Insurance Contracts: Decoding the special case of partial implementation of Insurance Accounting Standard Ind AS 117 in India

Abstract

Insurance contracts globally are accounted for as per IFRS 17 and in India the equivalent accounting standard is Ind AS 117, which represents a significant transformation in accounting for insurance contracts. Accounting for insurance contracts is applicable not only for insurance companies but also for non-insurance companies (as they also may have insurance contracts). However, the implementation of Ind AS 117 was initially notified for all companies in August 2024 as being effective from April 1, 2024 but subsequently on September 28, 2024, it was deferred only for insurance companies (to April 1, 2027). Interestingly, it was still made effective for non-Insurance companies (for their insurance contracts). The existing (global) research studies the issues around implementation of IFRS 17 globally but there is very little, if any, study on Indian scenario partly because it is a new standard. This paper fills the research gap by being (one of the) first paper to study the Indian scenario on partial implementation of Ind AS 117. The study employed 144 respondents for primary data survey, which included 72 responses from 12 insurance companies and 72 responses from 25 non-insurance companies. Using appropriate statistical and econometric tools, I find that the decision to defer the implementation for insurance companies was primarily because of operative complexity, unavailability of data, actuarial readiness, restrictions in IT framework and level of industry preparedness. For non-insurance companies, I find that Ind AS 117 requires accounting judgements, changes in accounting basis and raises disclosure requirements and compliance costs.