IRDAI Master Circular on General Insurance Business

Introduction

The Master Circular on General Insurance Business, issued by the Insurance Regulatory and Development Authority of India (IRDAI), aims to consolidate various guidelines and regulations related to general insurance products. This circular is designed to provide clarity, enhance compliance, and improve customer-centric practices in the general insurance sector.

Key Sections and Provisions

Scope and Applicability

• Effective Date: The Master Circular comes into force immediately.
• Replaces Earlier Guidelines: All earlier guidelines and circulars related to general insurance products are replaced by this Master Circular.
• Applicability: Applies to all existing general insurance products and add-on covers. It also applies to the general insurance coverage section within a package product but not to health insurance products included within a package product.
• Innovative Products: Insurers can offer new, innovative, and customized products under the new product regulations to existing customers.

Chapter I: General Information for Retail Policyholder/Customer

1. Product Availability:
   • Products must provide wider choices, cover various perils, be easy to understand, and be available in different durations.
   • Products should be customizable to meet regional and segment-specific needs.
2. End-to-End Technology Solutions:
   • Insurers must implement technology solutions for efficient policyholder onboarding, policy servicing, renewal, claim settlement, and grievance redressal.
3. Base Product:
   • Every insurer must have a base product defining the necessary minimum coverage for each line of business.
4. Documentation:
   • No claim should be rejected for want of documents that should have been collected at the time of underwriting. Only documents directly related to the claim settlement should be requested.
5. Retail General Insurance Products Must Specify:
   • Scope of coverage, exclusions, warranties and conditions, application of underinsurance, salvage value, deductibles, and basis of settlement of loss.
6. Customer Information Sheet (CIS):
   • A CIS must be provided with every policy, detailing the scope of coverage, exclusions, claims procedures, and grievance redressal mechanisms. Acknowledgment from the policyholder is required.
7. Cancellation:
   • Policyholders can cancel the policy at any time without needing to provide reasons. Insurers can cancel only on grounds of fraud with a minimum notice of 7 days.
8. Appointment of Surveyor:
   • Losses exceeding Rs 50,000 for motor insurance and Rs 1 lakh for other insurance must be surveyed by a registered surveyor and loss assessor.
9. Claims:
   • Timelines for claim settlement must be communicated. Allocation of surveyors should happen within 24 hours of claim report. Survey reports should be submitted within 15 days, and claims decided within 7 days of receipt of the survey report.
10. Withdrawal of Retail Product:
    • Policyholders must be informed in advance about product withdrawal, and options for renewal must be provided.
11. Grievance Redressal:
    • Insurers must have a robust grievance redressal system, including contact details of the insurance ombudsman in response letters.
12. Implementation of Ombudsman Awards:
    • Compliance with ombudsman awards within 30 days is mandatory, with penalties for delays.

Chapter II: Insurers – General Principles

1. Board Approved Policies and Procedures:
   • Insurers must have Board-approved underwriting policies, claims and policy servicing manuals, and standard operating procedures.
2. Training:
   • Regular training must be provided to intermediaries and employees on products, regulations, and service timelines.
3. Technology Enablement:
   • Insurers must adopt technology solutions for seamless policyholder onboarding, policy servicing, renewal, claim settlement, and grievance redressal.
4. Performance Monitoring of Surveyors:
   • Criteria for monitoring surveyor performance must be Board-approved. A tech-based system for survey job allocation must be developed.
5. Product Management Committee (PMC):
   • The PMC ensures compliance with regulatory requirements and proper due diligence for product-related risks.
6. Advertisement Committee:
   • The AC approves every advertisement in compliance with regulations and is constituted with senior management officials.

Chapter III: Product Management

1. Product Development:
   • Products should be need-based, clear, transparent, and affordable, with fair terms and conditions.
2. Product Approval Process:
   • The PMC ensures compliance with regulatory requirements. Products must be uploaded on the insurer’s website before launch or within seven days of UIN allotment.
3. Unique Identification Number (UIN):
   • Every product and add-on must have a UIN, used in all relevant documents and communications.
4. Product Withdrawal and Revisions:
   • Modifications to products must be approved by the PMC and treated as new products. Withdrawn products must be retained solely for servicing existing policyholders.

Chapter IV: General Guidelines – All Lines of Business

1. Risk Classification:
   • Insurers must ensure that all risk-level information is organized and collated by specific criteria.
2. Acceptance of Risk:
   • Underwriting evaluations must be guided by Board-approved policies consistent with reinsurance treaties.
3. Policy Duration:
   • General Insurance policies can be issued on annual, long-term, or short-term bases.
4. Reinsurance-Driven Product:
   • Terms quoted by reinsurers may vary but must be consistent with the insurer’s underwriting guidelines and approved by the Risk Management Committee.
5. Annual Performance Review:
   • The PMC must conduct an annual performance review of every product and line of business, with reports submitted to the Risk Management Committee and Internal Audit Committee.

Chapter V: General Guidelines – Specific Lines of Business

1. Motor Insurance:
   • Compliance with the Motor Vehicles Act 1988 is mandatory. Insurers must offer comprehensive cover, road assistance, salvage collection, and transparent IDV determination.
2. Surety Insurance:
   • Surety insurance contracts must comply with Section 126 of the Indian Contract Act 1872 and cannot cover financial guarantees or be issued for assets outside India.
3. Trade Credit Insurance:
   • Policies protect businesses against non-payment for goods and services, covering commercial or political risks. Insurers must follow specific guidelines for underwriting trade credit business.

Chapter VI: Miscellaneous Provisions

1. Returns Submission:
   • Insurers must submit periodic returns as per the Master Circular on submission of returns.
2. Repeal of Guidelines and Circulars:
   • This Master Circular supersedes all previous guidelines and circulars related to general insurance products listed in Annexure C.

Annexures and Forms

• Annexure A: Circulars issued pursuant to court orders that will remain in force.
• Annexure B: Customer Information Sheet (CIS) format.
• Annexure C: List of repealed circulars.

Conclusion

The Master Circular on General Insurance Business provides a comprehensive framework for regulating general insurance products in India. It emphasizes transparency, fairness, and compliance, ensuring customer-centric practices and robust governance. Insurers must adhere to these guidelines to enhance policyholder trust, streamline operations, and maintain regulatory compliance.