PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR MARCH 2018

PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR MARCH 2018

PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR MARCH 2018

PwC’s Insurance Insights Analysis of regulatory changes and impact assessment for March 2018 Click to launch

PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR MARCH 2018

2 PwC PwC’s Insurance Insights PwC’s Insurance Insights Preface Our point of view on recent trends in insurance Other key guidelines issued by the Authority during the month of March 2018 Contacts 1 IRDAI During the month of February 2018, the insurance sector witnessed an increase in the amount of premiums collected. Specifically within the life insurance sector, the Life Insurance Corporation of India (LIC) continues to dominate the market share. A brief outlook at the general and life insurance sectors, in terms of premium collection, market share, number of policies issued and lives covered, has been presented below. • The figures clearly depict the dominance of the public sector in terms of premium collection and market share in both life and general insurance.

• In the case of life insurance, the market share of LIC has increased by almost 70%,1 cementing the company as the leading life insurance provider in the country. In terms of insurance policies issued upto February 2018, LIC issued a significant amount of policies, totalling to more than double those of private life insurers. However, at the same time, private life insurers have held a significant market share in terms of the number of lives covered under group schemes. • Within the general insurance sector, there has been growth in revenues earned by companies. Private and public sector general insurers both continue to enjoy a large market share in the general insurance sector.

PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR MARCH 2018

3 PwC PwC’s Insurance Insights PwC’s Insurance Insights Preface Our point of view on recent trends in insurance Other key guidelines issued by the Authority during the month of March 2018 Contacts Market share up to February 2018 Private life insurers LIC 70% 30% Life insurance sector Source: IRDAI Source: IRDAI Private life insurers Premium in crore INR For February 2017 For February 2018 Up to 28 February 2017 Up to 28 February 2018 3944.09 5248.24 41250.19 48891.40 LIC 6847.59 8476.73 99096.57 115803.52 0.00 20000.00 40000.00 60000.00 80000.00 100000.00 120000.00 140000.00 Private life insurers LIC General insurance sector Market share up to February 2018 Private and public sector general insurers Stand-alone private health insurers Specialised PSU insurers 89% 5% 6% 0.00 20000.00 40000.00 60000.00 80000.00 100000.00 120000.00 140000.00 Private and public sector general insurers Stand-alone private health insurers Specialised PSU insurers Premium in crore INR New business premium (in crore INR) General insurers For February 2017 For February 2018 Up to 28 February 2017 Up to 28 February 2018

PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR MARCH 2018

4 PwC PwC’s Insurance Insights PwC’s Insurance Insights Preface Our point of view on recent trends in insurance Other key guidelines issued by the Authority during the month of March 2018 Contacts Source: IRDAI Source: IRDAI Private life insurers Number of policies/schemes For February 2017 For February 2018 Up to 28 February 2017 Up to 28 February 2018 577011.00 593619.00 5191670.00 5753415.00 LIC 1761155.00 1851386.00 15344205.00 16725281.00 0.00 2000000.00 4000000.00 6000000.00 8000000.00 10000000.00 12000000.00 14000000.00 16000000.00 18000000.00 Private life insurers LIC Number of lives covered under group schemes Private life insurers For February 2017 For February 2018 Up to 28 February 2017 Up to 28 February 2018 7575619.00 12295768.00 110722234.00 106343590.00 LIC 2478179.00 8251467.00 43305652.00 46893195.00 0.00 20000000.00 40000000.00 60000000.00 80000000.00 100000000.00 120000000.00 Private life insurers LIC

PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR MARCH 2018

5 PwC PwC’s Insurance Insights Preface Our point of view on recent trends in insurance Other key guidelines issued by the Authority during the month of March 2018 Contacts PwC’s Insurance Insights In this edition, we wish to focus upon the significance of motor insurance. In India, it is mandatory to avail third party motor insurance. Surprisingly, motor insurance is one of the largest portfolios for general insurers and it has contributed nearly 39% to the gross direct premium written by general insurers in 2016–17. The segment assumes significance also because of third party insurance, which is mandated by law. Due to its controlled pricing mechanism and high-loss ratios, third party motor insurance has been subject to close regulatory supervision and has experienced many ups and downs. Another analysis conducted by the Insurance and Regulatory Development Authority of India (IRDAI [the Authority]) shows that more than 25% of motor insurance policies written in 2015–16 were that of new vehicles and more than 70% of policies were associated with less than 6 year old vehicles. This is an indication of the number of uninsured vehicles on the roads.2 While there are several initiatives that are being undertaken by the Government of India through its legislative and executive powers and the Authority through its regulatory framework, statistics indicate that much more needs to be done. Further, several initiatives have been taken by the Authority to promote motor third party liability insurance awareness, for which the Authority personally publishes the premium rates each year, which every insurer needs to comply with and set their premium masters accordingly. In order to simplify and promote ease of selling motor insurance policies: • The Authority has recently issued Guidelines on Motor Service Providers regularising the role played by automobile dealers in selling and servicing motor insurance policies.

• The Authority has also recently issued an Exposure Draft on Telematics, which has the potential to revolutionise the pricing mechanism of motor insurance by the use of technology in assessing the risks posed by a particular driver or a particular vehicle. • The Authority has also permitted the sale of simple motor insurance policies through point of sale persons. 2 IRDAI Journal. (September 2017). Motor insurance in India. Retrieved from https://www.irdai.gov.in/ADMINCMS/cms/Uploadedfiles/IRDAI%20Journal%20Septe mber%202017.pdf

PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR MARCH 2018

6 PwC PwC’s Insurance Insights Other key guidelines issued by the Authority during the month of March 2018 Our point of view on recent trends in insurance Contacts Preface PwC’s Insurance Insights Directions of High Court of Delhi at New Delhi on Exclusions related to Genetic Disorders3 Introduction The Authority recently directed all insurance companies to re-look at their exclusionary clauses in insurance contracts and ensure that they do not reject claims on the basis of exclusions relating to genetic disorders. The basis for this direction was the recent judgment in the case of M/s United India Insurance Company Limited vs Jai Parkash Tayal, wherein the Hon’ble High Court of Delhi held that the exclusionary clause of genetic disorders in insurance policies is too broad, ambiguous and discriminatory and thus violates Article 14 of the Constitution of India.

Implications for insurers • No claim in respect of any existing health insurance policy shall be rejected based on exclusions related to genetic disorders. • Insurers are not allowed to include genetic disorders as one of the exclusions in the new health insurance policies issued in respect of all their existing health insurance products and also in the new products launched and/or filed under the provisions of Guidelines on product Filing in Health Insurance Business dated 29 July 2016. • The notification, however, does not indicate that a person with a known genetic disorder will get insured. At the time of underwriting policies, insurance companies are free to refuse health insurance to customers they see as unfit. However, once insured, the insurer can’t deny a claim on the grounds of a genetic disorder.

Ref: IRDAI/HLT/REG/CIR/046/03/2018 Date of issue: 19 March 2018 Applicability: To all Life, General and Health Insurers 3 https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo3426& flag=1

PWC'S INSURANCE INSIGHTS - ANALYSIS OF REGULATORY CHANGES AND IMPACT ASSESSMENT FOR MARCH 2018

7 PwC PwC’s Insurance Insights Other key guidelines issued by the Authority during the month of March 2018 Our point of view on recent trends in insurance Contacts Preface PwC’s Insurance Insights The Prevention of Money-laundering (Maintenance of Records) Second and Seventh Amendment Rules 20174 Introduction On 1 June 2017, the Government of India issued a notification stating that Aadhaar and PAN/Form 60 would be made mandatory for availing any financial services, including insurance. Further, it was clarified in circular IRDAI/SDD/MISC/CIR/248/11/2017 that an Aadhaar number would be required to be linked to an insurance policy.

In light of the recent petition of the Hon’ble Supreme Court of India dated 13 March 2018, the deadline for linking Aadhaar has been extended till the matter has been heard and the judgement has been declared. Implications for insurers • In case of existing insurance policies, the date for linking Aadhaar has been extended till the verdict is announced by the Hon’ble Supreme Court of India. • In case of new insurance policies, insurers should collect Aadhaar details and PAN/Form 60 from their clients within six months from the starting date of the account- based relationship. In cases where clients do not have their Aadhaar details, they can provide any official valid document, as mentioned under the Prevention of Money -Laundering (Maintenance of Records) Rules, 2005. Ref: IRDA/SDD/CIR/MISC/047/03/2018 Date of issue: 20 March 2018 Applicability: To all life and general insurers (Including Standalone Health Insurers) 4 https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo3427& flag=1

8 PwC PwC’s Insurance Insights Other key guidelines issued by the Authority during the month of March 2018 Our point of view on recent trends in insurance Contacts Preface PwC’s Insurance Insights Premium Rates for Motor TP Liability Insurance Cover for FY 2018-195 Introduction The Authority had released an exposure draft on 7 March 2018 on the revision of premium rates for motor third party insurance covers, inviting comments from all concerned stakeholders. Pursuant to comments received from the stakeholders and examination by the Authority, the Authority has notified premium rates applicable to motor third party liability insurance covers for the year 2018–19. The detailed rates of premium based on the category of the vehicle are mentioned in the circular issued. Implications for insurers • Insurers, on an immediate basis, will have to configure their systems and amend their premium masters and underwriting policies in compliance with the said guidelines. • Insurers are not allowed to cancel current insurance policies and undertake new policies to avail the new premium rates.

• This notification as well as the schedule of premium rates shall be prominently displayed on the notice board of every underwriting office and on insurers’ websites where it can be viewed by the public. Ref: IRDA/NL/NFTN/MOTP/053/03/2018 Date of issue: 28 March 2018 5 https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo3434& flag=1

9 PwC PwC’s Insurance Insights Other key guidelines issued by the Authority during the month of March 2018 Our point of view on recent trends in insurance Contacts Preface PwC’s Insurance Insights Exemption of reinsurance schemes, in respect of specified insurance schemes, from the purview of GST6 Introduction Based on the meeting held by the Goods and Services Tax (GST) Council on 18 January 2018, it was decided to exempt reinsurance schemes, in respect of specified insurance schemes, from the purview of the tax network vide D.O. No. 354/12/2018- TRU dated 24 January 2018 from the finance secretary. Given the fact that no GST is payable on insurance premium in such schemes but that GST was applied on reinsurance for such schemes led the GST Council to accept the proposal to exempt reinsurance for specific insurance schemes. The captioned order stated above contains a total of 24 such schemes which are exempt from GST, stated as part of the annexure to the order. These schemes, inter-alia, include the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Fasal Bima Yojana (PMFBY), among others.

Implications for insurers This exemption is on the basis that any benefit derived by insurers on account of reduction in premium should be passed on to the beneficiary and also state and central exchequers. Thus, insurers should keep in mind that if the benefit of reduction in premium is not passed down to the beneficiary/government, suitable action can be taken against the insurance company, as per section 171 of the Central Goods and Services Tax (CGST) Act, 2017. Ref: IRDA/F&A/CIR/MISC/052/03/2018 Date of issue: 28 March 2018 Applicability: All insurers 6 https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo3433& flag=1

10 PwC PwC’s Insurance Insights Contacts Our point of view on recent trends in insurance Preface Other key guidelines issued by the Authority during the month of March 2018 PwC’s Insurance Insights Vivek Iyer Partner vivek.iyer@pwc.com Mobile: +91 9167745318 Dnyanesh Pandit Director dnyanesh.pandit@pwc.com Mobile: +91 9819446928 Joydeep K Roy Partner joydeep.k.roy@pwc.com Mobile: +91 9821611173 Saigeeta Bhargava Associate Director saigeeta.bhargava@pwc.com Mobile: +91-9560518833 Yugal Mehta Manager yugal.mehta@pwc.com Mobile: +91 9970163293 Varsha Mehrotra Consultant varsha.mehrotra@pwc.com Mobile: +91 83890640211 Prateek Kannan Consultant prateek.kannan@pwc.com Mobile: +91 9840753109

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© 2018 PwC. All rights reserved About PwC pwc.in Data Classification: DC0 This document does not constitute professional advice. The information in this document has been obtained or derived from sources believed by PricewaterhouseCoopers Private Limited (PwCPL) to be reliable but PwCPL does not represent that this information is accurate or complete. Any opinions or estimates contained in this document represent the judgment of PwCPL at this time and are subject to change without notice. Readers of this publication are advised to seek their own professional advice before taking any course of action or decision, for which they are entirely responsible, based on the contents of this publication. PwCPL neither accepts or assumes any responsibility or liability to any reader of this publication in respect of the information contained within it or for any decisions readers may take or decide not to or fail to take. © 2018 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers Private Limited (a limited liability company in India having Corporate Identity Number or CIN : U74140WB1983PTC036093), which is a member firm of PricewaterhouseCoopers International Limited (PwCIL), each member firm of which is a separate legal entity. VB/April2018-12504

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