The proposed rules from the Insurance Regulatory and Development Authority of India would lower existing expense caps of 30% for general insurers and 35% for standalone health firms to a shared 25% within two years. Standalone companies, such as Star Health, contend that diversified insurers benefit unfairly if motor third-party and government health policies are tallied, as these non-commissioned lines inflate general insurers' spending room. The draft framework also intends to transition the core measurement metric from gross written premium to gross direct premium income. Additionally, the regulator is seeking to establish product-wise commission caps across the sector.
Key points
Standalone health insurers warn that a single expense framework unfairly favors diversifi…: Standalone health insurers warn that a single expense framework unfairly favors diversified general insurers carrying broader operational portfolios.
Insurers recommend excluding mandatory lines like motor third-party coverage and state he…: Insurers recommend excluding mandatory lines like motor third-party coverage and state health programs because they do not carry distribution commissions.
Counting commission-free government and motor policies artificially expands general insur…: Counting commission-free government and motor policies artificially expands general insurers' capacity to fund spending on retail health products.
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The stakeholders have made the recommendation to the Insurance Regulatory and Development Authority of India (Irdai) as part of its feedback on the proposed changes to EoM regulations, said Nilesh Kambli, CFO, Star Health.
"The point is, for government health business or for motor third-party business, which are mandatory in nature, there is no intermediary involved and should not be allowed for the 25% limit," said Kambli. "These should be removed from the base so that the EOMs are more reflective of the actual cost that is being used for distribution of consumer-facing products."
Star Health is one of India's leading standalone health insurers.
The regulator has proposed bringing general insurers and standalone health insurers under a common EoM framework, with the expense limit set to decline to 20% over five years. Under the transition discussed on the call, insurers would need to bring the limit down to 25% within two years.
Standalone health insurers have argued that government-sponsored health schemes and mandatory products such as motor third-party and crop insurance have different distribution economics from retail insurance, said Kambli.…
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