The health insurance industry is set to experience a major change with the Insurance Regulatory and Development Authority of India (IRDAI) now allowing the health insurance companies to introduce new products without its prior approval. The new “Use and File” approach towards health insurance products and all general insurance companies involved in the health insurance business means that the insurers can easily compete with each other in bringing forth innovative products to their customers without having to wait for regulatory approval.
This deviation from the current regime that mandates insurers to seek approval, involving a long waiting period, before launching any new product(s) will usher in more efficiency amidst competition in the health insurance sector.
“We at ManipalCigna, welcome the regulatory move as this will help foster innovation in product development and the products will get introduced to customers in a timely manner. IRDAI has allowed insurance companies to introduce products without prior approval is a major announcement, this also brings more flexibility to the product filing and approval process. The reforms will further reduce the human intervention, thereby, cutting down on the cumbersome waiting period that will ease the process, help the suitable products to reach the untapped geographies and enable their launch in a faster and more efficient manner,” says Prasun Sikdar, MD & CEO, ManipalCigna Health Insurance Company Limited.
Customers stand to gain
This flexibility that was earlier limited to group insurance products alone has now been extended to retail products too. This means that retail products would now be filed as the “Use & File (U&F)” norm as opposed to the earlier “File & Use (F&U)” rule. Explaining how the new circular granting the U&F provision to all products and add-on covers would benefit customers in the long run, Rakesh Jain, CEO, Reliance General Insurance says, “The announcement to provide flexibility in product filing procedure for insurance policies is a very positive and highly welcome decision by the IRDAI. This will aid customer-centricity and fuel product innovation which should help augment insurance penetration in our country. Additionally, it will enable us to provide customized solutions faster, respond quickly and offer optimal pricing to the customers. This move by the IRDAI will empower customers to create their own coverage as per their requirements and encourage insurers to address and meet those requirements quickly.”
Increased insurance availability
The change in rules is set to usher in a huge opportunity for general insurance companies to introduce new and innovative products tailor-made to the benefit of their customers. Policyholders will now have more products to choose from as insurers vie with each other to cater to the dynamic needs of the market. Having more products to choose from means that customers will be able to secure their lives better sans the risk of exigencies.
Vivek Iyer, National Leader, Financial Services- Risk, Grant Thornton Bharat explains, “The long-run impact would be twofold with deeper insurance penetration through innovative products that are most aligned to customer needs and expectations. Besides, there would be a stronger product-oriented focus by governance functions within organizations, given that the use and file procedure by the regulator places greater reliance on the good conduct of the market participants.”
The onus lies on insurers alone
This key move by the IRDAI has simplified the product approval process. The launch of new products would now be seamless. However, this also means that insurance companies will now shoulder greater responsibility to ensure that the customers are availed of the right products along with appropriate pricing. Iyer adds, “No downside at the moment, but we would see a strong regulatory focus through penalties on account of “Use & File” failures by industry participants.
Yogesh Agarwal, Founder, Onsurity says, “The new circular of IRDAI has definitely put a lot of freedom to the insurers. But this freedom also comes up with a great requirement of responsibility and ownership. There are chances that some of the insurance companies may put unfair clauses or inappropriate pricing for the products. But we strongly expect that the IRDAI will put a lot more onus and responsibility on the fairness of the products to the product management committee at the insurers.
Definitely, this change is a welcome step and there will be further guidelines and report that would be issued by IRDAI laying down principles and more detailed roles and responsibilities of the Product Management Committee, Actuarial team and board surrounding the use and file of insurance products.”