Page 8 - Insurance Times January 2018 Sample

IRDAI to set rules for pricing of policies via fitness devices IRDAI caps insurers' pay-
IRDAI will soon come out with regulations for life and health insurance compa- ment to Motor Insurance
nies that use fitness trackers and wearable's for pric-
ing policies. The issues involved include privacy of in- Service Providers
dividual data and applying the principles of insurance. IRDA has issued a new regulation,
Insurance Regulatory and Development Authority of bringing to
India in a statement said that insurers now look at an end the
ensuring 'wellness' of the customer and this is factored old practice
into their pricing and product design. For example, of general in-
some insurers reward policyholders for maintaining a fitness regime or under- surance com-
going regular diagnostics. panies paying
The insurance regulator has set up a panel to look into innovations in insurance extra commission to automobile dis-
involving wearable/portable devices. As per IRDAI, "Use of wearables and por- tributors for selling their policies.
table devices in insurance are a subject that frequently comes up in the context Insurance Regulatory & Develop-
of financial technology. In the context of both health and life insurance, wear- ment Authority has capped pay-
able devices could be used to measure personal fitness and incorporate a healthy ments by insurers to agents and deal-
lifestyle." ers at 19.5% for cars and 22.5% for
The terms of reference for the panel include examining technological advance- two-wheelers and brought them
ments in portable devices and seeing how they can be used for improving as- under its purview as motor insurance
sessments and reducing risks. The panel will also look at global developments in service providers (MISPs) starting this
the area and suggest a policy framework, keeping in mind the interests of the month, a move that is expected to
customers. bring down claims ratio.
"The implementation is on way and
IRDAI panel to review norms for investment in Govern- we have to see the impact of that

ment Bonds entire dealership comes under the
regulatory supervision," said an in-
Insurance Regulatory and Development Authority has constituted a committee surance company executive who re-
for reviewing norms that require 50% of the quested not to be named. "There
funds mobilised from traditional life policies were payouts happening in other
to be invested in government bonds. Accord- forms, to dealers and to brokers,
ing to the committee's report, the restriction
which has come down now to one
on investments does not permit life compa-
commission to dealers." These deal-
nies to generate a return of even 8% in tra-
ers were outside Irda's regulation
ditional policies given the drop in yields on for so long.
government bonds.
With Irda's regulations, they have
"The expectation of generating a return of at least 8% per annum is a tall order
given that at least 50% of assets of the insurer are mandatorily to be backed by been now structured and brought
G-Secs (government securities), which currently yield 6.7-7.2% per annum. Fur- under the regulator's ambit. They can
choose to work with brokers or with
ther, given the downward pressure on interest rates, the actual yields on fu-
insurance companies, but under the
ture premiums are only expected to be lower," said the report. In reality, al-
regulator's supervision. Insurers said
most 80% of the proceeds of traditional policies are invested in government bonds
since other investments do not qualify. the development will help the indus-
try in better claims management and
According to the report, there is a need to lower the mandatory proportion of reducing expenses, which were paid
'G-Secs' in the life fund and the pension & general annuity funds and allow for earlier as outsourcing expenses.
more exposure in alternative higher yielding assets (for example, equity or prop-
erty) or high-rated corporate bonds. The panel has also suggested that the regu- "We feel that this will help us in
lator allow insurance companies to adopt a modular product approach for de- bringing down the claims ratio," he
had said after announcing second
signing insurance products. Currently, the regulator has approved a policy which
is a bundle of various benefits payable at the occurrence of different events. quarter results of the company.

8 The Insurance Times, January 2018

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