IRDAI (Expenses of Management of Insurers transacting General or Health Insurance business) Regulations, 2023

On 27-3-2023, the Insurance Regulatory and Development Authority of India (‘IRDAI’) notified the Insurance Regulatory and Development Authority of India (Expenses of Management of Insurers transacting General or Health Insurance business) Regulations, 2023. The Rules will repeal the IRDAI (Expenses of Management of Insurers transacting General or Health Insurance Business) Regulations 2016.

Applicability: The provisions will come into force on 1-4-2023 and will remain in force for a period of 3 years and will be applicable to Insurers transacting General Insurance or Health Insurance business.

Key Points:

1. Objective: to enable and provide flexibility to the Insurers to manage their expenses within the overall limits based on their gross written premium to optimally utilize their resources for enhancing benefits to policyholders.

2. Limit of Expenses:

   • Insurer carrying on General Insurance Business: 30% of gross premium written in India in a financial year.

   • Insurer carrying on Health Insurance Business: 35% of gross premium written in India in a financial year.

3. Additional Allowable Expenses:

   • Head Office Expenses: insurer having his principal place of business in India and having branch offices outside India or having International Financial Service Centre Insurance office is allowed 10% of gross premium income written outside India.

   • Expenses incurred towards Rural sector, Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri Jan Arogya Yojana and Pradhan Mantri Fasal Bima Yojana business or such other schemes as notified by the Authority: Such allowance will not exceed 15% of the incremental premium/ actual expenses of management/ or 15% of gross direct premium.

   • Expenses incurred towards “Insurtech” and “Insurance Awareness”: 5% of the allowable expenses of management.

4. The Authority (‘IRDAI’) has the power to exercise forbearance in case an insurer exceeds the limits of expenses of management. Such forbearance may be exercised on a case-to-case basis in respect of insurers having duration of business upto 5 years.

5. Compliance:

   • Expenses should be within the allowable limit. In case of excess, it will be charged to the Profit and Loss Account.

   • No variable pay will be payable to Managing Director/ Chief Executive Officer/ Whole-Time Directors and Key Managerial Personnel if the amount of actual expenses exceeds by 10% of the projected expenses.