Insurance Regulatory and Development Authority of India (IRDAI) today said that there could be restrictions on performance incentive to Managing Director (MD), Chief Executive Director (CEO), whole-time directors and key management persons if a life insurance company does not comply with the expenses of management guidelines.
In its draft norms on expenses of management for life insurers, IRDAI said that non-compliance will also lead to restriction on opening of new places of business. The regulator has said that no insurer can spend as expenses of management in any financial year an amount exceeding the aggregate sum of five per cent of all single premiums received during the year on immediate annuity policies, deferred annuity policies.
This aggregate also includes one year renewable group policies, other than group fund based policies, five per cent of all premium received on other single premium policies during the year excluding group fund based policies and one per cent of all the premium / contribution received on group fund based policies; among others.
An insurer having his principle place of business in India and having branch outside India will be allowed an additional allowance towards share of Head Office. Such allowance cannot exceed 5 per cent of the gross premium income written direct outside India through such branch company during the year.
If there is any violation of the limits on overall basis, IRDAI may also decide to impose graded penal action or direct removal of managerial personnel. Further, it may also direct the insurer to not underwrite new business in one or more segments in case of persistent violation of these regulations.
The regulator said that for the financial year 2015-16, Insurers have option either to comply with these regulations or with the provisions of erstwhile Rule 17D as the case may be. From the financial year 2016-17 onwards, insurers shall comply with these regulations.
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