Irdai extends 'Use & File' procedure to health and general insurance plans

Currently, insurance companies have to obtain prior approval from the insurance regulator to launch new products

In a bid to empower insurance companies to respond to the emerging market needs in terms of products, the Insurance Regulatory and Development Authority of India (Irdai) on Wednesday extended the “Use and File” procedure to all health insurance products and most general insurance products under, fire, motor, marine, and engineering.

Currently, insurance firms have to obtain prior approval from the insurance regulator to launch new products. “This is a stepping stone towards improving the ease of doing business in the insurance sector by moving from the current regime requiring prior approval for launching the products to a regime where products could be launched without any prior approval”, Irdai said in a statement.

Irdai chairman Debashish Panda had earlier suggested in his interaction with the industry players that the insurance regulator intends to revamp the product certification process wherein the players will be able to follow the system of “use and file” rather than “file and use”.

To this effect, the insurance regulator released two circulars on Wednesday.

One of the circulars allowed all categories of products and add-ons or riders that are be introduced or modified under health insurance business and offered by general and health insurance companies can be launched through the “Use and File” procedure, provided that insurers have in place a board approved policy of products that are to be offered or modified / revised.

“Insurers shall ensure that the product pricing is viable, self-sustainable and affordable to the targeted market. The revision in the price, if any, shall be effected only based on the underlying claims experience (Incurred Claims Ratio) and to make the product viable and self-sustainable. Insurers shall disclose the rationale for revision in price along with the underlying claim experience (Incurred Claims Ratio) of the product that lead to the revision in the price in their website”, the Irdai said.

The second circular permitted general insurers to file all products under Fire, Marine, Motor and Engineering lines of business under “Use and File” procedure for both retail and commercial categories.  However, the retail products of miscellaneous lines of business having initial sum insured upto Rs 5 crores would be continued to be filed with the regulator under the “File and Use” procedure.

“It is envisaged that these initiatives will enable the insurance industry in launching suitable products in a timely manner”, Irdai said in a release. The insurance industry is expected to use this opportunity for introduction of customized and innovative products, expansion of the choices available to the policyholders in order to address the dynamic needs of the market, which will further help in enhancing the insurance penetration in India, it added.