Insurance Regulator IRDAI Eases Approval Norms for Life, Health Insurance Products


India’s insurance regulator IRDAI recently relaxed approval norms for insurance products in life and health category, by bringing them under the “Use and File” method. Under the brand new procedure, the insurance firms will now not require prior approval before launching the product. Together with fostering ease of doing business, this move can even assist in augmenting insurance penetration in India. Foreign investors must note that India has an enormous underserved insurance market, with FDI cap at 74 percent.

In a bid to enhance ease of doing business, the Insurance Regulatory and Development Authority of India (IRDAI) recently allowed insurers to supply life and medical health insurance products to customers without its prior approval. In line with the notification, IRDAI has prolonged the “Use and File” procedure to insurance firms dealing in life, and medical health insurance products and riders, which suggests that these insurers can now introduce products out there and later file updates with the regulator.

The move is envisaged to enable insurers to launch a lot of the products in a timely manner. The insurance industry is anticipated to make use of this chance for introduction of customized and modern products and expansion of the alternatives available to the policyholders with a purpose to address the dynamic needs of the market.

This move will further augment insurance penetration in India, which was 4.2 percent in FY 2021. The life insurance industry, which has captured the biggest market share in India, is anticipated to growth at a rate of 5.2 percent between 2019-2023. Further, within the non-life insurance general category, medical health insurance business is one in all  the fastest-growing segments, accounting for a 33.33 percent market share.

What’s the present process for approval within the health and life insurance segments?

Under the present “File and Use” system, an insurance firm wishing to introduce a recent product has to first file an application with the IRDAI and use the product on the market out there only after getting all regulatory approvals.

What’s the “Use and File” procedure?

Under “Use and File”, insurance firms are permitted to market products without the regulator’s prior approval, thereby avoiding the lost waiting process.

This procedure allows insurance firms to swiftly introduce recent schemes with modern features, enabling people to participate and canopy their health expenses.

What are the brand new approval norms for insurance firms?

As per the brand new norms, general and medical health insurance firms dealing in medical health insurance and life insurance firms can launch, modify or revise all categories of products and add-ons or riders within the medical health insurance business through the “Use and File” method.

Life insurance

The life insurance firms can now launch a lot of the products (except individual savings, individual pensions and annuity) before taking prior approval of the regulator. These firms will need to have a “Board Approved Product Management and Pricing Policy (BAPMPP).”

This Board shall constitute a Product Management Committee (PMC), which will need to have Appointed Actuary, Chief Risk Officer, Chief Marketing/Distribution Officer, Chief Technology Officer and Chief Compliance Officer of the insurer as members. Along with the above, the insurance company may include other members of its senior management within the PMC as members or as invitees.

The PMC shall review and approve the products/riders in accordance with BAPMPP, before filing with the Authority under the brand new procedure. The PMC shall even be answerable for carrying out due diligence to make sure compliance with regulatory requirements.

The brand new “Use and File” method might be applicable to the next products:

  • Individual non-linked pure term products
  • Individual non-linked term products with return of premium
  • Individual non-linked health products
  • Individual unit-linked products that are offered with the present approved funds only
  • Group non-linked term insurance products (including one-year renewable, single premium)
  • The next group non-linked savings insurance products:
    • Group non-linked superannuation product
    • Group non-linked gratuity product
    • Group leave encashment product
    • Group post-retirement medical product
  • Group non-linked credit life insurance products
  • Group non-linked health products
  • All riders for individual & group business, including:
    • Term rider
    • Accidental death profit rider
    • Accidental total / partial everlasting disablement rider
    • Waiver of premium rider
    • Critical illness rider
    • Terminal illness rider

Medical health insurance

Insurance firms dealing in medical health insurance products must get the approval by the Board of those products which might be to be offered, or modified. The PMC of the insurer shall ensure compliance to the policy of the board while signing of the brand new products or modification of products.

Insurance firms must file the proposed name of the product, date of approval by PMC and shall obtain the Unique Identification Number (UIN). Thereafter, they have to file the product together with relevant documents with the IRDAI inside seven days of launch of the product.

The rules also prescribe that the revision in the worth, if any, shall be effected only based on the underlying claims experience and to make the product viable and self-sustainable. Insurers shall disclose the rationale for revision in price together with the underlying claim experience) of the product that result in the revision in the worth of their website.

What if IRDAI raises concerns over such a product later?

If a customer has already taken an insurance policy launched under “Use and File”, and the IRDAI later raises concerns about it, then it will possibly initiate a means of deliberations. Meanwhile, the client will proceed to get the advantages of the policy for the primary 12 months, and if the insurance company makes amendments in keeping with regulator’s apprehensions, the client will still get these renewed advantages.

Nevertheless, if the policy is withdrawn consequently of IRDAI’s intervention, the product will now not be available for renewal within the second 12 months. In such a scenario, the insurance company may provide the policyholder with similar options from its existing policies, and the client may conform to taking one.

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