At present, there are segmental and sub-segmental management limits for insurers. The Regulator made suggestion on introduction of an objective clause which will provide flexibility to the insurers to manage their expenses within overall limits based on their gross written premium
The Insurance Regulatory and Development Authority of India (IRDAI) proposed a single management expense limit of 30 per cent of gross premium written during a financial year for general insurers and 35 per cent for standalone health insurers, on 24 November.
At present, there are segmental and sub-segmental management limits for insurers.
The IRDAI draft (Expenses of Management of Insurers Transacting General or Health Insurance Business) Regulations, 2022, highlights the insertion of a single limit of ‘Expenses of Management’ and additional allowances for the rural sector and government welfare-oriented schemes along with expenses for ‘insurtech’ and ‘insurance awareness’.
According to the proposal, the Managing Director (MD), Chief Executive Officer (CEO), Whole-Time Directors (WTD) and Key Management Persons (KMPs) should receive no variable pay for the financial year in which the actual expenses exceed the projected expenses by more than 10 per cent.
The Regulator made suggestion on introduction of an objective clause which will provide flexibility to the insurers to manage their expenses within overall limits based on their gross written premium. This formed part of the exposure draft on expenses of management in the case of life insurers.
Also, there may be an additional allowable expense around 15 per cent incremental premium over the previous year for the rural sector business and government schemes, according to the draft. IT will be covering the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY).
Insurance Regulatory and Development Authority of India (Irdai) has invited comments on the two draft regulations by 14 December.