September 23, 2023

In a bid to improve the ease of doing business, the Insurance Regulatory and Development Authority of India (IRDAI) recently allowed insurers to offer health and most of the general insurance products to customers without its prior approval.

IRDAI has tweaked the ‘Use and File’ (U&F) procedure for all health insurance products and almost all the general insurance products in line with the reform agenda taken up towards having a fully-insured India.

However, according to experts, this move by the regulator comes with its own set of challenges. 

“The provision of U&F procedure for retail products is a significant milestone for the non-life business, especially because of the era of innovation that it will usher in, and the deeper insurance penetration that it will bring about. This also means that the insurance industry would need to bring in stronger governance around product development and risk management,” says Vivek Iyer, partner and national leader, financial services – risk, Grant Thornton Bharat, a fully-integrated assurance, tax, and advisory firm. 

According to industry experts, the new circular by the IRDAI has provided a lot of freedom to the insurers, but this freedom also comes with a great requirement of responsibility and ownership on the part of the insurance companies. 

“There are chances that some of the insurance companies may put the unfair clauses or inappropriate pricing for the products. But we strongly expect that IRDAI will put lot more onus and responsibility on the fairness of the products to the product management committee of the insurers,” says Yogesh Agarwal, founder, Onsurity, India’s first tech-led monthly subscription based employee-health platform. 

Also, the industry would be awaiting further guidelines and reports from the IRDAI, clarifying and laying down principles and more detailed roles and responsibilities of the product management committee, actuarial team, and board surrounding the U&F of insurance products. 

The long-run impact would be two fold(1) deeper insurance penetration through innovative products that are most aligned to customer needs and expectations, and (2) stronger product-oriented focus by governance functions within organisations, given that the U&F procedure by the regulator places greater reliance on good conduct of the market participants. We do not see any downside at the moment, but we would see a strong regulatory focus through penalties on account of U&F failures by industry participants,” adds Iyer.