The Insurance Regulatory and Development Authority of India ("IRDAI"), via notification dated November 23, 2020, had released the IRDAI (Minimum Information Required for Investigation and Inspection) Regulations, 2020 ("Regulations"). As per the notification, the Regulations shall come into force after six months from date of its publication i.e. 24 May, 2021. These Regulations are applicable to all insurers and intermediaries. These Regulations specify minimum information which is to be maintained by the insurer, intermediary or insurance intermediary to enable the investigation officer to effectively discharge his/her duties as per the Insurance Act, 1938 ("Insurance Act"). The regulations are divided in three parts wherein the first part is applicable on insures, the second part is applicable on intermediaries and insurance intermediaries and the third part is applicable to insurers, intermediaries and insurance intermediaries.
- Regulatory Background
2.1 Insurer has been defined under the Insurance Act, 1938 to mean
(a) an Indian Insurance Company, or
(b) a statutory body established by an Act of Parliament to carry on insurance business, or
(c) an insurance co-operative society, or
(d) a foreign company engaged in re-insurance business through a branch established in India...."
Intermediary or Insurance Intermediary has been defined under The Insurance Regulatory and Development Authority Act, 1999 as follows-
"2(1)(f)- intermediary or insurance intermediary includes insurance brokers, re-insurance brokers, insurance consultants, corporate agents, third party administrator, surveyors and loss assessors and such other entities, as may be notified by the Authority from time to time"
2.2 The objective of the Regulations is specification of minimum information required to be maintained to enable the investigative officer to effectively discharge his/her duties under section 33 of the Insurance Act. Section 33 of the Insurance Act provides for power of investigation and inspection by authority. Section 33(1) states the following-
"1) The Authority may, at any time, if it considers expedient to do so by order in writing, direct any person (herein referred to as "Investigating Officer") specified in the order to investigate the affairs of any insurer or intermediary or insurance intermediary, as the case may be, and to report to the Authority on any investigation made by such Investigating Officer..."
As mentioned above, the authority (IRDAI) has the power to direct the investigation officer for investigation of affairs of any insurer or intermediary or insurance intermediary who will then have to submit the report pertaining to the investigation.
2.3 Further, the section gives the power to the investigating officer to cause an inspection of the books of the insurer or intermediary or insurance intermediary. The section mandates that it shall be the duty of the person in charge of the insurer or intermediary or insurance intermediary to produce all such books of account, registers, other documents and the database in his custody or power and to furnish any statement and information relating to the affairs of the insurer or intermediary or insurance intermediary and all such information which is sought by the investigation officer.
2.4 As per Section 33 (6), the IRDAI has the power to order the following after giving the insurer or intermediary or insurance intermediary a chance to make representation-
- Require the insurer to take action pertaining to the matter arising out of the report which the IRDAI thinks is suitable or
- Cancel the registration of the insurer or intermediary or insurance intermediary
- Direct any person to apply for winding up of the insurer or intermediary or insurance intermediary
- Key Highlights of the notification
3.1 Part-I (Provisions applicable to all insurers)
Regulation 4 mandates every insurer has to maintain all records, information, data, documents, books or registers which are required to be maintained under the extant provisions of the Act, Rules, Regulations, Guidelines, Circulars or Direction applicable to insurers and other information specified under Regulation 5 to 16. Information relevant to the working of branches or other offices may be maintained there in case it is not practical to be maintained at the principle place of business.
3.2 The following information has to be maintained as per Regulation 5-
- A record of all proposals for insurance received - this shall state details such as proposal number, date when proposal is signed, name and code of insurance agent etc.
- A record of cover-notes issued- this should specify the identification number, name of the party, date of commencement etc.
- A record of policies which shall be serially numbered and listing all policies issued in a chronological order- this should state the number of the policy, name of the insured, date of commencement etc.
- A record of documents in respect of group insurance business- this should state the group type, group size, free cover limit applied to the group etc.
- A record of documents in respect of insurer transacting reinsurance business- this should state the unique identification number of the reinsurer, type of reinsurance arrangement, lines of business written etc.
- A record of premiums showing receipt of premiums received in a chronological manner- this should state the date of receipt of amount, amount of premium received, name and contact details etc.
- A record of endorsements mentioning the policy number to which it is attached to, dates of commencement and expiry of the endorsements, types of endorsements etc.
- A record of bank guarantees giving details such as particulars of party, amount, other conditions of bank guarantee etc.
- A record of all claims intimidated
3.3 Regulation 6 provides for items of information to be maintained for the business of the insurer as a whole. The records pertaining to the following have to be maintained –
- Insurance agents and details of each agent
- Insurance intermediaries tied up or otherwise with the insurer giving in respect of each insurance intermediary, specified person, broker qualified person, telemarketer, authorized verifier
- insurance agents and insurance intermediaries
- all salaried field workers
- employees including employees on contract basis, excluding salaried field workers
- appointment letter issued to all agents, consultants, members of the staff along with changes therein
- duplicate copies of appointment letters, if issued, to the agents, consultants and members of the staff along with changes
- Cash book and disbursement book with supporting documents
- Investments giving separately for immovable property, securities and scripts, loans on mortgages and other loans, particulars of all the investments held and showing the changes occurring therein from time to time
- other assets, such as (i) deposits; (ii) amounts due; (iii) sundry debtors; (iv) furniture and fixtures; (v) stationery; (vi) cash in hand, and (vii) cash with bank
3.4 Regulation 7 to 16 provide for the following compliance by insurer-
- Maintain all agreements with outsourcing entities, agents, insurance intermediaries, hospitals, and others for solicitation or servicing of insurance business or training or for any other purpose and other details pertaining to the same.
- Obtain and maintain a legally valid receipt for every payment made, receipt for every payment received in a chronological manner.
- Maintain details of any payment made to an employee on account of travelling expenses.
- Proper record of attendance of staff
- Every office of an insurer issuing any documents used for evidencing of the assumption of risk shall ensure that the documents are maintained in accordance with the manner prescribed under Regulation 11.
- Retain all the documents relating to claims settled, including copies of any survey, investigation or loss assessment reports in accordance to the criteria prescribed under Regulation 12.
- Retain all details pertaining to the reinsurance arrangement
- Retain all details pertaining to the coinsurance arrangement
- Maintain ledger accounts with respect to reinsurance and coinsurance in accordance with Regulation 15.
- Maintain documents submitted to IRDAI for registration of the company and other records of the Company as specified under Regulation 16 and any correspondence with government or tax authorities. A list of all the pending cases will also have to be maintained.
3.5 Part II (Provisions applicable to Intermediaries and Insurance intermediaries)
Regulation 17 mandates every intermediary to maintain all records, information, data, documents, books or registers which are required to be maintained under the extant provisions of the Act, Rules, Regulations, Guidelines, Circulars or Direction applicable to intermediary and other information specified under Regulation 18 to 21. Information relevant to the working of branches or other offices may be maintained there in case it is not practical to be maintained at the principle place of business.
3.6 Regulation 18 provides that the insurance intermediary shall maintain the records pertaining to the following-
- Policies solicited with respect to new business
- policies solicited with respect to renewal business
- claims, if serviced and processed through the insurance intermediary
- claims surveyed by the insurance intermediary
- Claims, in case the claim is serviced and processed through third party administrators
- details of solicitation with respect to reinsurance business
- claims with respect to the reinsurance business solicited
- grievances and complaints with details
3.7 Regulation 19 to 21 provide for the following compliances for Intermediaries
- Maintain all agreements with outsourcing entities, insurers, other insurance intermediaries, hospitals, and others for solicitation or servicing of insurance business or training or for any other purpose and other details pertaining to the same.
- Obtain and maintain a legally valid receipt for every payment made, receipt for every payment received in a chronological manner
- Maintain documents submitted to IRDAI for registration and other records of the Company as specified under Regulation 21 and any correspondence with government or tax authorities. A list of all the pending cases will also have to be maintained.
3.8 Part III (Common Provisions applicable to insurers, intermediaries and insurance intermediaries)
Regulation 22 provides that the insurer, intermediary and insurance intermediary are expected to maintain all the relevant information, documentation, and related papers with respect to the specific function which it carries.
3.9 Regulation 23 provides that the information maintained will be reconciled with the audited financials. The information can be stored in physical or electronic form and access to be given to the person authorized by IRDAI.
3.10 Regulation 24 provides that there has to be a board approved policy for the maintenance of records and destruction of old record which is stored in physical of electronic form. Records, other than those specified under regulation 12, will have to be stored for a minimum period of 10 years.
The Regulations provide elaborate details of the records to be maintained and take a step towards ensuring that all the relevant records are maintained for enabling the Investigation Officer to effectively discharge his/her duties. The compliance costs will certainly increase. The regulations do provide for the option of storing the records digitally which could ease up the process of storage of years of records. The regulations have aimed at ensuring that the investigation officer will not suffer due to lack of availability of records and aims at enabling him to conduct enquiries more effectively.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.