In the use-and-file regime, an insurer doesn't have to file a product with Irda; it has to adhere to the standardised norms and later send information on the product to the regulator
The insurance regulator has allowed insurers to have standard products that can be sold in the market under the use-and-file regime. However, none of the insurance companies have filed any product under the regime till date due to the limited product feature possibility in the structure.
In the use-and-file regime, an insurer doesn't have to file a product with Insurance Regulatory and Development Authority (Irda); it has to adhere to the standardised norms and later send information on the product to the regulator. In the meantime, the insurer can sell the product.
Insurers said not many products had been filed under this norm, as there was some uncertainty over standardised rules for this category.
"There is very little scope to innovate and personalise the products. If we go for such a structure, all products of insurers may end up looking similar with those of their peers," said a private life insurance company official.
At present, Irda follows the file-and-use route under which all products have to be filed with the regulator before being launched in the market.
However, the use-and-file norms would entail that the insurance company could launch a product for sale in the market if it adheres to certain standard guidelines and has standard nomenclatures. Only a declaration on the same will have to be presented to Irda.
In October 2012, Irda had identified 18 products categories for standardisation. Product standardisation was considered for the file-and-use mandate as product approvals in the industry was taking time. This had led to companies not being able to offer products, as insurers could offer product till it was approved. So, the regulator has proposed standardising some products that can be offered in 15 days of being filed with the regulator.
The chief actuary of a mid-size private life insurance company said, on the one side, the industry was busy in building up their product portfolio and hence would not be actively looking to have products under use-and-file regime. "The customer segment is also looking for products, catering to specific needs and hence generalised products may not work in the market," the official added.
According to the regulator, the standard products would be simple, easily understandable with affordable premium rates. The 'standard kit' as part of this proposed system would include standard application.
Every product, after being sent to Irda for approval, on an average, takes 25-30 days to be approved before it can be sold in the market. However, insurance companies are not certain whether only a few products would be allowed to be filed under this regime or several products would be considered.
Life insurers also said the terms and conditions of approval under this regime were not clear. The chief executive of a mid-size life insurance company said though only simple endowment and term products might be sold under use-and-file, the policy wordage and features were still being debated.
Under former Irda Chairman J Hari Narayan's regime, Irda had suggested use-and-file method of product approvals, so that simpler products could be introduced in the market in a quicker manner.
Later, Irda had constituted four working groups to standardise products offered by life insurance companies. The groups looked at unit-linked investment plans, linked variable insurance plans, non-linked variable insurance plans and other non-linked plans.
This was aimed to bring uniformity in the designs of the products, determining relevant parameters for each product and ensuring these parameters are consistent with Irda regulations.
