Insurance Regulator Irdai said insurance companies that have an exposure to IL&FS will be required to make provisions if it becomes a non-performing asset (NPA) and that it cannot be written off.
The Insurance Regulatory and Development Authority of India (Irdai) also expressed concerns over commissions the insurance companies pay to the motor insurance service providers (MISPs) as they are higher than what has been set by the regulator.
Speaking on the sidelines of the the Annual Insurance Brokers Summit in Mumbai on Thursday, Irdai chairman Subhash Chandra Khuntia said, Exposure to IL&FS cannot be written off, they will have to make provisions. However, the exact exposure of the insurance industry to the IL&FS group is not known so far.
The insurance regulator also spoke on violations by MISPs. Whenever it is coming to our notice, we are taking action. We have also done some focused inspection of some MISPs, we are watching the market very carefully for some violations, he said.
Irdai in 2017 had capped distribution fees payable to auto dealers at 22.5% for the two-wheelers and 19.5% for four-wheelers and sports utility vehicles (SUVs). Earlier, insurance companies used to pay this distribution fees in the range of 25-30%, across the segment. This commission structure is applicable only on premium charged towards own damage . Premiums of comprehensive motor insurance policies have two components, one being third party and own damage.
Irdai is also in talks with government to reduce the goods and services tax (GST) on essential insurance items such as property insurance in vulnerable areas. Earlier, GST on third-party insurance was reduced from 18% to 12% and Irdai is in consultation with the GST council on reducing the tax rate on property insurance in vulnerable areas. In the speech, he asked the insurance industry intermediaries to ensure that their conduct is ethical and pitched for self-regulation in this aspect.
The Irdai chairman also asked insurers to speed up the claim settlement process and asked insures to give more time in underwriting their products.
Khuntia further said cybersecurity insurance will be a big opportunity for insurers in the future.