The insurers are responsible for new products and need to just inform the IRDAI after launch.
Insurance Regulatory and Development Authority of India (IRDAI) has extended the ‘Use and File’ procedure for most of the Life Insurance products. This means now the life insurance companies can also launch these products without prior approval of IRDAI. This move will enable Life Insurers to launch most of the products (except Individual Savings, Individual Pensions and Annuity) in a timely manner.
“This circular follows up on a previous circular for health insurance and some general insurance products. It is an excellent step because the product approval process has been very simplified. The insurers are responsible for new products and need to just inform the IRDAI after launch. The IRDAI 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,” says Kapil Mehta, Co-Founder, SecureNow Insurance Broker.
Who will approve products now
The life insurers are expected to have a Board approved product management and pricing policy (BAPMPP). 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. The PMC shall review and approve the products/riders in line with BAPMPP.
The PMC shall carry out a due diligence process and record its concurrence/sign off on various product related risks (such as risks related to capital requirements, profitability, underwriting, reinsurance etc.) to ensure proper product design, appropriate pricing, and filing with the Authority with complete compliance of regulatory requirements.
The CEO of the insurer shall have an overall responsibility for ensuring that a robust due diligence process is in place to mitigate risks arising from the products.
IRDAI has issued the Use & file (U&F) procedure for life insurance products and riders.
Some of the products and riders that may be launched without prior approval of IRDAI.
Individual non-linked pure term products
Individual non-linked term products with return of premium
Individual non-linked health products
Individual unit-linked products which are offered with the existing approved funds only
Accidental Death Benefit rider
Accidental Total / Partial Permanent Disablement rider
Waiver of Premium rider
Critical Illness rider
Terminal Illness rider
For individual unit linked insurance products (ULIPs) :
Expected Unit Fund value at Maturity shall be at least 90% of 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 mortality charge shall be consistent with that used for profit testing the product.
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.