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Faster product approvals through the use-and-file routes, perceived to be the biggest motivators behind the product standardisation concept, have not found favour with insurers. Life insurance companies are of the view the Insurance Regulatory and Development Authority (Irda) proposals mandate pricing and structure to the minutest level, leaving no room for improvisation and customisation by companies.
A senior official of a private life insurance company said, “We have approached Irda to understand the rationale behind this call for standard product norms. Our concern is that life insurance products are not amenable to standardisation in all aspects, given that they reflect the unique characteristics of each insurer. This proposal may be seen as anti-competitive and might lead to undifferentiated products being offered in the market that will reduce the innovation in the industry.”
The official said this move might not really address the root cause of delays in product approval, since Irda will anyway have to approve the pricing at each product level and ensure they are being priced fairly and adequately. “Else, the alternative could be to control product pricing, which is definitely a retrograde step and could result in a ‘race to the bottom’, typical of tariff regimes,” he added. The regulator had proposed standard products should be approved in 15 days’ time.
Sources in the insurance industry said only three to four companies in the industry wanted such a proposal. “Therefore, this is not an industry need; it is only a need of some companies. That is why several questions are being raised about the proposal,” said an industry expert.
Industry players said there should be some mix and match option to the policyholder in life insurance products that are typically long-term in nature. They opined that a product suitable for a large player — like Life Insurance Corporation of India — may not be suited for a smaller private life insurer. But, the CEO of a private insurer said that since rules would be the same for both (public and private life insurers), smaller players would lose out.
Product standardisation had been considered for the file-and-use mandate as product approvals in the industry was taking time. As a result, companies were not being able to offer products until they were approved. So, the regulator had proposed the standardising of some products that can be offered in 15 days of being filed with the regulator.
However, insurers explained Irda has made it clear that the use-and-file regime would not be implemented. “Irda has said that file and use will continue for all products, with a provision for standardised products to be approved in 15 days, instead of 30 days for other products,” said the product head of a life insurance firm.
The regulator will set up four committees to look in to the product categories. After this, detailed regulations are expected to come in for each of the 18 product categories identified by Irda for standardisation. This would become a rule, after approval by all stakeholders concerned.
The entire procedure would take at least 12-15 months, said private life insurers.