Irda yearly cap on new products to five restrictive: Life insurers

Insurance regulator had directed life insurers to file 'product planner' every financial year

With the Insurance Regulatory and Development Authority (Irda) asking insurers to file a ‘product planner’ every year, life insurers have said the regulator’s proposal to limit the number of new products every year to five is inadequate, as product categories are varied and they would need to re-file products.

In a circular to life insurance company chief executives, Irda had asked them to indicate the number of products they planned to file each quarter. It had said if the number of these products exceeded five in a financial year, the insurer should furnish the supporting market research and product-wise persistency for the 13th, the 25th and the 37th months as on April 30 of the previous year. For 2013-14, insurers have been asked to submit the product planner by April 30.

Rajeev Kumar, chief and appointed actuary, Bharti AXA Life Insurance, said, “The challenge that would be faced due to this decision is if the number of products is restricted to five, it would be difficult for us, as this year, we would need to re-file the traditional products according to the new norms.”

In February, Irda had brought out traditional product guidelines, which sought non-linked variable insurance products (index-linked products) be treated on a par with unit-linked products (Ulips). Insurers have been given time till June 30 and September 30 to re-file their group products and individual products, respectively.

Insurers also feel they have a large product category and merely five products a year would be restrictive. G V Nageswara Rao, managing director and chief executive of IDBI Federal Life Insurance, said due to regulatory changes and a change in market dynamics, it was difficult for the industry to plan a product calendar. “This year, due to re-filing under new norms, the number of products would definitely be more than five,” he said.

Depending on the size of a life insurance company, insurers file eight to 10 products every year—-in the individual, group, health and pension segments, among others. If the products to be filed are capped at five a year, insurers would not be able to file more than one product in each category.

Chandan Khasnobis, director and appointed actuary at IndiaFirst Life Insurance, said this might be a constraint for new insurance companies, which do not have a complete product portfolio. “Some exceptions need to be made to enable these to file more than five products a year,” he said.

Some insurers also said this was a directional reform and complete implementation would be carried out from next year. Sanjay Tripathy, executive vice-president (marketing and direct channels) HDFC Life, said while the decision might expedite product approvals in the long run, implementing it this year would be an arduous task for insurers. As of now, there is no clarity on whether riders would be included in the planner, as separate products. Insurers said if this was the case, it would be difficult to file new products.

Life insurers expect the decision would be modified to boost their business. “We would prefer a mechanism in which the regulator puts a limit of five products a year in the individual category. Group products and riders should be kept out of this,” Kumar said. Insurers also hope Irda doesn’t put a mandatory limit of five products.

“Irda should define a range of the number of new products (not riders) to be filed every year, which companies should adhere to. A definitive limit on the number of products would be detrimental to the industry,” said a senior official of a private life insurer.