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ANNUAL REPORT 2011-12
in the sector. The analysis of the data also revealed
huge ineffi ciencies in claim settlement by the
companies refl ected in the average claim ratio which
varied by as much as 100 per cent. The Authority
after having examined the framework of the pool and
its fi nancial management was satisfi ed that the pool
in its existing form was eroding the interests of the
policyholders and was also causing fi nancial distress
to the non-life insurance companies. In order to
ensure that the sector grows in a healthy fashion and
the policyholders interest is protected, the Authority
issued the Order dismantling the existing IMTPIP
and setting up a declined risks pool for third party
commercial vehicle motor insurance with effect from
1 st April, 2012.
III.10 Specifying the form and manner in which
books of accounts shall be maintained and
statements of accounts shall be rendered by
Insurers and other insurance intermediaries
III.10.1 In order to monitor various payments
made by insurance companies to bancassurance
channel, insurers were asked to fi le details of various
payments in the prescribed format vide Circular No.
IRDA/F&I/CIR/F&A/008/01/2010 dated 21 st January,
2010. These details had been called on a half yearly
basis. Subsequently, for monitoring payments to
all the intermediaries including the bancassurance
channel, insurance companies were asked to fi le the
details under section 31B (2) of Insurance Act, 1938
vide Circular No. IRDA/F&I/CIR/DATA/091/06/2010
dated 11 th June, 2010 in the prescribed format. These
details were required to be reported for the payouts
made above rupee one lakh, bifurcated into linked
and non-linked business.
III.10.2 Based on the assessment of the fi lings made
by the insurance companies for the two fi nancial years
2009-10 and 2010-11, the following were considered
for modifi cation:
As the Bancassurance channel details were
being called for under both of the above said
Circulars, in order to avoid duplication of the
efforts, need was felt to merge the two Circulars
providing for annual fi ling;
it was felt not to sub-categorize the data into
different segments of business viz. linked and
non-linked, for the basis of the review was on
the total business without such segregation;
reporting limit of rupees one lakh was considered
to be relatively low. It was therefore increased
to rupees fi ve lakh and above for reporting
with respect to all intermediaries except for
Bancassurance channel; and
confi rmation of adequate systems in place
for ensuring compliance with Section 40A of
Insurance Act, 1938 was also considered for
inclusion along with the fi ling in the form of
compliance certifi cate duly signed by the CEO/
MD of the respective insurance company.
III.10.3 As per Section 40B of the Insurance Act,
1938, every insurer transacting life insurance
business in India is required to furnish to the Authority,
the statement of Expenses of Management (EoM), in
the prescribed form within the prescribed time. The
detailed computation of EoM under Section 40B of
the Insurance Act, 1938 read with Rule 17D of the
Insurance Rules, 1939 are to be fi led on an annual
basis. On detailed review of the statements fi led by
the insurers, it was observed that divergent practices
were being followed in interpretation of some of
the applicable provisions. These divergences were
primarily observed in the interpretation of the terms
‘charges’ and ‘expenses capitalised’ under Section
40B.
III.10.4 With a view to facilitating a uniform approach
by all companies, clarifi cations were provided to the
industry for the purposes of explanation (b) of Section
40B on such terms as charges, expenses capitalized,
on accounting of income and expenditure on accrual
basis, pension and group business.
III.10.5 The Authority has notifi ed IRDA (Treatment of
Discontinued Linked Insurance Policies) Regulations
in 2010. Since notifi cation of the said regulations,
the Authority is in receipt of various representations
by the life insurance industry on allowance of higher
revival period to enable the policyholder to revive
the policy at a later stage and to allow the fund
management charge for managing the discontinued
linked fund. The Authority in exercise of power vested
under Regulation 11 of the said regulation has issued
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