Warning two insurers for exceeding the prescribed limits on expenses of management (EoM) during FY24-25, insurance regulatory and development authority of India (IRDAI) has restrained Edelweiss Life Insurance Company and Pramerica Life Insurance Ltd from opening any new place of business for six months.
Against allowable expenses of ₹494.09 crore for the non-participating segment, Edelweiss Life Insurance incurred ₹558.73 crore. In the participating segment, against an allowable limit of ₹239.50 crore, the insurer incurred ₹264.81 crore. Overall, the insurer's actual expenses exceeded the applicable EoM limits by ₹89.95 crore.
IRDAI said Edelweiss Life Insurance had not complied with the EoM limits specified under Regulations 7 read with Regulations 8, 10, 11 and 20 of the 2024 regulations. The excess expenditure was charged to the profit and loss (P&L) account or shareholders' account, as required under the regulations.
The insurer had sought forbearance from the regulator, noting that its overall EoM ratio had declined from 135% in FY21-22 to 112% in FY24-25. It attributed the improvement to initiatives aimed at increasing frontline sales productivity and achieving sustainable premium growth.
However, IRDAI noted that Edelweiss Life Insurance had also exceeded the EoM limits in FY23-24 and that its earlier request for forbearance had not been accepted. The regulator, therefore, rejected the insurer's request for FY24-25 as well.
IRDAI has warned Edelweiss Life for failing to comply with the applicable EoM limits and directed it not to open a new place of business for six months from the date of the order.
Pramerica Life Insurance Company faced a similar action, but for a substantially higher excess expenditure. For FY24-25, the insurer's allowable management expenses under the non-participating segment, including linked policies, stood at ₹609.94 crore. However, Pramerica Life Insurance incurred actual expenses of ₹747.73 crore, exceeding the prescribed limit by ₹137.79 crore.
The excess expenditure was charged to the P&L account, or shareholders' account, as required under the EoM Regulations, 2024. Pramerica Life Insurance had sought forbearance, citing demonstrable and sustained improvement in its EoM trajectory and ongoing corrective and governance measures.
The regulator, however, noted that Pramerica Life Insurance had also exceeded its EoM limits in FY23-24 and its earlier request for forbearance had not been accepted. For FY24-25, the insurer again exceeded the limit, with actual expenditure of ₹747.73 crore against the permissible ₹609.94 crore.
Consequently, IRDAI rejected Pramerica Life Insurance Company's request for forbearance, warned the insurer and directed it not to open a new place of business for six months from the date of the order.
The orders require both insurers to place the matter before their respective boards at the upcoming board meetings. They must also submit copies of the minutes of the board discussions to IRDAI within 15 days of the meetings.
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