All insurance contracts are required to be filed with the Insurance Development and Regulatory Authority of India (IRDAI), ie, the Indian insurance regulator, in accordance with the applicable product filing procedures issued by the IRDAI.

Until recently, products across all lines of insurance business had to be filed under a “File and Use” procedure (where the product required the IRDAI’s prior approval before it could be launched) and a few products (such as commercial products in general insurance) could be filed under a “Use and File” procedure, (where the product can be launched immediately after insurer’s internal committees approval subject to certain conditions such as submission of quarterly report to the IRDAI, completion of Use and File documents etc).

Following a series of circulars issued by the IRDAI, insurers are now permitted to offer a majority of their insurance products under the “Use and File” procedure, where insurers can launch their insurance products through self-certification.

Additionally, in terms of the content of insurance contracts, the IRDAI has issued additional guidance for various forms of insurance products, including:

• The IRDAI has recently issued the IRDAI (Insurance Products) Regulations 2024 which set out various requirements to be included in life, general and health insurance contracts.
• A number of regulations and guidelines issued by the IRDAI specify that, broadly, product literature must be in “simple language” and “easily understandable to the public at large“, and technical terms used in the policy wording must be clarified to the insured.
• There are specific regulations/guidelines for certain forms of insurance contract such as trade credit and surety.
• The IRDAI has over the last few years issued various standard forms of insurance contracts for various lines of insurance business including standard products for fire and allied perils for dwellings, small and micro businesses, personal accident, domestic travel, individual health insurance, non-linked non-participating individual pure risk life insurance, and individual immediate annuity.

Further, there are extraneous rules that impact policy terms. For example, the Insurance Act 1938 (Insurance Act) gives the policyholder a right to override contrary policy terms in favour of Indian law and jurisdiction, and Indian policyholders cannot be stopped from approaching the consumer courts.

Yes, the IRDAI has issued specific regulations/guidelines/circulars which govern the establishment, licensing and functioning of life insurers, general insurers, health insurers, Indian reinsurers and branch offices of foreign reinsurers, including:

1. The IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) Regulations 2024 (Registration Regulations) which regulate the establishment of primary insurance companies and Indian reinsurers.
2. The IRDAI (Registration and Operations of FRB and Lloyd’s India) Regulations 2024 (Branch Office& Lloyd’s Regulations) which regulate branch offices of foreign reinsurers to be established in India and syndicates of reinsurers operating through service companies set up in India under the Lloyd’s India branch;
3. The IRDAI’s “Guidelines on Issuance of File Reference Numbers to Cross Border Reinsurers” of 3 January 2023 (CBR Guidelines) which regulate the registration of cross border reinsurers (CBRs).

In addition, the IFSCA (Registration of Insurance Business) Regulations 2021 (IIO Regulations) and IFSCA (Operations of International Financial Services Centres Insurance Offices) Guidelines 2021 (IIO Guidelines) govern setting up of an IFSC Insurance Offices (IIO) in International Financial Service Centres (IFSC) in India. The regulator for these entities is the International Financial Services Centres Authority (IFSCA).

Yes, the registration and functioning of insurance intermediaries (which include insurance brokers, corporate agents, web aggregators, IMFs, TPAs and surveyors and loss assessors) are governed by the specific regulations issued by the IRDAI for the specific forms of insurance intermediary. Each of these regulations contain a specific code of conduct prescribed by the IRDAI to be adhered to by that form of insurance intermediary.

Yes, all entities writing insurance business or reinsuring Indian risks are required to register with the IRDAI, including:

1. Indian insurance companies are required to apply for registration with the IRDAI to carry out one of, life insurance, general insurance, health insurance or reinsurance business, under the Registration Regulations. This is a 3 stage application process which requires a staged-wise filing of detailed information and documentation with the IRDAI.
2. Branch offices of foreign reinsurers are required to apply for registration with the IRDAI to carry out reinsurance of Indian risks under the Branch Office & Lloyd’s Regulations. These entities are established in India as branch offices of overseas reinsurers. This is also 3 stage application process which requires a staged-wise filing of detailed information and documentation with the IRDAI.
3. Syndicates of reinsurers that seek to operate through service companies under the Lloyd’s India branch are required to follow the application procedure set out under the Branch Office & Lloyd’s Regulations.
4. Overseas Reinsurers who do not wish to establish a presence in India but seek to participate on the reinsurance of Indian risks can do so from their overseas offices by registering with the IRDAI as CBRs in accordance with the single staged procedure set out under the CBR Guidelines.

In addition, IIOs are required to apply to the IFSCA for registration under the procedures set out under the IIO Regulations, in order to establish unincorporated insurance or reinsurance branch offices in GIFT City.

Any direct or indirect foreign investment in an Indian insurance company or Indian reinsurer is restricted to 74% of the paid-up equity capital.

For insurance intermediaries, 100% foreign direct investment limit is permitted.

Pursuant to the increases in permitted foreign investment in the insurance sector, the IRDAI withdrew the requirement for insurers and insurance intermediaries to be Indian-owned and controlled.

Non-admitted insurers are not permitted to directly insure property situated in India or any ship or other vessel or aircraft registered in India.

However, a person resident in India is permitted to take or continue to hold a health insurance policy issued by an insurer outside India provided the aggregate remittance does not exceed the limits prescribed by the Reserve Bank of India (RBI).

Further, a person resident in India may take or continue to hold a life insurance policy issued by an insurer outside India, provided that the policy is held under a specific or general permission of the RBI.

Non-admitted insurers who are listed with the IRDAI as CBRs, in accordance with the CBR Guidelines, can participate in the reinsurance of Indian risks in accordance with the procedures and norms set out under the IRDAI (Re-insurance) Regulations 2018, as amended from time to time (Reinsurance Regulations).

Apart from CBRs who are primarily only required to obtain a registration with the IRDAI, branch offices of foreign reinsurers and syndicates of Lloyd’s established and operating under the Branch Office & Lloyd’s Regulations are required to follow a number of regulations and other guidance issued by the IRDAI which apply to primary insurance companies and Indian Reinsurers.

The present Indian insurance framework is silent on any mechanism for overseas insurance intermediaries like insurance brokers for setting up a branch office in India. An insurance intermediary who wants to carry out its business in India can only do so by incorporating a company under the Indian laws and obtaining the requisite license from the IRDAI.

IIOs established in GIFT City are required to follow the various regulations and other guidance issued by the IFSCA which has recently extended a number of regulations issued by the IRDAI to IIOs.

A branch office of foreign reinsurer and Lloyd’s India’s service company is permitted to undertake reinsurance business in India after obtaining prior approval from the IRDAI and an IIO is permitted to undertake insurance/reinsurance business only after obtaining prior approval from the IFSCA, in accordance with the applicable regulations.

Further, the IRDAI and the IFSCA has set out certain minimum requirements that are required to be maintained by a branch office of foreign reinsurer and an IIO respectively, in terms of minimum capital, net owned funds, minimum retention, and solvency margin.

A person carrying out insurance business in India without valid registration could face a penalty of up to INR 25 crores (c. US$ 3,004,167) and imprisonment for a term of up to ten years.

A person acting as an insurance intermediary (including an insurance broker) without being registered could face a penalty of up to INR 10 lakh (c. US$ 12,016). In addition, the appointment of an unlicensed person to act as an insurance intermediary is punishable with a penalty of up to INR 1 crore (c. US$ 120,166).

The insurance industry is highly regulated in India. The IRDAI has suo motu powers for undertaking inspections, conducting enquiries and investigations (including the audit) of insurers, reinsurers (including branch offices of foreign reinsurers), insurance intermediaries and other organizations connected with insurance business.

The maximum penalty for non-compliance with the applicable regulations or directions issued by the IRDAI is INR 1 crore (c. US$120,166).

The solvency of insurers, Indian reinsurers, branch offices of foreign reinsurers and service companies representing syndicates of Lloyd’s India is required to be calculated in accordance with the applicable regulations issued by the IRDAI. Insurers and reinsurers are required to maintain, at all times, a solvency margin of assets over liabilities of not less than 50 per cent of the capital requirements for that insurer/reinsurer. The required solvency margin is calculated based on mathematical reserves and the sum at risk. The IRDAI periodically specifies the factors that are to be considered in the calculation of the required solvency margin.

In addition, an IIO is required to maintain solvency margin as specified by its home country regulatory/supervisory authority. IIOs are required to file quarterly certificates which affirm that the required assets, liabilities and solvency margin has been maintained by the parent entity/head office.

An insurer/Indian reinsurer is required to have a minimum paid up equity share capital of INR 100 crore (c. US$12,017,140) and INR 200 crore respectively (c. US$24,034,280).

A foreign reinsurer seeking to set up a branch office in India is required to have a minimum net owned fund of INR 5,000 crore (c. US$ 600,857,000) and is further required to infuse a minimum assigned capital of INR 50 crore (c. US$ 6,010,155) into the branch office. Syndicates of reinsurers that seek to operate through service companies under the Lloyd’s India branch is required to have a minimum net owned fund of INR 5,000 crore (c. US$ 600,310,000) and is further required to infuse a minimum assigned capital of  NR 100 crore (c. US$ 12,000,620) into the branch office.

An IIO is required to maintain US$ 1.5 million (c. INR 12 crore) as assigned capital in any freely convertible foreign currency and is also require to maintain a minimum amount of INR 1000 crore (c. US$12,000,620) as net owned funds, which may be demonstrated in any freely convertible foreign currency and which is required to be maintained at all times during the subsistence and validity of the certificate of registration.

Further, the minimum capital requirement for brokers is in the following terms:

Direct brokers – INR 75 lakh (c. US$ 90,000);

Reinsurance brokers – INR 4 crore (c. US$480,879);

Composite brokers – INR 5 crore (c. US$601,099).

The Central Government has issued the Insurance Laws (Amendment) Bill 2022 which proposes to remove the minimum paid-up equity capital requirements for insurance companies and specifies that the determination of minimum paid-up equity capital will be in accordance with the regulations specified by the IRDAI considering the “size and scale of operations, class or sub-class of insurance business and the category or type of insurer“.

The IRDAI (Protection of Policyholders’ Interests, Operations and Allied Matters of Insurers) Regulations 2024 (Policyholders Regulations) issued by the IRDAI are the primary norms which set out guidance in relation to protection of policyholders’ interests, among other matters. The Policyholders Regulations have been recently notified, which have repealed, inter alia, the IRDAI’s erstwhile norms on this subject of 2017.

The Policyholders Regulations continue to prescribe the practices that are required to be undertaken by the insurers and insurance intermediaries prior to and at the point of sale of the insurance policy to ensure that the policyholder understands the terms of the policy properly.

In addition, the Policyholders Regulations require insurers to maintain a Board approved policy for protection of policyholders’ interests, which contains the claims procedure (including turnaround times) that is required to be followed by such insurer to ensure timely processing of claims.

Insurers are also required to put in place proper grievance redressal procedures and mechanisms in accordance with its Board approved policy and other applicable provisions for the resolution of grievances of the policyholders.

To avoid conflicts of interest, ordinarily, two entities from the same group are not permitted to undertake the same line of insurance business.

There are some restrictions on insurance companies and insurance intermediaries operating in the same group, where the IRDAI has discretion (in some cases) to determine the scope of ‘group’:

• an Indian corporate group can have an insurance company and an insurance broker or a corporate agent within the same group, subject to certain conditions being fulfilled;
• typically, within a group, the IRDAI will grant one certificate of registration to only one entity for insurance intermediation, unless a case on merits and with no conflict of interest is made before the IRDAI;
• a web aggregator cannot be a related party of an insurance company;
• there is no express restriction on insurance companies and surveyors operating in the same group, but the IRDAI is likely to view this as an inherent conflict of interest;
• there is no express restriction on insurance companies and TPAs operating in the same group; and
• an insurance agent or director of an insurance intermediary is permitted to be a director of an insurance company, subject to certain conditions being fulfilled.

All directors and key managerial personnel of insurers, reinsurance entities and insurance intermediaries are required to be compliant with the fit and proper criteria stipulated by the IRDAI under the respective regulations/guidelines and their appointment has to be either pre-approved by or notified post facto to the IRDAI.

The IRDAI has been given extensive power under the rules and regulations to investigate and examine the conduct of the key managerial personnel. For instance, §105A of the Insurance Act stipulates that where any offence has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

Indian insurance companies, Indian reinsurers, branch offices of foreign reinsurers and insurance intermediaries are required to have at least one physical office in India in order to be considered for registration. This minimum requirement is to be maintained by each of these entities during the course of operations in India. In addition, Indian insurance companies and insurance intermediaries are required to have adequate branch office presence across India which is commensurate with their proposed plans for distribution of insurance products across various states/cities in India. Further, one of the IRDAI’s considerations while considering an application for registering any of these entities is whether the applicant has adequate infrastructure and facilities to carry out the business.

IIOs are established in unincorporated form but are required to have a physical office in GIFT City.

CBRs are not required to have a physical office presence in India.

The outsourcing of activities by Indian insurers/reinsurers, branch offices of foreign reinsurers and service companies set up under Lloyd’s India, is subject to the restrictions and compliances prescribed under applicable law, in relation to, inter alia, confidentiality and security requirements, due diligence of vendors and reporting of agreements and payouts. Broadly, these entities are prohibited from outsourcing their core functions (including underwriting, claim decisions and investments) to third party service providers.

Yes, there are restrictions on the types of assets in which insurers or reinsurers can invest. Investments made by insurers and reinsurers are governed by:

• the Insurance Act;
• the IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations 2024 (Investment Regulations);

The Insurance Act mandates that insurers and reinsurers are required to invest at least a certain percentage of their controlled fund in government securities and the balance in approved investments as set out under the Investment Regulations. In addition, the Investment Regulations contain the following:

• exposure/prudential norms which limit the investments that can be made by insurers or reinsurers based per investee company, group and industry.
• a prohibition on investing more than 5 per cent of the company’s assets in entities belonging to the promoters.
• a prohibition on investing the funds of policyholders, directly or indirectly, outside India.

The Insurance Act requires all cedants to cede 4% of the sum insured as mandatory cession to the Indian reinsurance company and, thereafter, the Reinsurance Regulations require all cedants to seek best terms for their reinsurance placements by following the specified “order of preference”.

A cedant is required to first offer its facultative and treaty surpluses to Indian reinsurance companies transacting reinsurance business during the immediate past three continuous financial years, and thereafter to certain IIOs (per their investment criteria) and branch offices of foreign reinsurers. The cedant may then proceed to offer the surplus to other IIOs, and followed by CBRs and Indian insurance companies (only for facultative placements).

Although the order of preference does not apply to Indian insurance companies transacting life insurance business, the Reinsurance Regulations require them to endeavour to utilise the Indian domestic capacity before offering reinsurance placements to CBRs. Life insurance companies are also required to obtain the prior approval of the IRDAI before entering into reinsurance arrangements with their promoter company, or associate or group companies, except where the arrangements are on commercially competitive terms and an arm’s-length basis.

While the terms and conditions of a reinsurance agreements are not regulated, every Indian insurer is required to submit their annual Board approved reinsurance programme along with the retention policy with the IRDAI. In relation to reinsurers, the Reinsurance Regulations require every Indian reinsurer and branch offices of foreign reinsurers to file their Board approved underwriting policy with the IRDAI.

Insurers are permitted to solicit and procure insurance business either directly though their sales executives or through licensed insurance agents and insurance intermediaries. Insurers are prohibited from engaging unlicensed persons for soliciting and procuring insurance business or for providing introductions or leads.

The IRDAI notified new norms on payment of commission to insurance agents and insurance intermediaries where the total amount of commission permitted to be paid by insurers is required to be within the allowable limits within the expenses of management of the insurer as specified under the IRDAI (Expenses of Management, including Commission, of Insurers) Regulations 2024. Further, insurers are required to have a Board approved written policy on payment of commission to insurance agents and insurance intermediaries.

In order to solicit and service insurance products in India, an entity must be licensed as an insurance intermediary with the IRDAI and such solicitation and procurement of insurance may only be undertaken in accordance with the regulatory framework applicable to the entity. In addition, insurers and insurance intermediaries are also permitted to sell and service insurance policies through recognized distance marketing modes per the “Guidelines on Distance Marketing of Insurance Products” and through an Insurance Self-Network Platforms (ISNP) in accordance with the “Guidelines on insurance e-commerce”.

While the present RBI framework permits a person resident in India to take or obtain a general (including health) insurance policy issued by an overseas non-admitted insurer, if the premium payments are within the overall limits prescribed by the RBI, the present statutory and regulatory framework remains silent on the manner in which such overseas insurance may be sold or serviced, or whether any Indian entity may assist such overseas insurer in servicing such insurance policy.

Generally, all insurance policies are required to incorporate various customer protections including but not limited to the following:

• The policy shall give details of the insurer’s grievance redressal mechanism to enable policyholders to raise complaints against the insurers.
• The policy shall give details of the Insurance Ombudsman, who is appointed by the Insurance Council to address complaints by the insured against the insurer, in relation to the settlement of claims.

The Policyholders Regulations require insurers to settle the claims in a timely manner and in accordance with the turnaround times specified under such insurer’s Board approved policy for protection of policyholders’ interests.

Further, the Policyholders Regulations provide, amongst other obligations, that insurers follow certain practices at the point of sale of the insurance policy to ensure that the insured can understand the terms of the policy properly.

In addition to the above, the policyholder has an option of approaching the consumer courts to seek redressal of their disputes with the insurers.

Under the regulatory framework, appeals from orders issued and decisions made by the IRDAI may be referred before the Securities Appellate Tribunal (SAT). In this regard, procedural rules for filing appeals from the IRDAI orders or decisions with the SAT have also been notified.

The IRDAI has also established a grievance redressal cell which looks into the complaints/grievances from policyholders. This cell takes up the grievances with the respective insurers for redressal. Additionally, office of Insurance Ombudsman, which has been constituted under the Insurance Ombudsman Rules 2017, is an alternate grievance redressal platform which has been setup with an aim to resolve grievances of aggrieved policyholders against insurers and insurance intermediaries in a speedy and cost-effective manner.

Apart from the regulatory framework of the IRDAI, insurance disputes are generally adjudicated in arbitration, commercial courts and consumer forums.

The Indian courts are equipped to handle commercial claims. In 2015, the Commercial Courts, Commercial Division & Commercial Appellate Division of High Courts Act 2015 (Commercial Courts Act), was introduced which carves out special benches in all existing civil courts which will adjudicate commercial matters exclusively. Commercial courts are also established at district levels in all jurisdictions, including territories where the High Courts have original civil jurisdiction. By providing for exclusive forum, the Commercial Courts Act has expedited the litigation process for commercial disputes. Commercial disputes are referred to the commercial court having the requisite territorial and pecuniary jurisdiction. The pecuniary jurisdiction of commercial courts is INR 300,000 and above. Insurance and reinsurance disputes are categorized as commercial disputes and are adjudicated by the commercial courts.

The amendment to the Commercial Courts Act in 2018 has mandated mediation for parties before filing a commercial suit except where a party seeks urgent interim relief. The legislation is meant to speed up the adjudication process.

The Indian jurisdiction recognises arbitration, mediation, judicial settlement including settlement through Lok Adalat and conciliation as means of alternative dispute resolution.

The Indian Arbitration and Conciliation Act 1996 (ACA) governs arbitration in India, and it is based on the UNCITRAL model law. An arbitration seated in India between two Indian parties is a domestic arbitration, while an arbitration (even if it is seated in India) involving at least one foreign party is an International Commercial Arbitration (ICA).

The ACA preserves party autonomy in relation to most aspects of arbitration, such as the freedom to agree upon the qualification, nationality, number of arbitrators, the place of arbitration and the procedure to be followed by the tribunal. The principle of party autonomy has been confirmed by the Supreme Court in a number of cases.

An arbitration agreement, as per the ACA, needs to be in writing and should reflect the intention of the parties to submit their dispute(s) to arbitration. In respect of insurance policies, the IRDAI has issued a circular dated 27 October 2023 (“Circular”) directing all insurers that insurance policies issued under commercial lines of business shall have a mandatory arbitration clause, which stipulates that “the parties to the contract may mutually agree and enter into a separate Arbitration Agreement to settle any and all disputes in relation to this policy”. In case parties mutually agree on an arbitration agreement, then the arbitration proceedings will be conducted as per the provisions of the ACA. The Circular has further deleted arbitration clauses from all polices under the retail lines of business prospectively. For the existing retail policies, the existing arbitration clause shall remain valid till the term of the policy expires unless a policyholder specifically requests the insurer to replace it with the clause as mandated by IRDAI. This also applies to all existing policies issued under commercial lines of business.

An arbitration agreement can come into existence if it is contained in a subsequent exchange of letters, telex, telegrams or other means of telecommunication which provides a record of the agreement. Recently, the Constitution Bench of the Supreme Court, in Cox and Kings Ltd v SAP India Pvt Ltd, 2023 INSC 1051 has held that an arbitration agreement can bind non-signatories as well by applying the ‘group of companies’ doctrine. The doctrine provides that an arbitration agreement which is entered into by a company within a group of companies may bind non-signatory affiliates if there is a mutual intent or consent to bind such a party. The issue of impleadment of a non-party can be determined either by the Court at the referral stage or later by the arbitral tribunal.

Further, in relation to domestic arbitration, the ACA bars intervention of the courts except for some specific instances where the courts are allowed to intervene – for example, for interim relief, reference to arbitration when an action has been instituted before the court for the appointment of arbitrators, where parties have failed to nominate arbitrators within the stipulated time frame, a party can also seek the court’s assistance for recording evidence. With a view to strengthen institutional arbitration in India, the 2019 amendment contemplates appointment of arbitrators by arbitral institutions. However, this provision is yet to be notified for it to come into effect.

Increasingly, arbitration is a preferred mechanism for settlement of commercial disputes in this jurisdiction. Arbitrations are required to be completed strictly within the prescribed timelines. Pleadings are to be completed within six months, whereafter the award shall be made within twelve months. This period can be extended by another six months upon the consent of the parties, but any further extensions can only be granted by a court. These timelines, however, do not strictly apply to an ICA. Additionally, the parties can also choose to conduct arbitration proceedings in a fast-track manner, with the award being issued within six months.

Additionally, a cost regime for granting costs of the arbitration proceedings to a successful party has also been set out in the ACA. The ACA also prescribes the model fee to be paid to an arbitrator. The Supreme Court in 2022 clarified that, subject to party autonomy, the highest fee payable to an arbitrator will be INR 3,000,000. This ceiling is applicable to each individual arbitrator, and not the arbitral tribunal. A sole arbitrator shall be paid twenty-five per cent over and above this amount.

An arbitration award is final and binding on the parties and the courts generally refrain from interfering in arbitrations or arbitration awards and uphold the sanctity of the arbitration agreement and arbitration awards. A party can challenge the jurisdiction of the tribunal before the tribunal itself and if the tribunal decides it has jurisdiction, then the arbitration continues. The recourse provided against an arbitration award is on specified limited grounds provided in the ACA. Notably, once a challenge is disposed, any subsequent appeal(s) is also limited in scope and once the time for challenging the award has expired, the award can be enforced in the same manner as if it were a decree of the court.

The present Indian insurance framework is silent on any mechanism of transfer of books of a reinsurer to an Indian branch office.

Recently, the IRDAI has taken several steps towards amending the existing regulatory framework with the objectives of promoting the ease of doing business in India and increasing insurance penetration across India. In this regard, the IRDAI has conducted several sessions with market players to identify steps for the healthy growth of the insurance industry, improving claim settlement timelines, speedy redressal of grievances, policyholder welfare, rationalising the regulatory framework, and potentially reducing the compliance burden and has identified various areas in the existing legal/regulatory architecture for internal review. Accordingly, the IRDAI has recently introduced eight principle-based consolidated regulations based on a comprehensive review of the insurance regulatory framework. The following are some additional steps already taken by the IRDAI to ease the compliance requirements of insurers and reinsurers and facilitate new entities to enter the Indian insurance industry:

• By way of various circulars, the IRDAI has relaxed various filing and reporting requirements for insurers and branch offices of foreign reinsurers.
• Major changes have been brought about in the product filing procedure where insurance companies are now permitted to launch most of their insurance products through self-certification.
• The limits on commission payable to insurance intermediaries by insurance companies have been lifted by way of the IRDAI (Expenses of Management, including Commission, of Insurers) Regulations 2024. Further, the management of general and health insurance companies’ overall expenses are now subject to overarching limits, which replaced specific limits on expenses that were previously permitted to be incurred on various lines of insurance business.
• The IRDAI has introduced a new and simplified “order of preference” for cedants while placing reinsurance business, where the branch offices of foreign reinsurers and certain IIOs are placed in the same category after Indian reinsurance companies.
• The IRDAI has de-notified the tariff wordings under certain classes of insurance business such as fire insurance, motor and engineering.

Further, press reports indicate that other steps aimed at achieving the same objectives may be expected in the coming months.

With the significant increase in e-commerce transactions over the years, the IRDAI has recognised the sale and servicing of insurance products online and the issuance of e-insurance policies. The insurance sector is continuously adapting to various technological advancements such as AI, data analytics and digital marketing, vis-à-vis claims, underwriting, policyholder communication/grievance management, digilockers for maintenance of records and data and various data security and protection measures. The IRDAI has also issued specific norms on, inter alia, information asset management, data security, application security, endpoint security, cloud security and incident management, which are required to be complied with by Indian insurers and insurance intermediaries. Indian Insurers are also utilising applications, artificial intelligence, telematics and Internet of Things (IoT) and other insurtech products and transforming the manner of distribution of insurance business in India.

The IRDAI also introduced the IRDAI (Regulatory Sandbox) Regulations 2022 (Sandbox Regulations) updating the earlier sandbox guidance which aim to create a regulatory sandbox environment to test new business models, processes, proposals, and applications, with the goal of balancing the orderly development of the insurance sector and the protection of policyholders’ interests. In the past few years, the IRDAI has approved various proposals under the Sandbox Regulations, including wellness and fitness trackers through wearable devices, claims and collision estimation by using AI, digital wallets and specialized insurance products.

The IRDAI has recently issued the IRDAI (Bima Sugam – Insurance Electronic Marketplace) Regulations 2024 which require insurers to jointly set up an insurance electronic marketplace called “Bima Sugam”. In this regard, Bima Sugam is meant to be a digital platform that facilitates, inter alia, the “purchase, sale, servicing of insurance policies, settlement of insurance claims, grievance and other related matters as permitted by the Authority”.

The IRDAI has over the past few years been issuing a series of norms that indicate a shift towards the digitalization of various stages in the insurance sales and servicing process:

• With the significant increase in e-commerce transactions over recent years, the IRDAI has recognised the sale and servicing of insur­ance products online as well as the issuance of e-insurance policies. The IRDAI’s “Guidelines on Insurance e-commerce” lays down provisions for setting up insurance self-network platforms by insurers and insurance intermediaries, for undertaking the sale and servicing of insurance activities in India.
• The IRDAI has issued “Guidelines on Information and Cyber Security for Insurers” (Cybersecurity Guidelines) to stipulate the norms on, inter alia, information asset management, data security, application security, endpoint security, cloud security and incident management, which are required to be complied with by insurers and reinsurers. Recently, the IRDAI has extended the applicability of the Cybersecurity Guidelines to insurance intermediaries also.
• The IRDAI has issued guidance on the participation of Indian insurance companies and insurance repositories in the RBI’s account aggregator framework which is a digital platform for sharing financial information such as information in relation to insurance policies by insurance companies and insurance repositories with customers and other financial information users. Under this framework, insurance companies and insurance repositories are required to adopt “technical specifications” and information technology framework to ensure a secure flow of data.
• The Policyholders’ Regulations now mandatorily require every insurer to issue insurance policies in electronic form, irrespective of the mode of receipt of proposal form. The IRDAI may allow exemptions to this requirement in the policyholders’ interest or for orderly growth of insurance industry.

In addition to the above, in the Indian insurance market, many insurers have made efforts at updating their business methods by utilizing various forms of insurtech and have collaborated with various tech companies to develop websites and mobile applications to facilitate the sale and ser­vicing of insurance policies online which includes digitising customer verification, underwriting, premium payment and claims-processing func­tions, and to automate the policy-issuance and claims-settlement processes. Apart from these, insurers are also exploring such insurtech solutions for tracking user’s health, cargo, theft, hijack attempts, etc.

The Policyholders Regulations requires insurers and insurance intermediaries to maintain all policyholder data as confidential and in a protected manner. In addition, the Cybersecurity Guidelines also stipulate various requirements on protection of data and maintaining cyber security of its systems.

Further, the Digital Personal Data Protection Act 2023 (DPDP Act) was recently notified in August 2023 as India’s first comprehensive data protection and privacy legislation. The DPDP Act is published for general information and shall come into force in stages as notified by the Central Government. It provides guidance in relation to inter alia, grounds for processing of personal data, rights and duties of a Data Principal, obligations of a Data Fiduciary, contractual requirements for engaging a Data Processor, manner of adjudication and appeal, and penalties for non-compliance/breach of the DPDP Act’s provisions.

The regulatory requirements in India is that all insurers shall maintain complete confidentiality of policyholders’ data. Further, data pertaining to all policies issued and all claims made in India has to be held in data centres located and maintained in India.

The IRDAI (Corporate Governance for Insurers) Regulations 2024 (CG Regulations) requires insurers to maintain a Board approved “Environmental, Social and Governance (ESG) framework and also requires the insurer’s Board to establish a comprehensive “Climate Risk Management” framework, which facilitates the insurer’s climate risk management as per its size, nature and complexity of operations.

Insurers also have a statutory obligation to undertake a certain amount of insurance business in rural and social sectors in accordance with applicable regulatory norms. Recently, the IRDAI has constituted a committee to suggest and develop “affordable, accessible and comprehensive cover for rural population, on benefit based / parametric structure” and suggest on “women centric distribution channel to focus on reaching untapped/rural areas”.

Further, the company law framework also requires companies whose net worth is more than INR 500 crore (c. US$ 60,003,100), or turnover is more than INR 1000 crore (c. US$ 120,006,200) or net profit is more than INR 5 crore (c. US$ 600,031), to undertake CSR activities, and insurers who fall within this category will be required to undertake CSR activities in the prescribed manner. The IRDAI has also issued a circular to encourage insurers to invest in Sovereign Green Bonds (SGBs) issued by the Indian Government with an objective to reduce the carbon intensity of the economy. The IRDAI has specified that the investment in SGBs by insurers shall be treated as investment in infrastructure.

The Indian company law framework requires every Indian insurance company to have at least one woman director on its Board.

The following lines of insurance businesses may potentially be of significance over the next few years:

• Purchase of third-party motor insurance is a mandatory requirement under the Indian law, and with year-on-year increase in the sale of automobiles, the sales of motor insurance policies will also correspondingly rise in significance.
• With the recent introduction of surety insurance contracts in Indian insurance market, as an alternative to bank guarantees, these insurance policies may grow in popularity in the coming years.
• Recently, several insurers have been launching cyber insurance focussed on individual retail customers and these policies are likely to be of significance in the coming years.
• The IRDAI has recently de-notified the tariff wordings under certain classes of insurance business such as fire insurance, motor, engineering and therefore, we are likely to see more variations in terms of such policies.

In addition, the IRDAI (Insurance Products) Regulations 2024 has introduced a new type of life insurance product called ‘index linked life insurance products’ where the benefits under a policy are directly linked to a publicly available index. With regard to claims, while the focus used to be on more traditional lines of insurance (such as catastrophe, life, health and motor insurance), over the past decade or so the Indian insurance market has evolved and liability products such as PI, D&O, cyber policies and EPL have come to the forefront. There is familiarity and demand for these products and consequently significant claims activity. Among liability products, the past five years show there has been a steady upward trend in claims made under PI policies, and this remains the busiest claims area, followed closely by D&O.