The Insurance Regulatory and Development Authority of India (IRDAI) vide circular dated June 10, 2022, permitted life insurance companies to introduce products without taking prior permission (use-and-file) from IRDAI. The regulator had extended the same relaxation of the ‘use-and-file’ procedure to health and general insurance companies vide a circular dated 01.06.2022. Thus, the insurance companies can now launch products in the market and later file updates with the regulator.
“Earlier when the industry was in its nascent stage, it was made mandatory for the insurance companies to take prior approval before launching any life insurance product; however, with the maturity attained by the industry, it is envisaged that necessary relaxations may be allowed,” the insurance regulator said. 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 the ease of doing business for the insurers and also lead to expansion of the choices available to the policyholders, the IRDAI said.
“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,” the circular said.
Before introducing the new product, the life insurers are expected to have a Board approved product management and pricing policy (BAPMPP), in terms of the new regulations. “The Board shall also constitute a Product Management Committee (PMC), which shall have 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 and the PMC shall review and approve the products/riders in line with BAPMPP”, the circular said.
In a circular of the same date, the regulator specified certain conditions to be fulfilled for a new product or rider which are as under.
- 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.
- The number of options/variants offered under the product shall be reasonable. All options shall be easily explainable to prospective policyholders. Policyholders shall not be offered any overlapping benefits.
- For individual unit-linked insurance products (ULIPs), the expected Unit Fund value at Maturity shall be at least 90% of the total premium paid at 4% gross yield on the Unit Fund after allowing for all the deductions under the policy, including underwriting loadings if any.
- The mortality rate assumption used for the mortality charge shall be consistent with that used for for-profit testing of the product.
- For pure risk premium products with the return of premiums, Surrender Value shall follow a smooth progression and shall be close to the guaranteed maturity value towards the end of the policy term.
- For limited pay/single pay products: Benefits payable on surrender of the policy shall be reasonable and fair.
- For group products (other than fund-based group products), where different premium rates are applicable for different mortality assumptions, the selection of a specific mortality rate for a particular group shall be in accordance with objective criteria laid down in the Board-approved underwriting policy.
- The discounts and loadings offered based on various rating factors specific to the group, such as group size, shall be based on objective criteria and shall be in accordance with the Board-approved underwriting policy.
- For credit life products, the coverage term at inception shall not be more than the loan tenure. Sum Assured shall be consistent with the loan schedule.
- For non-linked riders, if required, expenses may be loaded only on a marginal basis.
- If the product/rider has a health component, non-standardized exclusions shall be in line with medical ethics, based on a medico-legal opinion obtained by the insurer in this regard.
Because above said notification of the regulator comes into effect from the date of the circular, the earlier circular no. IRDAI/ACT/CIR/MISC/124/07/2019 dated 26.07.2019, regarding the Use & File procedure for certain modifications under existing products and riders offered by life insurers is repealed.