IRDAI unveils new draft on expenses

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The Insurance Regulatory and Development Authority of India (IRDAI) has announced a revised exposure draft on the expenses of management (EoM) for the non-life insurance companies and proposed the removal of caps on payment of commission to insurance agents and intermediaries.

It has also proposed a revised 30 per cent and 35 per cent caps on EoM for general insurers and standalone health insurers, respectively, after taking into consideration the insurance industry’s views.

In the earlier exposure draft, released on August 23, it had proposed to put a lower cap of 20 per cent on commission paid to the agents and intermediaries of both non-life and life insurance companies. It had proposed a 30 per cent cap on EoM for the general insurance companies in the exposure draft issued on August 1.

The regulator has streamlined the expenses of management (EoM) guidelines for insurance companies, now proposing a blanket cap on EoM to the extent of 30 per cent of gross written premium in India for general insurance companies and 35 per cent for standalone health insurance companies.

EoM includes operating expenses, commission to insurance agents and intermediaries and commission and expenses on reinsurance. EoM is currently in the range of 20 per cent to 37.5 per cent for non-life insurers. The additional allowable expenses within the overall expense cap now also include expenses incurred towards government schemes such as Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri Jan Arogya Yojana, Pradhan Mantri Fasal Bima Yoyaja (15 per cent) as well as expenses incurred towards promoting insuretech and insurance awareness of up to 5 per cent to widen customer reach.