IRDAI Plans Another Product Regulation Overhaul

The insurance industry may be in for another round of revision in product regulations as the Insurance Regulatory Authority of India (IRDAI) firms up plans to review product structures and benefits every 3-5 years. The move comes amid the need to adapt to changing market needs.

IRDAI has constituted an insurance advisory committee consisting of members from the life insurance industry, general insurance industry and intermediaries. People privy to the developments say that the idea was to look at the entire product structure in the insurance space and look at the changes that can be made in the structures and product features taking into account the market segment and their specific needs.

“Once the committee formulates the product regime and the regulator accepts it, we can expect another round of regulatory changes for products,” said a senior industry official.

During the 2013 overhaul, there was a bit of chaos in the system as products had to be refiled. The then existing products had to be withdrawn in a few months’ time and products with updated features had to be filed. Almost 150-200 products were withdrawn from the market and insurers like Life Insurance Corporation of India (LIC) are still reeling under the impact of that decision.

V K Sharma, chairman of LIC explained that the number of new policy sales have been flat for them since the number of products that they have in the portfolio following the new product regime had seen a sharp drop. He, however, added that they expected the situation to normalise by the end of this financial year.

Industry sources also said that from now on, IRDAI would want to revisit the product sales numbers also on a regular basis and would seek clarifications on products that are seeing low sales numbers. Post this, insurers may be required to either modify or withdraw those products.

The regulator will meet the company chief executives on June 16 as part of an annual review meeting. Product structure related discussions are expected to be on top of the list.