Page 41 - Life Insurance Today January 2018

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 com- ment to Motor Insurance
panies that use fitness trackers and wearable's for
pricing policies. The issues involved include privacy of Service Providers
individual data and applying the principles of insur- IRDA has issued a new regulation,
ance. Insurance Regulatory and Development Author- bringing to
ity of India in a statement said that insurers now look an end the
at ensuring 'wellness' of the customer and this is fac- old practice
tored into their pricing and product design. For ex- of general in-
ample, some insurers reward policyholders for maintaining a fitness regime or surance com-
undergoing regular diagnostics. panies pay-

The insurance regulator has set up a panel to look into innovations in insur- ing extra commission to automobile
ance involving wearable/portable devices. As per IRDAI, "Use of wearables and distributors for selling their policies.
portable devices in insurance are a subject that frequently comes up in the Insurance Regulatory & Develop-
context of financial technology. In the context of both health and life insurance, ment Authority has capped pay-
wearable devices could be used to measure personal fitness and incorporate ments by insurers to agents and
a healthy lifestyle." dealers at 19.5% for cars and 22.5%
The terms of reference for the panel include examining technological advance- for two-wheelers and brought them
ments in portable devices and seeing how they can be used for improving as- under its purview as motor insur-
sessments and reducing risks. The panel will also look at global developments ance service providers (MISPs) start-
in the area and suggest a policy framework, keeping in mind the interests of ing this month, a move that is ex-
the customers. pected to 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 insur-
Insurance Regulatory and Development Authority has constituted a commit- ance company executive who re-
tee for reviewing norms that require 50% of quested not to be named. "There
the funds mobilised from traditional life poli- were payouts happening in other
cies to be invested in government bonds. Ac- forms, to dealers and to brokers,
cording to the committee's report, the re- which has come down now to one
striction on investments does not permit life commission to dealers." These dealers
companies to generate a return of even 8% were outside Irda's regulation for so
in traditional policies given the drop in yields
long.
on government bonds.
With Irda's regulations, they have
"The expectation of generating a return of at least 8% per annum is a tall or-
der given that at least 50% of assets of the insurer are mandatorily to be backed been now structured and brought
by G-Secs (government securities), which currently yield 6.7-7.2% per annum. under the regulator's ambit. They can
Further, given the downward pressure on interest rates, the actual yields on choose to work with brokers or with
insurance companies, but under the
future premiums are only expected to be lower," said the report. In reality, al-
most 80% of the proceeds of traditional policies are invested in government regulator's supervision. Insurers said
the development will help the indus-
bonds since other investments do not qualify.
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-
"We feel that this will help us in
erty) or high-rated corporate bonds. The panel has also suggested that the regu-
lator allow insurance companies to adopt a modular product approach for de- bringing down the claims ratio," he
signing insurance products. Currently, the regulator has approved a policy which had said after announcing second
is a bundle of various benefits payable at the occurrence of different events. quarter results of the company.
Life Insurance Today January 2018 41

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