Presentation on theme: "Market Conduct examination - A Case Study on Key Man Insurance Policies Conference on Regulatory Issues for Sr Officers of Insurance Regulatory Agencies,"— Presentation transcript:
1 Market Conduct examination - A Case Study on Key Man Insurance Policies Conference onRegulatory Issues for Sr Officers of Insurance Regulatory Agencies, Hyderabad.15th November, 2005
3 Market ConductOff site MonitoringOn site Examination(Target Exam)
4 Off Site Monitoring – Key Man Insurance Policies New Business AnalysisAnalysis of Premium IncomeSpurt in the Premium IncomeHigher Average Premium IncomeMarket IntelligenceFeedback from industryMedia reports
5 Off site monitoring Noticing the Aberrations Detailed Target Exams Self Regulatory measureDeliberations in Life CouncilRecommendations to IRDARestrictions on type of Key Man Policies
6 What is Key Man Insurance? Meets the business needs of a business concern.Definition of Key Man:Key man is an employee who contributes significantly to the business of the firm.
7 Objectives – Key Man Insurance Indemnify the loss of business earningsMeet the costs of replacementsTime to fill the vacuum – cover the monitory lossesPremiums paid allowable business expenses U/S 37 (1) of I T Act.
8 Tax Implications Insurance Premiums are allowed Business Expenditures Proceeds received by the employer taxed as business profitsIf assigned to key man proceeds considered as Income in his hands.
9 Onsite Examination - Methodology ExamineList of High worth Policies IssuedList of Single Premium PoliciesList of Key Man Insurance PoliciesDetails of Assignment RegisterContd..
10 Methodology List of Policy Withdrawals List of Policy Loans ExamineList of Policy WithdrawalsList of Policy LoansList of Policy SurrendersSource of First Premium deposited
11 Onsite Examination - Observations Higher proportion of Key Man Policies amongst Single PremiumsMajor % of Premium in the last quarterMore Plans of Flexible Nature
12 Assignment - Observations Simultaneous assignment in favour of Life AssuredAlternate way of Deferred Compensation (?)Assignment in favour of BanksA lead to verify the source of FinanceIn consideration of the Corporate LoanPolicy as Security where Surrender Value is zeroAssignments defeating the Objective
13 Other Observations No evidence of Direct Finance by Bank Withdrawal option exercised by Banks being absolute assigneesEndorsement on Policies for surrendering by employer or assigning to Key Man in case of Key man's exit from the company
14 Concomitant Observations Deviations from the File & Use NormsHigher allocations tantamount to rebating under ULIPsErrors in levying the charges under ULIPs
15 D V S Ramesh Assistant Director IRDA Hyderabad Thank youD V S RameshAssistant DirectorIRDAHyderabad