The Insurance Regulatory Development Authority of India (Irda) would come up with a format for seeking approvals for new insurance products by early next month as it looks to reduce delays in granting such approvals.
A template-based system is expected to expedite the approval process.
”We are working with the industry to figure out a design template about what we wish to see in products and what we don’t want to see in products. Right now, we are at an advanced stage of evolution and hopefully they will become regulations shortly. Once that is in place, and if we have products which are filed are in conformity with those guidelines, the clearance process will simpler,” J Harinarayan (pictured), Irda chairman, said.
Speaking on the sidelines of a programme organised by the Institute of Insurance and Risk Management (IIRM), he said any product in the life insurance business must have a minimum guarantee death benefit. “Otherwise it is not a life insurance product. That would be the template for that category. Similarly, for a pension product, the company should take the responsibility of providing the annuity. There are certain fundamental principles on which we can not compromise in the interest of policyholders. If the pension product is not going to end in a pension, don’t call it a pension,” he said.
Terming the domestic insurance industry as on the cusp of change, he said new products are likely to make forays into the Indian market.
“In other countries, particularly in the past 25 years, pension products have become very popular. Endowments products have become less popular. Direct savings oriented products with smaller tenure have become more popular. I would think that even in India, increasingly the trend will be in that direction. It is not yet so clear since the traditional products are still selling well. But I think in time this change will come.”
On banks selling insurance products of more than one insurer, he said, “The banks have misunderstood the position. Under the insurance law of the country, one agent can work with one insurance company, which means the agent can work with one life company, one non-life company and one standalone health insurance company. If the bank wants to work with more than one company then they should function like a broker and not an agent. An agent is the voice of the company. Whereas the broker is the agent of the customer. There is a fundamental difference.”
While the industry has been talking about newer practices in the sector, including risk-based solvency and use and file system, the Irda chief said the sector is still not ready for either of them.
“As far as the use and file is concerned, the sector is not yet ready. I say this because, the persistence levels of insurance policies is still low. Secondly, the expenditure structures of the insurance firms are not as healthy as they ought to be.”