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IRDA in 2008-09. It is expected that the lower level of sol- the Indian Motor Third Party Insurance Pool (IMTPIP) un-
vency for pure term products would provide significant re- der the Insurance Act, 1938 in order to assess the adequacy
lief to the life insurers both under individual products and of the reserves, which needs to be calculated as per the
under group products. This will also help the insurers in IRDA Regulations. The Authority, based upon the report of
launching more pure term products for sufficiently longer Shri K P Sharma, the then Consultant Actuary and after
periods and at affordable rates. considering the submissions of General Insurance Council,
has passed Order No. IRDA/NL/ORD/MPL/003/01/2012
9.1.2. At the end of March 2012, all the twenty-four life dated 3rd January, 2012 under Section 14 of IRDA Act read
insurers complied with the stipulated requirement of sol- with Section 64VA of Insurance Act, 1938 on Motor Third
vency ratio of 1.5. Life Insurance Corporation of India then Party Pool Reserves and Account Reserves. The order is
reported a solvency ratio of 1.54, which was the same as at applicable to all non-life insurers (including GIC Re as rein-
the end of March 2011. Twenty two life insurance compa- surer) and it mandates the insurers to provide for the Mo-
nies have maintained the solvency ratio at above 1.70; out tor Third Party Pool liability at 159 per cent since 2007-08
of which seventeen had the solvency ratio at above onwards.
9.2. Non-life Insurers 9.4. The Insurers have also been advised not to distribute
bonus, performance incentives, etc. by whatever name such
9.2.1. In the case of non-life Insurers, the Required Solvency payments are called to any key management personnel, the
Margin shall be the maximum of the fifty crores of rupees senior management, Appointed Actuaries, Whole time Di-
(one hundred crore of rupees in the case of reinsurer); or rectors of the Board or any of the CEOs without the prior
higher of RSM-1 and RSM-2 computed as under: specific approval of the Authority.
9.2.1.1. RSM-1 means the Required Solvency Margin based 9.5. By the end of March 2012, seventeen non-life insurers
on net premiums, and shall be determined as twenty per (excluding the health insurers) had complied with the stipu-
cent of the amount which is higher of the Gross Premiums lated solvency ratio and two companies have not met the
multiplied by a Factor and the Net Premiums. For the pur- minimum requirement of solvency margin ratio.
pose of calculation of RSM-1, premium of the last 12 months
on rolling basis will be taken into account. 10) Supervision of market conduct by
IRDAI:
9.2.1.2. RSM-2 means the Required Solvency Margin based
on net incurred claims, and shall be determined as thirty 10.1. The test of good conduct of business by insurers is
per cent of the amount which is the higher of the Gross Net whether policyholders are treated fairly both before the
Incurred Claims multiplied by a factor B and the Net Incurred contract is entered into and throughout the lifecycle of the
claims. insurance policy, until all obligations under the contract have
been satisfied. From the regulatory perspective, the pre-
9.3. Motor Third Party Pool requisite is a proper framework including relevant laws,
rules, regulations, guidelines etc., within which the insurers
9.3.1. The Authority had investigated actuarial valuation of and intermediaries operate. A good framework for conduct
of business lays down benchmarks for various aspects of
policyholder servicing. When it comes to monitoring and
supervision, the Regulator should be able to identify con-
cerns from a macro and systemic level and bring about re-
quired changes in the framework.
10.2. The lifecycle of a policy includes the proposal stage,
the issuance of the policy if the proposal is accepted and
various policy and claims servicing areas ranging from cor-
rection in the policy details to a change of address, receiv-
ing a claim intimation, arranging for a survey (wherever ap-
plicable), disposing of a claim, etc. The Authority has laid
The Insurance Times, July 2016 27
