The Insurance Regulatory and Development Authority of India (IRDAI) is planning to roll out some key reforms, such as risk-based solvency system and strengthened risk-management rules, to ensure than insurers are better equipped with capital adequacy to deal with socio-economic crisis like coronavirus pandemic.
"We are going to roll out some important reforms. Risk-based solvency or capital adequacy system will be introduced. We are working on it and we should be able to do it in about three years," said Irdai chairman S C Khuntia on Thursday.
Currently, every insurer has to maintain a solvency margin of 150%, while it has been observed that the solvency ratio of many such firms have failed below the threshold level. The solvency margin, or the extra capital that an insurance company is required to hold, indicates how prepared a firm is to meet unforeseen crisis.
Addressing the 22nd annual insurance and pension summit organised by the confederation of Indian Industry (CII), Khuntia said that the regulator is looking to introduce risk-based supervision norms, which is required so that those companies which carry higher risks get more supervision. "We want insurers to become more cost efficient, protect capital conservation ratio, preserve solvency and have a business continuity plan. New accounting standards will also be implemented from 1 January 2023. We may delay it by a year or two but the insurance companies have to start preparing themselves from this year itself," he said.
Recently, Irdai asked general and health insurers to settle claims of policy holders for treatment at make-shift or temporary hospitals set up for COVID-19 patients. The regulator said when a policyholder, who is diagnosed as COVID-19 positive, is admitted into any such make-shift or temporary hospital on the advice of a medical practitioner or appropriate government authorities, notwithstanding the definition of hospital specified in the terms and conditions of policy contract, the treatment costs shall be settled by insurers.
"...in order to ensure that the costs of treatment of COVID-19 are covered as per the terms and conditions of policy contract, a make-shift or temporary hospital permitted by Central/State government shall be regarded as a hospital or network provider and insurers shall settle the claims (as per the specified norms)," the Insurance Irdai said in a notice.