New norms on accounting standards, distribution channel soon, says IRDA

In a move to maintain transparency and strengthen both life and non-life segments in the sector, insurance regulator Insurance Regulatory and Development Authority of India (IRDA) is planning to soon announce new norms on accounting standards and distribution channel.“We are working on introduction of controls proactively in areas like accounting standards and distribution channel in the sector. We are likely to put it in the public domain soon and these new set of regulations will be implemented in 3-4 months,” an IRDA member told The Pioneer on Monday without divulging details about the norms.

As far as accounting standard norm is concerned, it is expected that the proposed standards would be the biggest ever financial reporting change for the insurance industry. The new standards for insurance contracts will improve the comparability of financial reporting among insurers globally. With the change in the Insurance Amendment Bill, the insurance regulator has been busy in framing the new set of regulations in almost all segments in the sector - be it life, non-life, investment or health insurance. 

“We have already put exposure draft on health in the public domain, seeking opinion from all the related parties and we have given three weeks’ time to express their views on the subjects,” the member said, adding that the comments will be put before the standing council followed by the insurance councils, and then it will go to the IRDA board for final approval.

In order to bring about an orderly and sustainable growth in the industry, newly-joined IRDA member Vijayalaxmi Iyer, however, hinted on last Saturday that that the regulator is likely to come up with a new set of regulations, including the health insurance within the next few months. “We are looking into every aspect of investment guidelines and accounting standards and the ecosystem involved in the areas such as life and non-life insurance segments,” Iyer said. 

As per the IRDA data, the non-life has grown up by 12 per cent last year, while the health insurance segment has generated `20,442 crore in premium business in fiscal 2015.“Keeping in view the low penetration of insurance in the country we find this growth to be satisfactory one as it is more than what was expected. In life too, the growth is happening now with the launch of the social security scheme like Pradhan Mantri Jeewan Jyoti Bima Yojana by the prime minister in February,” she added.

Early this month, accounting body ICAI has set-up a group of experts for this purpose, which has already started working on it. “We are working for insurance industry-specific accounting standards which will give a thorough and fair view of accounts of the insurance companies. These (standards) will come in the form of recommendations,” ICAI President Uttam Prakash Agarwal had said.

“The Accounting Standards Board will then keep the white paper in public for comments. After seeking comments from the public and other stakeholders, the board will again send the papers to ICAI council. Once approved, ICAI would consult the insurance regulator, IRDA, and recommend the standards for the insurance sector,” Agarwal said, adding that such standards would help stakeholders to get a better perspective of the insurance companies.However, global advisory firm KPMG said the proposed standards would be, without question, the biggest ever financial reporting change for the insurance industry. “Derived from significant collaboration between the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) the new standards for insurance contracts will improve the comparability of financial reporting among insurers globally,” it added.   

In June 2013, the boards published exposure drafts (EDs) on accounting for insurance contracts, and while much of the feedback received through previous outreach activities had been addressed there are still a number of understandable concerns being voiced within the comment letters.