Life insurance companies will now have the freedom to launch a wide range of products without the prior approval of the Insurance Regulatory and Development Authority of India (IRDAI).
Close on the heels of the ‘use-and-file’ policy for general insurance products, the insurance regulator has now extended this framework to life insurance policies as well. From insurers’ perspective, this move will facilitate quicker launch of products.
“It is a step in the right direction. It’s been one of the long-standing demands of the life insurance industry. The move will add a lot of agility and flexibility to life insurers’ product design and launch processes. The erstwhile product approval process was time-consuming,” said Vighnesh Shahane, MD and CEO, Ageas Federal Life Insurance.
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IRDAI believes this will help deepen insurance penetration in the country. “This move will enable life insurers to launch most of the products (except individual savings, individual pensions and annuity) in a timely manner according to the dynamic needs of the market. This will result in improving ease of doing business for insurers and also lead to expansion of choices available to policyholders,” the circular said.
Since taking over as the IRDAI chairman in March, Debashish Panda has underscored his intention to ease the compliance burden for the insurance industry. The latest move is part of the series of proposals being considered since March. “This progressive step by IRDAI will give a boost to the life insurance industry. It will enable us to offer innovative solutions to our customers with speed and agility, and help drive penetration of life insurance in the country,” a Max Life Insurance statement said.
Also read: IRDAI Chairman Debashish Panda rolls out the roadmap for reforms in the insurance industry
Product launch without prior approval
Under the framework, life insurers will now be able to launch individual and group pure term insurance, individual return-of-term insurance policies, unit-linked insurance policies with already approved fund options, non-linked health policies, group non-linked superannuation, credit life, gratuity products and so on . In addition, they can also launch riders, or add-ons, such as accidental death benefit, accidental total/partial permanent disablement and critical illness riders in the market and file the products with IRDAI later.
“In case of introduction of a new product/rider replacing an existing similar product/rider, the premium rates and benefits of the new product/rider shall be reasonable and fair…All options shall be easily explainable to prospective policyholders,” the IRDAI circular said.
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Insurers’ responsibilities
Life insurance companies will have to put in place a Board-approved product management and pricing policy (BAPMPP) and constitute a product management committee (PMC) comprising its Appointed Actuary, chief risk officer and chief compliance officer, among other as its members.
“The onus will now be on the industry to be more judicious and responsible while filing products. Insurers will have to ensure that protocols are maintained. For policyholders, this could lead to more customised and personalised products,” said Shahane. The PMC will be responsible for reviewing and approving the products, riders or modifications to existing products before filing them with the insurance regulator.
“The product approval process has been simplified. Insurers are responsible for new products and need to just inform the IRDAI after launch. It has specified the boundaries or principles for all products so that policyholder interests are not compromised. I think this will result in many new life products and variants being introduced,” said Kapil Mehta, Co-Founder, SecureNow Insurance Brokers.
IRDAI requires insurers to ensure that the premium rates, charges, and other terms and conditions are workable, reasonable, and fair. However, since these policies would not have passed through stringent scrutiny, policyholders would do well to go through terms and conditions more carefully while buying products instead of leaving paperwork to intermediaries.
