RBI Grade BNABARD ESISEBI
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Context: IRDAI’s action against life and non-life insurers for breaching Expense of Management (EoM) limits signals that the regulator is serious about bringing operating and distribution costs within prescribed limits.
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What Happened
IRDAI barred four insurers from opening new places of business for six months, after they breached the regulator-mandated EoM limits for 2024-25:
- Edelweiss Life Insurance
- Pramerica Life Insurance
- ACKO General Insurance
- Niva Bupa Health Insurance
What is Expense of Management?
- EoM is the total of an insurer’s operating expenses and distribution costs — salaries, office costs, marketing, and crucially commissions paid to agents and brokers.
- IRDAI caps EoM as a percentage of premium.
- Why the cap exists. Every rupee an insurer spends on running itself is a rupee not available for paying claims or for reducing premiums. A regulator that lets expenses run unchecked ends up with policyholders paying more for less.
- As a senior private sector insurance official put it, bringing costs within limits frees up more funds for claims and improves affordability.
