compiling the services price index numbers. Further, the department has been liasing with other departments of the IRDA in their data requirements. The R&D has participated actively in the CII Working Group on Data Standards in Health Insurance constituted by CII / IRDA. The report of the group was submitted to the CII. The department is also helping the Ministry of Health, Government of India in devising Standard Treatment Guidelines.
Protection of interests of policyholders
IRDA’s main mission is to protect the interests of the policyholders. The Authority through Regulations mandated the insurers to put in place effective mechanisms for grievances redressal. Consistent with this, the Authority has set up grievance cells separately for life and non-life insurance. There is a separate channel set up in the IRDA to deal with complaints of senior citizens in respect of health insurance policies in the recent past. Apart from receiving specific complaints from policyholders and taking them up with the insurers for resolution, theAuthority is proactive in identifying the underlying issues and if necessary conduct focused inspections. The Authority has also advised the insurers to incorporate the grievance redressal channels available to the policyholders in the policy document itself.
ii. Maintenance of solvency margins of Insurers
Every insurer is required to maintain a Required Solvency Margin as per Section 64VA of the Insurance Act 1938. Every insurer shall maintain an excess of the value of his assets over the amount of his liabilities of not less than an amount prescribed by the IRDA, which is referred to as a Required Solvency Margin. The IRDA (Assets, Liabilities and Solvency Margin of Insurers) Regulations, 2000 describe in detail the method of computation of the Required Solvency Margin.
In case of Life Insurers, the Required Solvency Margin is the higher of an amount of Rs.50 crore ( Rs. 100 crore in case of Re-insurers) or a sum which is based on a formula given in the Act / Regulation. In case of General Insurers, the Required Solvency Margin, shall be maximum of the following amounts:
fifty crore of rupees (one hundred crore of rupees in case of Re-insurer) ; or
a sum equivalent to twenty per cent of net premium income; or
a sum equivalent to thirty per cent of net incurred claims,subject to credit for re-insurance in computing net premiums and net incurred claims being actual but a percentage, determined by the regulations, not exceeding fifty per cent.
IRDA has set a working Solvency Margin Ratio (Ratio of Actual Solvency Margin to the Required Solvency Margin) of 1.5 for all insurers. During 2007-08, IRDA has introduced the quarterly reporting of Solvency Status for all the Insurers. Accordingly, all the insurers are now required to file their Solvency Status as on June 30, September 30, December 31 and March 31.
One of the important factors that influence insurance penetration is the capital requirement under solvency margin. The pure term products provide simple life cover and it is believed that companies could design products, which could reach various segments of the population in meeting their insurance needs thereby enhancing insurance penetration. In line with this objective, the Authority has decided to allow the life insurers to reduce the capital requirement in the case of pure term products without changing the factor loadings in the case of the remaining products. It is expected that the lower level of solvency for pure term products would provide significant relief to the life insurers both under individual products and under group products. This will also help the insurers in launching more pure term products for sufficiently longer periods and at affordable rates.
As linked products are assuming significant share in the total premium collected by the insurance companies, and as the investors in these products are bearing the investment risk, it is necessary that more information is disseminated to the prospects / policyholder so that he / she can take informed decisions. In this regard, the Authority has asked the life insurers to be more transparent in the policy wordings of the ULIP products and mandated the insurers to submit to the Authority details on guaranteed benefits and non-guaranteed benefits for each policy year. Aformat has also been introduced