Only 5 life products can be filed in a year: Irda

LIC seeks exemption from the rule and is hopeful of getting special treatment

 

The Insurance Regulatory Development Authority (Irda) has come out with a new product planner rule, by which an insurance company can file only five products for approval in a year. However, Life Insurance Corporation of India (LIC), the country's largest insurer, might be given a special dispensation by the regulator.

In order to reduce the time taken for product approvals, Irda has asked life insurers for a product planner before every financial year. The planner would give an indication of the number of products an insurer proposes to file each quarter.

S K Roy, chairman of LIC, explained that the product appetite of the marketing team of a company of its size is huge. "We have spoken to the regulator on this issue and should be able to get a special dispensation," he said. Roy added LIC's product portfolio has shrunk from 60 products to 16 life insurance products and eight group insurance products.

Irda has said if the number of products exceeds five, the insurer should furnish supporting market research, product-wise persistency for the 13th month, 25th month and 37th month as on April 30 of the previous year.

The new product guidelines for traditional products were implemented in January 2014. The new rules made changes in the product structures, commissions, and surrender charges; it also increased transparency in product return disclosures.

As a result, all insurers were required to re-file all products with the regulator to comply with the new norms. However, industry players said the approvals had been a little slower due to which the complete product portfolio of life insurers was yet to be achieved. According to the product planner, every financial year, a company can file five new products, apart from riders that are not part of this number.

At present, Irda follows the file-and-use method of application, wherein insurers apply to obtain prior approval of the authority to introduce/modify insurance products.

Beginning April 2014, insurers have been advised to file this planner at least 45 days before the beginning of the next financial year (before February 15 of each year).

On an average, industry players file 8-10 products and riders each year, which are an addition to their existing product portfolio.

Now that it has been capped at five, insurers are worried the choice given to a customer might be limited because insurers would not be able to file more than one product in each category (pension, health, group, individual and others).

While LIC is hopeful of getting an exemption from the new rule, other insurance firms are upset.

"We have had to re-file our entire portfolio with Irda. They should have either relaxed the norms for at least this year or increased the cap to 10," said the CEO of a large bank-promoted insurance company.

According to another insurance executive, in order to cover the bare minimum areas of term, endowment, pension, child plan, health and unit-linked space, they need six basic products. "A company would like to offer at least two or three products in each of the above category to its customers. With the restrictions, we are constrained," he said.

Meanwhile, regulatory officials noted that only some products by insurance companies are well received by customers. "The idea is to have few products that sell well," said an official.