Insurance Laws (Amendment) Act 2015 has carried out amendments to the sections 40B and 40C. By the virtue of the amendment in these sections, the rule 17D and 17F prescribed by the Central Government have become defunct and Authority has been empowered to frame regulations governing the expenses of management.
In view of the above, it has been necessitated to frame regulations on Expenses of Management for Insurers transacting the business of Life Insurance. The draft regulations are attached.
The draft contains, amongst the others, the following.
1. Expenses of Management include remuneration / commission to the agents/ insurance intermediaries and other expenses debited to Revenue Account. However it does not include charge to Profit such as Income Tax, Wealth Tax and Service tax etc.
2. Board approved policy for allocation and apportionment of the Expenses of Management within various segments.
3. Certification from one of statutory auditors on compliance of the Regulations and the allocation. Auditor also needs to certify that allocation and apportionment of expenses is in accordance with the board approved policy.
4. Returns to be signed by Chief Financial Officer, Appointed Actuary, Chief Executive Officer and Compliance Officer to be adopted by the Board on the recommendation of Audit Committee
5. Allowance of Head Office for foreign branch @ 5percent of the gross premium income written outside India.
6. Separate allowance for Pure Risk products.
7. Powers of the Authority to exempt for initial period of five years.
8. Further Powers of the Authority to allow higher expenses provided that the excess is debited to shareholders’ fund
9. Transitory Provisions: Insurers to have option for FY 2015-16 either to comply with the Regulations or to the erstwhile rules.
All are requested to offer their valuable comments/suggestions on the proposed regulations. The comments/suggestions should reach by 05th January, 2016 in the format attached to the undersigned by e-mail at rksharma [at] irda [dot] gov [dot] in with a copy to Dr. Mamta Suri, HOD-F&A at mamta [at] irda [dot] gov [dot] in
R K Sharma