Insurance Litigation 2023 Comparisons

The insurance sector in India is regulated by the Insurance Regulatory and Developmental Authority of India (IRDAI), and there are, in addition, several consumer-centric regulations setting out various practice directions and guidelines to be followed by insurers, reinsurers and insurance intermediaries.

The IRDAI can investigate, either on its own motion or following a complaint or any other information received from policyholders/third parties, any alleged breach by insurers, reinsurers or insurance intermediaries, and the punishment can include a monetary penalty of up to INR10 million (approximately USD123,000) for each breach, resulting directions and/or cancellation of the relevant registration.

Apart from supervisory proceedings before the IRDAI and proceedings before any other regulators, such as the Securities and Exchange Board of India (SEBI), the Competition Commission of India (CCI) or the Central Consumer Protection Authority (CCPA), insurance and reinsurance disputes are generally adjudicated in the following forums:

• Arbitration – Most commercial general insurance contracts typically have a standard arbitration clause where any dispute on quantum – liability already having been admitted – can be referred to arbitration.
• Civil courts – Retail general insurance contracts, life insurance and health insurance contracts usually contain a jurisdiction clause in favour of the courts. For commercial general insurance contracts with an arbitration clause, insureds can approach a civil court when the dispute falls outside the scope of the arbitration clause.
• Consumer forums – Insureds can approach consumer forums with the relevant monetary and territorial (if applicable) jurisdiction. The right to approach a consumer forum is an independent option/remedy which cannot be curtailed even by an existing arbitration clause.

Litigation Process

An insured may, depending on the underlying facts, raise a dispute before an arbitral tribunal, an appropriate civil/commercial court or a consumer forum. See 1.3 Alternative Dispute Resolution (ADR) for a discussion on arbitration.

Disputes before a civil/commercial court

The Commercial Courts Act 2015 (the “CCA 2015”) prescribed the constitution of commercial courts for adjudicating commercial disputes of a specified value. The commercial courts have been set up at the district level as well as at the High Court level with the objective of having a more streamlined process for speedier adjudication of commercial disputes. It is mandatory to undergo a pre-mediation exercise before filing a commercial suit.

These courts are, effectively, civil courts with a specific mandate to hear only commercial matters. Insurance and reinsurance have been classified as “commercial disputes” under the CCA 2015. The pecuniary threshold for a dispute to be classified as “commercial” is INR300,000 (approximately USD3,700).

The commercial courts are governed by the Code of Civil Procedure 1908 (CPC) and the CCA 2015. If there is a conflict between the two, the CCA 2015 will generally prevail.

Civil courts in India are divided into district courts, high courts and the Supreme Court, in ascending order of hierarchy. There are approximately 688 district courts, 25 high courts and the Supreme Court, which is the highest court of law in India.

Out of the 25 high courts in India, the high courts at Calcutta, Bombay, Madras, Delhi and Himachal Pradesh have original jurisdiction to decide matters, including commercial matters, where the quantum of dispute is higher than an ascertained pecuniary value and, in relation to Calcutta and Madras, within a designated territorial limit from the High Court. Disputes below the prescribed monetary value would go to the commercial court with appropriate territorial jurisdiction at the district level or an ordinary civil court where the value is lower than INR300,000 (approximately USD3,700).

In all other cases, commercial courts at the district level with the necessary territorial jurisdiction can hear insurance/reinsurance disputes which are valued at INR300,000 (approximately USD3,700) and above. The hierarchy and designations of commercial/civil courts at the district level may be different across states in India.

Disputes before a consumer forum

The consumer commissions have a three-tier hierarchy, with District Commissions at the lowest rung, followed by a State Commission (for every state) and a National Commission at the apex level. District Commissions have the jurisdiction to deal with complaints arising out of contracts for services or goods involving allegations of “deficiency in service”, where the consideration does not exceed INR5 million (approximately USD61,000). For the State Commission, the threshold is over INR5 million (approximately USD61,000) up to INR20 million (approximately USD244,000), whereas the National Commission can take up original complaints where the consideration is above INR20 million (approximately USD244,000). The District Commission and the State Commission must also have the necessary territorial jurisdiction. 

Rules on Limitation

Limitation periods are generally governed by the Limitation Act 1963 (the “Limitation Act”), save for the limitation period to approach a consumer forum which is prescribed under the Consumer Protection Act 2019 (the “Consumer Act 2019”).

According to Schedule 55 of the Limitation Act, the limitation period of three years is calculated either from:

• the date of the occurrence causing the loss; or
• the date of denial of the claim under the policy.

Under the Consumer Act 2019, the limitation period is two years instead of three years. 

Some insurance contracts specify timelines to report claims and others require the reporting to be “as soon as reasonably practicable”, both forms of which are typically expressed as conditions precedent to the insurer’s liability. Therefore, the court may refuse to impose liability on account of a delay in notification of a claim, even if some portion of the limitation period still remains available to the insured. 

In situations where a loss has been notified to the insurer, and the claim has been rejected or the policy avoided, the limitation period of three years will commence from the date of communication of such denial. However, it may not be necessary to wait for a rejection or denial to be communicated if there is a breach of the timelines provided for closure of an assessment/claim under the IRDAI (Protection of Policyholders) Regulations, 2017 (the “PPI Regulations 2017”) or any other guidance specifying such time periods or other requirements.

Mediation

Mediation, conciliation and arbitration are recognised as ADR mechanisms. High courts and district courts generally have mediation cells and mediation has particularly gained traction following the introduction of the CCA 2015, which makes mediation a prerequisite to bringing a suit.

Arbitration

On the adjudicatory front, arbitration is preferred for commercial disputes and most commercial contracts have an arbitration clause. The Arbitration and Conciliation Act 1996 (the “Arbitration Act”) has been amended over the years with the aim of making arbitration a more effective and attractive alternative to court proceedings.

There are set timelines for completing domestic arbitrations, while in international commercial arbitrations there are guidelines/best practices in relation to timelines.

There is also an option for “fast track” arbitration, where an award may be passed within six months if the requirements are met.

Settlement Outside Courts

Independently, where a court is of the view that there are elements of settlement that may be acceptable to parties before it, it may formulate the possible terms of settlement, take the view of the parties and refer the parties to either:

• arbitration;
• conciliation;
• judicial settlement, including settlement through Lok Adalat; or
• mediation.

This power is derived from Section 89 of the CPC. 

Such reference will require the consent of the parties where such consent/agreement is otherwise required under law, for instance in the case of arbitration. 

Insurance-Specific ADR

Specifically for insurance disputes, the government of India has created the Insurance Ombudsman Scheme, which enables individual policyholders to settle their complaints out of court in a cost-effective and efficacious manner. An aggrieved policyholder can approach the Insurance Ombudsman provided their claim value is under INR3 million (approximately USD36,500).

Retail general insurance, life insurance and health insurance contracts usually contain a jurisdiction clause in favour of the courts. Typically, standardised arbitration clauses are mostly found in commercial general insurance contracts where any dispute on quantum, liability having been admitted, can be referred to arbitration.

The enforcement and recognition of foreign judgments and decrees in India are governed by, inter alia, Section 44-A and relevant orders of the CPC. Only a foreign judgment of a superior court of a reciprocating territory, as notified by the government of India, can be enforced before the appropriate court in India.

In this regard, the Indian government has notified several reciprocating jurisdictions, including Bangladesh, Canada, the Colony of Aden, the Colony of Fiji, Hong Kong SAR, the Republic of Singapore, Malaysia, Myanmar, New Zealand and the Cook Islands, Samoa, Papua New Guinea, Trinidad and Tobago, the UAE and the UK.

Case Load

In India there are about 11,046,037 civil cases pending before various district and lower courts, about 4,355,597 before the high courts and 69,766 before the Supreme Court.

These statistics may not provide a completely accurate current position given that several of these matters may not even be in a position to be heard on account of the parties’ non-compliance.

Nonetheless, it is generally accepted that the disposal rate of individual judges and courts is on the higher side.

Court proceedings in India can often be time-consuming and potentially expensive. The establishment of commercial divisions has somewhat reduced the length of time, but the process is still lengthy and potentially expensive.

Domestic arbitrations have specified timelines for completion. According to Section 29A of the Arbitration Act, arbitration proceedings are required to be completed within 12 months from the date of completion of pleadings (a maximum period of six months for completing pleadings). Parties may, by mutual agreement, extend the 12-month period by another six months. Any further extension can only be granted by a court upon an application by a party.

There are no specific mandatory timelines for concluding an international commercial arbitration (arbitration seated in India with one non-Indian party), but Section 29A of the Arbitration Act states that the tribunal will endeavour to conclude such proceedings within 12 months from the completion of pleadings.

Arbitration-related court proceedings are generally disposed of relatively expeditiously.

There are limited grounds to challenge a purely domestic arbitral award. The grounds available for challenging an award arising out of an international commercial arbitration are further limited, as the ground of “patent illegality” is not available.

Costs of Proceedings

Courts in India refrain from awarding actual costs, and if costs are awarded in court proceedings, they are nominal.

In arbitration proceedings, Section 31A of the Arbitration Act gives the discretion to the arbitral tribunal to award costs to a party. The Arbitration Act defines costs as fees and expenses of the arbitral tribunal and lawyers, administrative fees and any other expenses incurred in connection with the arbitration proceedings. The costs awarded are typically “reasonable costs” as opposed to actual costs.

Indian courts generally strictly enforce arbitration clauses. This position holds true for insurance and reinsurance contracts as well.

The principle of party autonomy has been re-affirmed by the Supreme Court in a number of cases, and the scope of interference with foreign-seated arbitrations is extremely limited.

In a recent landmark judgment, the Supreme Court considered the enforceability of an arbitration agreement in an unstamped instrument. It was held that an unstamped agreement is not enforceable in law and that the arbitration clause contained therein would also not be enforceable in law.

The Supreme Court has also ruled in favour of party autonomy and held that parties have the right to have their dispute(s) decided in accordance with institutional rules, which can include an emergency arbitrator delivering interim orders, where such awards would be, generally speaking, enforceable by the courts in India.

India is subject to the New York Convention as well as the Geneva Convention. Enforcement of an arbitral award rendered in a recognised jurisdiction is governed by Part II of the Arbitration Act.

The party applying for enforcement of a foreign award is required to produce, as evidence:

• the original award or a duly authenticated copy of the award;
• the original arbitration agreement or a duly certified copy of the same; and
• such other evidence as is necessary to prove that it is a foreign award.

Refusal to Enforce a Foreign Award

Enforcement of a foreign award may be refused on any of the following grounds (among others):

• a party to the arbitration is under some incapacity or the arbitration agreement is not valid under the law to which the parties have subjected it or under the law of the country where the award was made;
• no proper notice of the appointment of an arbitrator or of the arbitration proceedings was served, or a party was otherwise unable to present its case;
• the arbitral award is beyond the scope of the arbitration agreement;
• the composition of the arbitral tribunal was not in accordance with the parties’ agreement or the law of the country where the arbitration took place;
• the award has not yet become binding on the parties, or has been set aside or suspended at the seat of the arbitration;
• the subject matter of the arbitration is not arbitrable under the law of India; and
• the enforcement of the award would be contrary to the public policy of India.

Most commercial general insurance contracts typically have a standard arbitration clause where any dispute on quantum, liability having been admitted, can be referred to arbitration. Under such limited arbitration clauses, the insured would be precluded from arbitrating disputes where the claim has been rejected in entirety as not being covered under the policy or the policy has been repudiated. However, the insured may also choose to approach the consumer forum (if applicable), which is a summary procedure, or the relevant civil/commercial court.

The Supreme Court has recently settled the question of whether corporate insureds can be considered as “consumers” under the Consumer Protection Act 1986 (the “Consumer Act 1986”). The Supreme Court held that since insurance contracts are contracts of indemnity there exists no element of profit generation and therefore insurance disputes come within the purview of the Consumer Act 1986.

Applicable Rules

The arbitration clauses must be standardised and the arbitration is governed by the provisions of the Arbitration Act, including in relation to the procedural rules for conducting the arbitration. That being said, an arbitrator/arbitral tribunal, with the consent of the parties, may adopt its own procedural rules for conducting the proceedings as long as such rules are not in contravention of any non-derogable provisions of the Arbitration Act. The Arbitration Act is based on the principles of party autonomy, and the power to determine procedural rules governing the arbitration proceedings is enshrined in Section 19 of the Arbitration Act.

Challenge to an Award

Section 34 of the Arbitration Act provides a party with a right to approach a court to set aside an arbitral award. A court hearing a challenge of an award does not sit as a first appellate court over the decisions of an arbitral tribunal, and therefore, it cannot re-examine the evidence/merits to arrive at a different possible conclusion or finding.

The court’s scope of interference is limited to the grounds laid out in Section 34, which includes incapacity of a party to enter into arbitration, improper notice of arbitration, ultra vires jurisdiction, invalid composition of the arbitral tribunal, a conflict with the public policy of India, and patent illegality appearing on the face of the award. Also, by way of the amendment to the Arbitration Act in 2015, the scope of “public policy” has been narrowed down to include only those instances where:

• the making of the award is fraudulent or corrupt;
• the award is in contravention of the fundamental policy of Indian law; or
• the award is in conflict with the most basic notions of morality or justice.

The scope of interference is further restricted where an arbitral award has been passed in an international commercial arbitration, in which case the ground of “patent illegality”, which includes perversity, is not available.

An application for setting aside an award must be made before the expiry of three months from the date on which the award was received by the party concerned. The courts can entertain the application beyond three months, but within 30 days, if the party concerned is able to demonstrate sufficient cause.

The order by the court under Section 34 of the Arbitration Act can be appealed, under Section 37, to the court with the necessary jurisdiction to hear appeals from the court in question. There is no statutory right to appeal from an order passed under Section 37. However, a party may prefer a special leave petition, under Article 136 of the Constitution of India to the Supreme Court. It is at the discretion of the Supreme Court to entertain such a petition, which it does sparingly.

Under Indian law, there are a number of terms that are implied into a contract of insurance. For instance, even though a policy may not expressly say so, all contracts of insurance are of utmost good faith and insurers are entitled to a fair presentation of the risk before its inception. The duty of utmost good faith places an obligation on the insured to voluntarily disclose all material facts relevant to the risk being insured. If there has been a misrepresentation or non-disclosure of a material fact, then an insurer can avoid the policy from its inception.

Another implied term is the right of subrogation, for which there is also statutory and judicial recognition. While there may not be a need for a separate contractual clause to trigger it, in practice, policies do contain subrogation clauses. The PPI Regulations 2017 also require an insured to assist the insurer in recovery proceedings.

Insurers are entitled to a fair presentation of the risk before a policy’s inception and this entitlement is derived from the fundamental principle of insurance law that utmost good faith must be observed by the contracting parties. This forbids the insured from concealing what they privately know, with a view to drawing the insurer into a bargain based on their ignorance of that fact. Insurers can avoid the policy if there is fraud, misrepresentation or non-disclosure by the insured prior to the inception of the policy.

In the past year, the courts have addressed a significant number of insurance-related issues, particularly in relation to interpretation of insurance policies, disclosure of material facts, and repudiation of claims by insurers on grounds of non-production of documents. There has been a trend towards stricter interpretation of terms and conditions of policies. The Supreme Court has held that the terms of an insurance policy should be strictly construed, without altering the nature of the contract, as it may adversely affect the interest of the parties.

In terms of disclosure requirements for health insurance policies, the Supreme Court has held that if any query or column in a proposal form is left blank, then the insurer should ask the insured to complete it.

On the issue of overlapping insurance policies, the Supreme Court has held that a contract of insurance is one of indemnity. Double insurance is when an insured is indemnified by two or more insurers for the same risk. In instances where the insured has been fully indemnified for the loss by one insurer, the second insurer can decline the claim regarding the same incident.

Insureds in India can:

• resort to the dispute resolution mechanism set out in the policy document (usually arbitration in the context of commercial general insurance contracts); or
• approach the internal grievance redressal mechanism of the insurer, the grievance cell of the IRDAI or the insurance ombudsman under the Redress of Public Grievance Rules 1998 (depending on the nature of the grievance); or
• initiate formal legal proceedings against the insurer before the consumer protection forums or the Indian civil courts.

Reinsurance contracts are also contracts of insurance and, therefore, the position on these is the same. In fact, the CCA 2015 defines a commercial dispute as including both insurance and reinsurance over the value of INR300,000 (approximately USD3,700).

By operation of law, an insured can approach a consumer forum, inter alia, in relation to any claim against an insurer in India. This forum can be approached independently of any right that the insured may have under the policy terms, including its right to initiate arbitration proceedings.

The consumer courts follow a summary procedure, which does not usually involve detailed evidence or cross-examination of witnesses. The fee for filing a complaint before a consumer forum is also nominal, as opposed to before a civil court, where the fee is ordinarily determined based on the claim amount.

There is no equivalent law in India of the UK Third Parties (Rights Against Insurers) Act 2010. As a general rule, Indian law recognises the principle of privity of contract and consequently, a third party may not be able to bring a direct action or claim against an insurer.

That being said, it is common practice for third parties to name the defendant’s insurer in motor accident-related proceedings. The Motor Vehicles Act 1988 (MVA) provides that the rights of an insured under a policy are transferred to a third party claiming against the insured in the event of the insured’s insolvency. The MVA empowers the Motor Claims Tribunal to seek the insurers’ involvement in a third-party action against the insured if the tribunal believes the claim is collusive or if the insured fails to contest the claim. However, Section 164 of the MVA limits the insurer’s liability concerning third-party insurance with effect from 1 April 2022 in the following terms:

• in the case of death, INR500,000 (approximately USD6,200); and
• in the case of grievous hurt, INR250,000 (approximately USD3,000).

There are presently no limits on the insurer’s liability in cases of permanent disability or minor injury.

Insurance bad faith does exist in India, but it is not expressly codified. Both the insurer and the insured are required to disclose material information to each other, and insurers cannot avoid reasonably clear liability by acting in bad faith or by resorting to unfair trade practices.

There is also a separate constitutional duty on government insurers to act in a fair and reasonable manner before and after inception of the insurance policy.

The PPI Regulations 2017 prescribe the claims procedure that is required to be followed by insurers to ensure timely processing of claims. Insurers are required to pay interest at 2% above the prevalent bank rate, in cases where there is delayed payment of the claim amount. In addition to the higher rate of interest, other civil penalties can also be imposed on insurers, including damages for breach of contract, compensation for deficiency in service, etc.

The Consumer Act 2019 has also introduced a centralised agency called the Central Consumer Protection Authority (CCPA). The CCPA has wide powers, including the power to initiate investigations and impose sanctions and penalties as may be required and allowed in the circumstances.

The relationship between an insured and a broker is that of a principal and agent. An insurance broker is an agent of the insured and whether a representation made by a broker is binding or not would depend on whether the broker was authorised by the insured to make such a representation. In the absence of such authorisation, it is unlikely that representation made by the broker will be binding on the insured. It is pertinent to note that as the insured signs the proposal form, the insured must bear all the consequences arising out of the form.

The IRDAI (Outsourcing of Activities by Indian Insurers) Regulations 2017 (“Outsourcing Regulations”) permit Indian insurers to outsource activities that would usually be undertaken by the company internally, subject to the prescribed compliance requirements being fulfilled, and provided that the activities proposed to be outsourced do not fall within the ambit of the defined “core activities”. Broadly, Indian insurers are prohibited from outsourcing product design, underwriting, claim handling or actuarial functions to a third-party service provider, as these activities form a part of the company’s core functions.

In terms of delegating underwriting or claims handling to external parties, an Indian insurer is prohibited under R5 of the Outsourcing Regulations from outsourcing “decision making in underwriting and claims”.

Professional indemnity (PI), directors’ and officers’ liability (D&O), errors and omissions (E&O), employment practice liability (EPL) and cyber-liability policies are examples of the types of policies that provide cover for defence costs incurred by insureds provided that the policy terms and conditions are satisfied.

There is unlikely to be change in this area of the law in the next few years.

There is familiarity and demand for liability insurance, and over the past five years there has been a steady upward trend in claims made under PI policies. It remains the busiest claims area, followed closely by D&O. In fact, PI and D&O claims make up at least half of the total claims that this firm has seen being made under liability policies.

Not only has there been an upsurge in the frequency of claims, but there has also been a sharp increase in the quantum being claimed by the insureds under liability policies, which means that claim severity is also on the rise.

PI and D&O claims are likely to continue to make up the largest share of claims. There is also likely to be a rise in EPL – while previously claims were usually made in other jurisdictions, a number of claims have recently been made in India, with high-value settlements demanded.

The cyber-insurance sector is also seeing increasing interest and development in terms of the wording and post-claim support being offered by insurers, reflecting the increase in claim notifications and related quantum. This is specifically because of the remote working environment introduced by the COVID-19 pandemic.

An insured can avail of protection against its costs risks for third-party claims under different types of insurance policies, including PI, public liability, D&O, EPL, E&O and product liability policies.

Under the principles of subrogation, the insurer has the same right as the insured to recover a loss from the third party responsible for the loss/the wrongdoer.

Subrogation applies in all types of insurance, except life insurance and personal accident insurance. The right of subrogation has been recognised by statute under Section 79 of the Marine Insurance Act 1963 (the “Marine Insurance Act”) and case law, including Economic Transport Organization v Charan Spinning Mills Ltd ((2010) 4 SCC 114), where the Supreme Court classified subrogation into three broad categories.

Subrogation by Equitable Assignment

This is not evidenced by a document. It is based on the insurance policy and the insured receiving the claim amount. The insured cannot deny the equitable right of subrogation, even if there is no written evidence to support it.

Subrogation by Contract

This is evidenced by a document. The court recognises that insurers usually obtain a written letter of subrogation to avoid disputes about the right to claim reimbursement, or to settle the priority of claims between them or confirm the reimbursement amount under the subrogation, and to ensure the insured’s co-operation. If the insured executes a letter of subrogation, the insurer’s rights against the insured are governed by its terms.

Subrogation-cum-Assignment

The insured executes a letter of subrogation-cum-assignment. This enables the insurer to retain the entire amount recovered and sue in the name of the insured or in its own name if the letter so provides. The insured is then left with no right or interest and can no longer sue in its own name and for its own benefit.

A subrogation right cannot usually be waived. However, in some cases, the insurer and insured can agree to waive subrogation entirely, or in relation to specific individuals/entities.

The right of subrogation has been recognised by statute under Section 79 of the Marine Insurance Act and the insurer can exercise this right in the name of the insured.

Claims have been received by insurers in India where the insured has claimed for business interruption losses on account of the COVID-19 pandemic and the consequent lockdowns. However, since such policies require there to be a physical loss which, in turn, results in business interruption losses, the claims of insureds have often been rejected.

Currently, there are no authoritative rulings specific to claims of business interruption losses stemming from COVID-19 related disruptions.

As stated in 7.1 Type and Amount of Litigation, there are presently no authoritative rulings on whether the COVID-19 pandemic and/or the lockdowns would amount to a physical loss, thereby enabling the consequent claim of business interruption. It is difficult to predict, particularly given the stage of the pandemic, whether any such ruling will be available in the next 12 months.

Unlike the Financial Conduct Authority business interruption insurance test case in the UK, there has been no test case in India. However, the COVID-19 pandemic did give rise to business interruption claims under property insurance policies. In some cases, insurers have denied liability for COVID-19 notifications on the basis that material damage to property is a prerequisite for an indemnifiable claim for business interruption, and the COVID-19 pandemic did not cause any physical damage or loss to the insured property.

Due to the COVID-19 pandemic, several regulatory changes were also introduced by the insurance regulator with the aim of stabilising the insurance market and securing the protection of policyholders’ interests. In this regard, with a view to furthering the business continuity of Indian insurers and other insurance entities, and ensuring proper service to policyholders, the IRDAI issued directions on, inter alia, the handling of COVID-19 claims, extension of grace periods for premium payments, relaxation of regulatory timelines and expeditious servicing of insurance policies.

Factors such as the war in Ukraine and the pandemic have made insurers a lot more cautious about the risk they are taking. Premiums have been revised to take account of potential losses, and the coverage afforded has been under review.

The Indian insurance industry is a relatively new market compared to various global markets. As a result, the industry is still considered to be in a relatively nascent stage of development, particularly for various lines of insurance products which have recently been introduced in India. In relation to these products, the insurer’s underwriting is derived, to some extent, from global claims experience, in the absence of specific Indian claims experience.

Recently, the Indian market has witnessed an increase in the volume as well as the quantum of claims reported, due to various ESG factors. Additionally, there has been a significant increase in premiums, particularly for life and health insurance, attributed to adverse mortality and morbidity rates, experienced in large part as a result of the COVID-19 pandemic.

Broadly, the norms on data security and confidentiality in India arise from statutory law, that is, the recently notified Digital Personal Data Protection Act 2023 and the Information Technology Act 2000. In addition, certain similar norms under the Indian insurance regulatory framework are set out under the PPI Regulations 2017 and the IRDAI Guidelines on Information and Cyber Security of 24 April 2023, which essentially place an obligation on insurance companies and insurance intermediaries to maintain the confidentiality of data. However, these norms also permit disclosure of data, after obtaining consent from the data owner, and remain subject to requirements to maintain data security and other similar requirements.

Typically, in terms of market practices in India, it is understood that gaining the express consent of the customers would allow insurance companies to disclose information to concerned entities, despite the existence of the confidentiality requirements under the statutory and regulatory framework. For this purpose, it is a common practice for insurance companies to request such consent in the initial proposal forms, which are signed by the customers at the time of proposing/purchasing insurance. For capturing consent, insurance companies generally incorporate a broadly worded consent provision as part of the declaration under these forms. Thereafter, once the consent of the proposer/applicant is captured, this data is typically shared with reinsurers for their own underwriting and claim settlement purposes.

Furthermore, in terms of litigation, considering that the Indian data protection framework is in a nascent stage and the provisions set out under the current statutory framework are limited, there do not appear to have been any significant disputes of note concerning data protection in the insurance industry at the time of writing.

The Indian insurance sector is highly regulated and there have recently been many significant regulatory developments in the sector. Some of these developments are listed here.

• The IRDAI has notified the IRDAI (Payment of Commission) Regulations of 26 March 2023, in furtherance of the exposure draft with the same title issued on 23 November 2022, and it has repealed the IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations 2016.
• The IRDAI has notified the IRDAI (Expenses of Management of Insurers Transacting General or Health Insurance Business) Regulations 2023 and the IRDAI (Expenses of Management of Insurers Transacting Life Insurance Business) Regulations 2023 of 28 March 2023, in furtherance of the respective exposure drafts with the same title, and has repealed the respective regulations of 2016.
• The IRDAI has notified the IRDAI (Registration of Indian Insurance Companies) Regulations of 5 December 2022, and the Master Circular on Registration of Indian Insurance Company 2023 of 24 April 2023, which repealed the IRDAI (Registration of Indian Insurance Companies) 2000, the IRDAI (Transfer of Equity Shares of Insurance Companies) Regulations 2015 and the IRDAI (Investments by Private Equity Funds in India Insurance Companies) Guidelines 2017 of 5 December 2017. The new guidance sets out various norms in relation to the investment structures and transfer of shares norms for Indian insurance companies.
• The IRDAI has notified the Insurance Regulatory and Development Authority of India (Regulatory Sandbox) (Amendment) Regulations, 2022 of 7 December 2022, in furtherance of the exposure draft issued on 3 August 2022, to amend the IRDAI (Regulatory Sandbox) Regulations 2019.
• The IRDAI has notified the IRDAI (Insurance Intermediaries) (Amendment) Regulations, 2022 on 7 December 2022, which amend the regulations governing the registration of corporate agents and insurance marketing firms to increase the maximum number of tie-ups that are permitted with insurance companies.
• The IRDAI has issued the Guidelines on Issuance of File Reference Numbers (FRN) to Cross Border Reinsurers on 3 January 2023. These guidelines allow for auto renewal of FRN and supersede the Guidelines on Cross Border Re-insurers of 22 January 2021.
• The IRDAI has issued the Guidelines on Remuneration of Directors and Key Managerial Persons of Insurers of 30 June 2023 to bring the remuneration of other key managerial persons within its ambit.
• The IRDAI has issued the Information and Cyber Security Guidelines 2023 of 24 April 2023, which supersede the IRDAI Guidelines on Information and Cyber Security for Insurers of 7 April 2017 and various circulars issued on this subject.

• In addition, the IRDAI has also issued several exposure drafts in relation to:
1. Bima Vahak Guidelines;
2. Insurance Advertisement and Disclosure Regulations;
3. Reinsurance Amendment Regulations;
4. long-term motor products; and
5. issuance of e-insurance policies.

While the foregoing exposure drafts are at the deliberation stage and stakeholder comments have been invited, it is anticipated that new regulations and guidelines will be issued on these and other matters in the coming year.