India – Insurance Update

by | Apr 5, 2023

The IRDAI has notified three regulations, which came into force on April 1, 2023, that are poised to grant insurers greater freedom in their organizational management and will have a material impact on insurers, insurance intermediaries and insurance agents.  

The IRDAI (Payment of Commission) Regulations, 2023 (the “2023 Commission Regulations”); the IRDAI (Expenses of Management of Insurers transacting General or Health Insurance business) Regulations, 2023 (the “2023 General EOM Regulations”); and the IRDAI (Expenses of Management of Insurers transacting Life Insurance Business) Regulations, 2023 (the “2023 Life EOM Regulations”) have been notified.  They repeal the IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance intermediaries) Regulations, 2016; the IRDAI (Expenses of Management of Insurers transacting General or Health Insurance Business) Regulations 2016 and the IRDAI (Expenses of Management of Insurers transacting Life Insurance Business) Regulations, 2016, respectively.

The erstwhile regime prescribed specific caps on the amount payable as commission on the basis of the category of the product or policy.  However, Regulation 5 of the 2023 Commission Regulations dispenses with individual product and policy based caps, and instead prescribes that the commission cannot exceed the expenses of management (“EOM”) limits as prescribed by the 2023 General EOM Regulations and 2023 Life EOM Regulations.  Regulation 3 of the 2023 General EOM Regulations prescribe limits of 30% and 35% of the gross premium written in India in a financial year for general and health insurers, respectively.  The 2023 Life EOM Regulations retain product and policy based caps.  However, these caps are broad-based and apply to all forms of EOM.

The new regulations mark a step towards a liberalized regime offering insurers flexibility in their management of expenditure, as insurers are now permitted to determine the quantum of commission payable on all products, subject only to a broad and general EOM limit.  Even within the life insurance sub-sector, there is greater flexibility on the payment of commission, as, although the product based caps have been retained, they permit flexibility on the expenditure pattern and breakdown paid towards commission and other expenses, subject to the product based EOM cap.

In addition to the foregoing limits set out under the 2023 General EOM Regulations and the 2023 Life EOM Regulations, the IRDAI has allowed additional limits for expenses in relation to setting up of foreign branches, setting up of branches in the International Financial Services Centre, the rural and social sector, government insurance schemes, insure-tech and insurance awareness. These additional limits for EOMs will serve to enhance insurance penetration, which is the primary developmental goal.

More News

US Fiscally Transparent LLC qualifies as a US Tax Resident

The Indian tax authorities have denied treaty benefits to fiscally transparent entities such as foreign partnership firms and limited liability corporations (LLCs) on the ground that such entities are not liable to tax in their home country and do not qualify as tax...

read more

ITR World Tax 2025 Rankings

We are pleased to share that we have been ranked by ITR World Tax in the practice areas of General Corporate Tax, Indirect Tax and Transfer Pricing. Akil Hirani, Managing Partner and Head of Transactions, and Ravi S. Raghavan, Partner - Tax and Private Client Group,...

read more

SEBI’s new proposal on FPI disclosures

The Securities and Exchange Board of India (“SEBI”) has released a consultation paper proposing to modify the disclosure requirements for large foreign portfolio investors (“FPIs”).  In August 2023, by its circular SEBI/HO/AFD/AFD-PoD-2/CIR/P/2023/148, SEBI...

read more

Akil Hirani interviewed by The Legal 500

Original source: Legal500.com Akil Hirani, Managing Partner and Head of Transactions, outlines the philosophy of the firm and explains how the firm is adapting to client needs. What do you see as the main points that differentiate Majmudar & Partners from your...

read more