Significant Accounting Policies
Basis of Preparation of Financial Statements
The accompanying financial statements are prepared and presented under the historical cost convention,
unless otherwise stated, and on accrual basis of accounting, in accordance with accounting principles
generally accepted in India (Indian GAAP).
The Company has prepared in accordance with the requirement of the Insurance Act, 1938, as amended
(the "Insurance Act") read with the Insurance Regulatory and Development Authority Act, 1999 (the "IRDAI
Act"), the Insurance Regulatory and Development Authority of India (Actuarial, Finance and Investment
Functions of Insurers) Regulations, 2024 (the "Regulations”), the regulation/orders/directions/circulars/
guidelines issued by the Insurance Regulatory and Development Authority of India (the "IRDAI") and
the Companies Act, 2013 as amended (the "Act”), in this regard and in accordance with the accounting
principles generally accepted in India, including the Accounting Standards specified under section 133 of
the Act read with the Companies (Accounting Standards) Rules, 2021 specified under section 133 of the
Act to the extent applicable and in the manner so required.
The financial statements are presented in Indian rupees rounded off to the nearest lakhs.
Use of Estimates
The preparation of financial statements in conformity with Indian GAAP requires the management to make
judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these
estimates are based on the management’s best knowledge of current events and actions, Management
believes that the estimated used in the preparation of financial statements are prudent and reasonable
uncertainty about these assumptions and estimates could result in the outcomes requiring a material
adjustment to the carrying amounts of assets or liabilities in future periods. Actual results may differ from
the estimates and assumption and any revision to accounting estimates is recognized in the period in
which they actually materialize.
Revenue Recognition
i. Premium Income
Premium (net of "Goods and Services Tax”) is recognized as income on the commencement of risk
after adjusting for unearned premium (unexpired risk). Any subsequent revision or cancellation of
premiums are accounted for in the period in which they occur.
With effect from October 1, 2024 for long term products, Premium for a Long-Term policy if collected
at the time of sale of the policy, for the entire Policy Duration or for any duration exceeding 12 months,
is recognized on a yearly basis. In other words, the Gross Written Premium reported for Financial Year
is the total Gross Written Premium due for the Long-Term Policy multiplied by '1/n’, where 'n’ is the
Policy Duration. Any excess amount collected is treated as Advance Premium.
Unearned Premium Reserve
Unearned Premium Reserve (UPR) means an amount representing that part of the premium
written (net of reinsurance ceded) which is attributable and to be allocated to the succeeding
accounting periods. In accordance with Insurance Regulatory and Development Authority of India
(Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024 reserve for unexpired
is calculated at 50% of the net premium of preceding twelve months.
Premium Deficiency
Premium Deficiency Reserve is recognized at the Company level. The reserve held in excess of the
unearned premium reserve, which allows for any expectation that the unearned premium reserve
will be insufficient to cover the cost of claims and related expenses incurred during the period
of unexpired risk. Assessment of expected claim cost and related expenses is certified by the
Appointed Actuary in accordance with the Insurance Regulatory and Development Authority of
India (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024.
ii. Reinsurance ceded
Reinsurance premium ceded is accounted in the period in which the risk commences and over the
period of risk in accordance with the treaty arrangement with the reinsurers. Any subsequent revision
to, refunds or cancellations of premium are recognized in the period in which they occur.
iii. Commission on Reinsurance Premium
Commission received on reinsurance ceded is recognized as income in the period in which reinsurance
premium is ceded. Profit commission under re-insurance treaties, wherever applicable, is recognized in
the period of final determination of the profits and as intimated by Reinsurer.
iv. Interest / Dividend Income
Interest income is recognized on accrual basis. Dividend income is recognized when the right to
receive the dividend is established.
v. Premium/discount on purchase of investments
Accretion of discount and amortization of premium relating to debt securities is recognized over the
holding/maturity period on a constant yield to maturity method. However, in case of securities with
put/call option, the accretion of discount or amortization of premium is recognized till the date of such
call/put option instead of maturity period of security.
vi. Profit/Loss on Sale/Redemption of Investments
Profit and Loss on sale/redemption of investments, being the difference between sale consideration/
redemption values and carrying value of investments (i.e. weighted average value) is credited or
charged to Revenue or/and Profit and Loss account as applicable.
The profit/loss on sale of mutual funds/equity/alternative investment funds include accumulated
changes in the fair value previously recognized in 'Fair Value Change Account’ in respect of a particular
security. Sale consideration for the purpose of realized gain/loss is net of brokerage and taxes, if any,
and excludes interest received on sale.
Acquisition Cost of Insurance Contracts
Acquisition costs are those costs that vary with, and are primarily related to the acquisition of new and
renewal of insurance contracts viz. commission, policy issue expenses, etc. These costs are expensed in the
period in which they are incurred.
Premium received in advance
Premium received in advance represents premium received in respect of those policies issued during the
period where the risk commences subsequent to the balance sheet date.
Claims/Benefits Incurred
Claims incurred comprises of claims/benefits paid, change in estimated liability for outstanding
claims, change in estimated liability for claims incurred but not reported (IBNR) and claims incurred
but not enough reported (IBNER) and specific settlement costs comprising legal and other directly
attributable expenses.
Provision is made for estimated value of outstanding claims/benefits at the Balance Sheet date net of
claims recoverable from reinsurance. Such provision is made on the basis of the ultimate amounts that are
likely to be paid on each claim/benefits, established by the management in light of past experience and
progressively modified for changes as appropriate, on availability of further information and include claim
settlement costs likely to be incurred to settle outstanding claims.
Claims/benefits (net of amounts receivable from reinsurers/coinsurers) are recognized on the date of
intimation based on estimates from insured in the respective revenue accounts
IBNR and IBNER
The estimated liability for claims incurred but not reported (IBNR) and claims incurred but not enough
reported (IBNER) is estimated by the Appointed Actuary in compliance with guidelines issued by
IRDAI vide circular No. IRDAI/ACTL/CIR/MISC/80/05/2024 dated May 17, 2024 and the Insurance
Regulatory and Development Authority of India (Actuarial, Finance and Investment Functions of
Insurers) Regulations, 2024 with applicable provisions of Actuarial Practice Standards 21 issued by the
Institute of Actuaries of India. The Appointed Actuary uses generally accepted actuarial methods for
each product category as considered appropriate depending upon the availability of past data.
IBNR reserves are provisions for claims that may have been incurred during the accounting period but
have not been reported or claimed. The IBNR provision also includes provision, for claims that have
been incurred but are not enough reported (IBNER). The provision for IBNR and IBNER is based on
actuarial estimate duly certified by the Appointed Actuary of the Company.
Provision is made for estimated value of claims which have not been reported to the Company at the
Balance Sheet date net of reinsurance, and other recoveries. Such provision is made on the basis of
the ultimate amounts that are likely to be paid on each claim, established by the management in light
of past experience and progressively modified for changes as appropriate, on availability of further
information and include claim settlement costs likely to be incurred to settle outstanding claims.
Allocation of Investment Income: segregation between Policyholders and Shareholders funds
Investment income earned on policyholders’ investments funds at Balance Sheet date have been credited
to Revenue Account and Investment income earned on shareholders’ investments funds at balance sheet
date have been credited to Profit & Loss Account.
Investment income which is not directly identifiable has been allocated on the basis of the ratio of directly
attributable investment income earned on shareholders’ investments funds and policyholders’ investments
funds on the basis of actual investment holdings bifurcated according to the IRDAI vide circular No. IRDAI/
ACTL/CIR/MISC/80/05/2024 dated May 17, 2024.
Investment income across segments within the Revenue account has also been allocated on the basis of
segment-wise gross written premium.
Investments
Investments are made and accounted for in accordance with the Insurance Act, 1938, the Insurance
Regulatory and Development Authority of India (Actuarial, Finance and Investment Functions of Insurers)
Regulations, 2024 as amended and various other circulars/notifications issued by the IRDAI in this context
from time to time.
Investments are recorded at cost including acquisition charges (such as brokerage, transfer charges etc.) if
any and exclude interest accrued up to the date of purchase.
Debt securities, including Government securities are considered as 'held to maturity’ and accordingly
stated at historical cost subject to amortization of premium or accretion of discount on constant
yield to maturity basis in the Revenue Account and in the Profit and Loss Account over the period
of maturity/holding.
Classification:
Investments maturing within twelve months from Balance Sheet date and investments made with
the specific intention to dispose off within twelve months from Balance Sheet date are classified
as short-term investments. Investments other than short term investments are classified as long
term investments.
The investments funds are segregated into Policyholders’ and Shareholders’ fund on security level basis
in compliance with circular no. IRDAI/ACTL/CIR/MISC/80/05/2024 dated May 17, 2024 to "bifurcate
the Policyholders’ and Shareholders’ funds at the end of each quarter at the "fund level” on "notional
basis". The Company continues to follow the practice of segregating investments into Policyholders’
and Shareholders funds at the end of each quarter at the "fund level” on "notional basis".
Listed and Unlisted securities
Listed equity/ETF’s/InvITs and actively traded securities are stated at fair value as at the Balance Sheet
date being the last quoted closing price of the National Stock Exchange ("NSE") and in case of not
being listed in NSE, the fair value shall be the last quoted closing price of Bombay Stock Exchange
("BSE"). Unrealized gain/losses due to change in fair value of listed securities is credited/debited to
'Fair Value Change Account’.
Unlisted Securities are stated at cost. The realized gain or loss on the listed and actively traded
securities and mutual funds is the difference between the sale consideration and the weighted average
cost as on the date of sale, includes the accumulated changes in the fair value previously taken to
the fair value change account, in respect of the particular security; such loss or gain is transferred to
Revenue account or/and Profit and Loss Account as applicable on the trade date.
Investments in units of Mutual funds are valued at Net Asset Value (NAV) as at Balance Sheet date.
Unrealized gains/losses are credited/debited to the 'Fair Value Change Account’.
AIFs are valued based on the most recent available Net Asset Value (NAV).
Investment Impairment Policy
The Company assesses at each balance sheet date whether any impairment has occurred in respect of
investments. The impairment loss if any, is recognized in the profit and loss account and the carrying
value of such investment is reduced to its recoverable value. If on the assessment at the balance sheet
date a previously impaired loss no longer exists, then such loss is reversed to the Profit and Loss
Account and the investment is restated to that extent.
Fair Value Change Account
'Fair Value Change Account’ represents unrealized gains or losses due to change in fair value of traded
securities and mutual fund units outstanding at the close of the period. The balance in the account
is considered as a component of policyholder’s fund and shareholder’s funds respectively basis on
mutual fund mapped and not available for distribution as dividend. As per the IRDAI circular no. IRDAI/
ACTL/CIR/MISC/80/05/2024 dated May 17, 2024 fair value changes has been bifurcated between
shareholder and policyholder.
Fixed Assets and Depreciation
Tangible assets and depreciation
Fixed assets are stated at cost of acquisition (including incidental expenses relating to acquisition and
installation of assets) and expenses directly attributable to bringing the asset to its working condition
for its intended use, less accumulated depreciation and impairment of assets, if any.
Subsequent expenditure incurred on tangible assets is expensed out except where such expenditure
results in an increase in future benefits from the existing assets beyond its previously assessed
standard of performance.
Depreciation on tangible fixed assets has been provided on the straight-line method as per the useful
life prescribed in Schedule II to the Companies Act, 2013, except in respect of the following categories
of assets, in whose case the life of the assets has been assessed as under, taking into account the
nature of the asset, the estimated usage of the asset, the operating conditions of the asset and past
history of replacement.
All assets including intangibles individually costing up to W 5,000 are fully depreciated/amortized in
the period in which they are acquired.
Leasehold Improvements are depreciated over the lease period.
The residual values, useful lives and methods of depreciation of fixed assets are reviewed at each
financial year end and adjusted prospectively, if appropriate.
Intangibles assets and amortization
Intangible assets comprising software are stated at cost less amortization. Significant expenditure
on improvements to software are capitalized when it is probable that such expenditure will enable
the asset to generate future economic benefits in excess of its originally assessed standards of
performance and such expenditure can be measured and attributed to the asset reliably. Subsequent
expenditures are amortized over the remaining useful life of original software. Software’s are amortized
using straight line method over a period of four years from the date of being ready to use.
Intangibles (including software) are amortized over a period of 4 years on pro-rata basis with reference
to the date of purchase/discard, being the management’s estimate of the useful life of such intangibles.
Capital work in progress
Capital work-in-progress includes assets not ready for the intended use and are carried at cost,
comprising direct cost and related incidental expenses.
Impairment of assets
The carrying values of assets forming part of any cash generating units at Balance Sheet date are
reviewed for impairment at each Balance Sheet date. If any indication for such impairment exists, the
recoverable amounts of those assets are estimated and impairment loss is recognized, if the carrying
amount of those assets exceeds their recoverable amount. The recoverable amount is the greater of
the net selling price and their value in use. Value in use is arrived at by discounting the estimated future
cash flows to their present value based on appropriate discount factor. If at the Balance Sheet date
there is any indication that a previously assessed impairment loss no longer exists, then such loss is
reversed and the asset is restated to that extent.
After impairment, depreciation is provided on the revised carrying amount of the asset over its
remaining useful life, if any.
Taxation
Income tax expense comprises current tax (i.e. amount of tax payable on the taxable income for the period
determined in accordance with the Income-tax Act, 1961), and deferred tax charge or credit (reflecting
the tax effects of timing differences between the accounting income and taxable income for the period)
Current income tax is the amount expected to be paid to the tax authorities in accordance with the
provisions of the Income Tax Act, 1961.
In accordance with the recommendations contained in guidance note issued by the Institute of Chartered
Accountants of India, Minimum Alternate Tax ('MAT’) credit if applicable is recognised as an asset to the
extent there is convincing evidence that the Company will pay normal income tax in future by way of a
credit to the profit and loss account and shown as MAT credit entitlement. However the Company has
opted for new tax regime u/s 115BAA in the income tax act 1961, hence provisions of Minimum alternative
tax are not applicable.
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the
Balance sheet date. Deferred tax assets are recognized only to an extent that there is reasonable certainty
that sufficient future taxable income will be available against which such deferred tax assets can be
realized. If the Company has unabsorbed depreciation or carry forward tax losses, deferred tax assets are
recognized only if there is virtual certainty supported by convincing evidence that such deferred tax assets
can be realized against future taxable profits.
The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-
down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain
or virtually certain, as the case may be, that sufficient future taxable income will be available against
which deferred tax asset can be realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, that sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset if the enterprise has a legally enforceable right to
set off assets against liabilities representing current tax; and deferred tax assets and deferred tax liabilities
relate to same taxation authorities having same taxation governing laws.
Employees’ benefits have been recognized in accordance with the relevant provisions of the Accounting
Standard 15.
i. Short Term Employee Benefits:
All employee benefits payable within 12 months of rendering the services are classified as short term
employee benefits. Benefits such as salaries, bonus and other short term benefits are recognized in the
period which the employee rendered the services. All short term employee benefits are accounted on
undiscounted basis.
ii. Long Term Employee Benefits:
The Company has both defined contribution and defined benefit plan. The plans are financed by the
Company and in the case of some defined contribution plans, by the Company along with the employee.
a) Defined Contribution Plan
The Company makes monthly contributions to the "Employees' Provident Fund Organisation
(EPFO) India” which is based on a specified percentage of the covered employees’ salary. The
Company’s contribution thereto is charged to Revenue Account or Profit and Loss Account
as applicable.
b) Defined Benefit Plans
i. The liability in respect of Gratuity is provided for on the basis of an actuarial valuation carried
out at the year-end using the Projected Unit Credit Method. Actuarial gain and loss are
recognized in full in the Revenue Account or/and Profit and Loss Account as applicable for the
period in which they occur. The Company has a recognized Trust for Gratuity benefits, "Max
Bupa Health Insurance Ltd Employees’ Group Gratuity Fund” to administer the Gratuity funds.
The Trust has taken master policy with the Axis Max Life Insurance Limited (formerly known
as Max Life Insurance Company Limited) to cover its liabilities towards employees’ Gratuity.
The Gratuity obligation recognized in the Balance Sheet represents the present value of the
defined benefit obligation as adjusted for unrecognized past service cost and as reduced by
the fair value of the gratuity fund.
ii. The liability in respect of long term accumulating leave encashment is provided for on the basis
of actuarial valuation carried out at the year end for long term compensated absences using
Projected Unit Credit Method. Actuarial gains and losses are recognized in full in the Revenue
Account or/and Profit and Loss Account, as applicable for the period in which they occur.
Short term compensated absences are provided for based on estimates. Non-accumulated
compensated absences are accounted for as and when availed / encashed.
Further in the valuation of leave encashment, actuary has considered the Last-in-first-out
(LIFO) basis to arrive at availment ratio for consumption of leaves expected in the future from
the accrued balances. No assumptions pertaining to in-service encashment are considered for
the valuation.
iii. Deferred compensation, which is a long term employee benefit, is provided for based on
the independent actuarial valuation carried out as at the Balance Sheet date and charged
to Revenue Account or Profit and Loss Account, as applicable based on services rendered
by employees.
Stock options are granted to eligible employees under "Employee Stock Option Plan 2020 (ESOP
2020)” in the financials year 2020-21 effective from June 01, 2020 and "Employee Stock Option
Plan - 2024 (ESOP 2024)” in the financial year 2023-24 effective from December 13, 2023. The
mode of settlement of the scheme is through equity shares of the Company. The options so
granted are accounted for based on intrinsic value basis in accordance with the 'Guidance Note on
Accounting for Employee Share based Payments’, issued by the Institute of Chartered Accountants
of India ("ICAI”). Intrinsic value of option is the difference between fair value of the underlying
stock and the exercise price on the date of grant, which is amortized over the vesting period with a
charge to the Revenue Account or Profit and Loss Account.
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