Irdai clears way for life insurers to launch products without prior approval

Insurance regulator Irdai on Friday extended the ‘use and file’ procedure for the most of the life insurance products, allowing the life insurance companies to launch new products without its prior approvals.

This regulator’s measure will be “streamlining” the process for life insurers of issuing new products, except for a few like individual savings, individual pensions and annuity, in the market as it will reduce time to market, according to analysts.

Issuing a circular on the ‘Use & File procedure’, Irdai said the country’s 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.

This circular will come into force with immediate effect. For the use and file procedure for products launching into the market, insurance companies will have to adopt a board-approved product management and pricing policy (BAPMPP). The board will also constitute a product management committee (PMC), which will have an appointed actuary, chief risk officer, chief marketing/distribution officer, chief technology officer and chief compliance officer of the insurer as members and also an option to include other members of its senior management as invitees. “The PMC shall review and approve the products/riders in line with BAPMPP,” Irdai said. Irdai’s move on Friday came after the similar relaxations were extended to all the health insurance products and almost all the general insurance products by it vide a circular dated June 1.

According to industry analysts and observers, earlier it took around two-three months on an average for an life insurance product to get approved by the regulator, depending on the product category and insurance companies which file the product.

According to Krishnan Sitaraman, senior director & deputy chief ratings officer, Crisil Ratings, “Previously, for every product, life insurance companies would have to file it with Irdai for prior approval before launching it. And after its approval, they could go to the market with the product. Now, they can directly launch new products, except for a few like individual savings, individual pensions and annuity.”

Sitaraman said in the revised dispensation, for launching a new products directly, an insurance company will need to have in place a structured internal process that includes a product management committee constituted by its board which will be reviewing and approving the product. “Once that process is adhered to, the company can go ahead with launching the product. After launching the product, the insurance company will have to file it with Irdai,” he said.

“Today’s move by Irdai will provide more flexibility to insurance companies to be quick to the market with their products. This was also a demand from insurance companies that they should have this kind of a facility so that they can introduce innovative products frequently. This is a market friendly step I would say from the regulator and one which was extended to non-life insurers a few days back,” Sitaraman told FE.

“This announcement will increase efficiency in new launches by streamlining the process for insurance companies of issuing new products in the market. It will reduce time to market. India is an under penetrated market on the insurance front. This measure can help support market penetration to an extent,” Sitaraman averred.

He, however, said it will be too early to come to the conclusion whether this measure will increase growth in the sector as decisions like new product launches will typically be driven by fundamental reasons like customer needs rather than the time taken for regulatory approvals.

Srinivasan Parthasarathy, chief actuary, HDFC Life Insurance, said this is a welcome move of Irdai. “We believe this will certainly reduce the time taken for launching life insurance products. Earlier, the process took a few months. Following this procedure, it can be done within a few days. Individual unit-linked, health and term insurance products are allowed to be filed under the ‘use & file’ procedure, ensuring adherence to the existing regulations,” Parthasarathy said, adding considering the “judicious use of this process over time”, the company hopes that the regulator will extend it to other life insurance product categories as well.”The penetration of life insurance is very low in India, compared to that of matured markets. Providing simple and customisable products, easy-to-use platforms and superior service facilities will go a long way in financially securing a bigger portion of our population,” he added.