Now, life insurers can introduce products without Irdai's prior approval

Currently, all life insurance products and riders require prior approval of the insurance regulator before launch

The Insurance Regulatory and Development Authority of India (Irdai) has expanded the scope of ‘use & file procedure’ to most of the life insurance products, barring individual savings, individual pensions, and annuity products. This means life insurance companies can launch these products without prior approval of the insurance regulator.

Currently, all life insurance products and riders require Irdai’s prior approval before launch but some modifications are allowed to be carried out through “use & file” procedure.

The move is in line with the reform agenda of Irdai’s new Chairman Debashish Panda. In an interaction with industry players in early April, Panda had highlighted that one of the much-needed changes the regulator intends to bring in includes revamping the product certification process wherein the players will be able to follow the system of “use and file” rather than “file and use”.

“In order to facilitate the life insurance industry to respond faster to the emerging market needs, in terms of designing and pricing of insurance products and to promote ease of doing business, it is decided to expand the scope of “Use & File” procedure for life insurance products,” Irdai said in a circular on Friday.

According to the insurance regulator, when the industry was at a nascent stage, it made sense to get the regulator’s prior approval before launching a product. However, now that the industry has matured, the insurers should be allowed to file products without any prior approval.

“The life insurance industry is expected to use this opportunity to respond faster to the emerging market needs, in terms of designing and pricing of insurance products resulting in more choices for the policyholders, which will further help in increasing the insurance penetration in India,” the regulator said in a press statement.

“The Irdai has allowed some products, such as term, individual unit-linked, and health products, to be filed under the ‘use & file’ procedure compared to the current norm where every product has to go through an approval process. This will certainly cut down the time taken to launch products. Currently, on an average, it takes a few months to get a product approved from the regulator,” said Srinivasan Parthasarathy, chief actuary, HDFC Life.  

Parthasarathy, however, said the circular did not allow the “use & file” procedure for individual traditional savings products, participating products, annuity products, and for some reason, group unit-linked products. “Once the regulator gets the comfort that the freedom given to the industry is being used judiciously, other products may also be allowed under “use & file “procedure. Having said that, I believe, they could have allowed annuity products under this procedure,” he said. 

Rushabh Gandhi, deputy CEO of IndiaFirst Life Insurance, said the move would trend well with the developmental work being done by the regulator. “Currently, on the individual side, only pure protection and select-linked policies are within scope. With time, we are confident that the regulator will extend the scope to individual par and non-par savings plans,” Gandhi said.

To enjoy the benefits of the “use & file”, the life insurance companies will now need to have a board-approved product management and pricing policy. The insurers’ board will have to constitute a product management committee, which will have an appointed actuary, chief risk officer, chief marketing/distribution officer, chief technology officer, and chief compliance officer as members. Further, insurers may include other members of its senior management in the PMC as members or as invitees.

The committee will ensure that the benefits reflecting in sales literature, terms and conditions reflecting in policy documents will be consistent with the design approved, the regulator said.

Further, the committee will also be tasked with carrying out a due diligence process on products and record their concurrence on various product related risks. The chief executive officer of an insurer will ensure that a robust due diligence process is in place to mitigate risks arising from the products.

“This has been a long-standing demand and I believe this will provide insurers with a lot more flexibility and agility when it comes to introducing newer products to the market. However, the onus will be on the insurers to be more responsible and judicious while launching new products and do proper due diligence,” said Vignesh Shahane, MD and CEO, Ageas Federal Life Insurance.

FREEDOM FOR INSURERS

• Use & file allowed for all health insurance products & almost all general insurance products

• This is in line with the reform agenda of the new Irdai Chairman Debasish Panda

• Irdai believes insurance industry has matured and doesn’t need to take prior approval for products

• Insurers say this reduce the time to launch products in the market

• Typically, it takes about 4-6 months to get product approvals for life insurers

• Onus will be on insurers to be more responsible and judicious while launching new products