IRDAI has expanded the scope of ‘use and file’ procedure for life insurance products. Here’s how these modifications aim to promote insurance penetration while offering a wider choice of products for the customers
The Insurance Regulatory and Development Authority of India (IRDAI) released a circular on June 20, 2023 introducing modifications to the existing ‘use and file’ procedure for life insurance products. These changes aim to facilitate the insurance industry in promoting insurance penetration.
Here are the key modifications and their implications for life insurers and policyholders.
Expansion Of Scope
The circular expands the scope of the ‘use and file’ procedure by including additional categories of life insurance products. The following modifications have been made:
Individual And Group Unit-Linked Life And Health Insurance Products: Under para No. 10.4 of Section B of Chapter I, individual and group unit-linked life and health insurance products are now included. This change will allow life insurers to use and file these products under the revised procedure.
Combi Products: A new para 10.10 has been added after para 10.9 of Section B of Chapter I, and introducing the concept of “combi products”. Combi products refer to insurance products where a life insurer acts as the lead insurer. Life insurers offering combi products must comply with the extant norms prescribed by IRDAI.
Dispensing With Segregated Fund Identification Number (SFIN) Clearance Process: Para 11.3.3 has been added after para 11.3.2 of Section B of Chapter I, stating that the current SFIN clearance process by IRDAI is dispensed with. However, insurers must still adhere to the provisions of para – 4.15 (a) (1) (2) and (3) of the Investment Master Circular Ref: IRDA/F&I/CIR/INV/226/10/2022 dated 27.10.2022. This includes complying with all prudential and exposure norms as per Regulation 9 of IRDAI (Investment) Regulations, 2016, as amended from time to time, for each segregated fund and the assets under management (AUMs) of unit-linked insurance plans (Ulips).
Addition Of New Unit Linked Funds: A new para 14.8 has been added after para 14.7 of Section C of Chapter I, allowing for the addition of new unit-linked funds to existing unit-linked products. These modifications must comply with para 11.3.3 of Section B of Chapter I, as mentioned above. Once new funds are added to existing or new unit-linked products, they will be treated as existing funds for subsequent unit-linked products.
The recent circular from IRDAI introduces significant modifications to the ‘use and file’ procedure for life insurance products. These changes aim to support the insurance industry in promoting insurance penetration and improving the accessibility of life insurance products for the Indian population.
What This Means For Customers
The modifications introduced through the circular on the ‘use and file’ procedure for life insurance products have several implications for customers. These changes aim to enhance the accessibility and
range of life insurance products, thus providing customers with more options and a streamlined experience.
Policyholders can expect to benefit from a more efficient and accessible range of life insurance products as a result of these regulatory enhancements.
Increased Product Options: The inclusion of individual and group unit-linked life and health insurance products expands the scope of offerings available to customers. Unit-linked products provide the potential for investment growth along with life insurance coverage, thus allowing policyholders to participate in the financial markets and potentially earn higher returns. This addition gives customers more choices to meet their specific insurance and investment needs.
Combi Products: The introduction of combi products allows customers to access comprehensive insurance coverage under a single policy. Combi products involve a lead insurer who offers a combination of different insurance coverages, such as life, health, and critical illness, in a bundled package. This simplifies the buying process for customers, thus eliminating the need to purchase separate policies for each coverage type.
Streamlined Processes: The removal of the segregated fund identification number (SFIN) clearance process reduces administrative hurdles for insurers, thus resulting in smoother and faster product launches. This can lead to quicker availability of new life insurance products in the market, thereby benefiting customers who seek timely coverage or investment opportunities.
New Unit-Linked Funds: The allowance for the addition of new unit-linked funds to existing products expands the investment choices for customers. They can now access a broader range of funds, which may align better with their risk appetite and investment objectives. The availability of diverse investment options enhances the flexibility and customisation of unit-linked insurance plans (Ulips).
Enhanced Product Accessibility: These modifications collectively aim to promote insurance penetration and make life insurance products more accessible to the Indian population. By simplifying regulatory requirements, the IRDAI intends to facilitate the development and introduction of innovative insurance offerings. As a result, customers can expect a wider array of life insurance products that cater to their unique needs, preferences, and financial goals.