General insurance products might soon be available over-the-counter (OTC), especially in the motor and health segment.
The Insurance Regulatory and Development Authority (Irda) had set up a working group last month to review the file-and-use norms for the general insurance industry. The group has Suresh Mathur of Irda as its chairman, with six other members from non-life companies (one from each insurer) and one convenor from Irda. A senior official associated with the group told Business Standard that they would look into developing a format in which simple and fixed benefits products would be grouped under a template.
“Such products will be easier to understand for the customers. While companies may continue to sell their unique products, each general insurer may be required to have a fixed number of such products,” said the official.
Irda decided to form the working group as it felt that a review of extant guidelines had to be undertaken to ensure that products were designed, marketed, sold and serviced, ensuring that a viable, simple, useful product was available to consumers and sustainable for insurers.
Non-life insurers, similar to life insurers, are required to follow the file-and-use regime for product approval. This process is also expected to come under review, in order to enable a use-and-file type of a regime. In the use-and-file regime, an insurer doesn’t have to file a product with Irda; they have to adhere to the standardised norms and later send information on the product to the regulator’s office.
Life insurers have already been given permission to file products under use-and-file, though they have not exercised this option. While use-and-file would mean quick approvals, insurers fear that there would be no scope for introducing their distinct products, since standard norms would have to be followed.
The health and motor sectors constitute 55-60 per cent of the total product portfolio of the general insurance industry. If a quicker approval process is initiated, more products would be available in the market, leading to better penetration of the non-life sector. Non-life insurance penetration (as a percentage of GDP) in India is less than one per cent.
Once these norms by the working group are implemented, sector experts said simple products would be available not just in the bank and company branches, but also in local grocery stores and phone booths, benefitting people especially in rural areas.
“Such products will have only have one basic feature of motor or health and will be easy to understand. Hence, even the local shop-keeper will be able to sell them,” said the chief distribution officer of a large private general insurer.
The working group will have Suresh Mathur of Irda as its chairman, with six other members from the non-life companies (one from each insurer) and one convenor from Irda. This group has to submit its report in three months.
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