General insurers can launch new policies on pilot basis: Working group

Launch of non-life insurance products on pilot basis, and classifying the policies based on the buyer (retail or corporate) are some of the recommendations made by a working group set up by the insurance regulator.

Releasing the report Monday, the Insurance Regulatory and Development Authority (IRDA) has sought the comments of the stakeholders on the report and recommendations of the working group on file-and-use guidelines.

According to the group, the current file-and-use system requires all products to be filed with IRDA before these can be used.

"The process of developing innovative products requires experimentation, testing, refinement and finalisation. The current system does not afford this freedom of testing and refinement, and jumps from experimentation to finalisation," the report states.

Hence the working group has suggested a new category of insurance policies 'Pilot Products' which the insurers may launch for a short period of time in a defined area on a pilot basis after informing IRDA.

"After gaining experience on the product, they may finalize the product and take it through approval process depending upon whether it is a retail product or commercial," the group recommends.

Suggesting classification of general insurance policies into retail and commercial, the working group has recommended use-and-file system for commercial lines while file-and-use system for retail products.

Under the file-and-use system an insurer can sell a new product after getting IRDA's nod.

"Most of the products of specialist mono-line companies should fall in commercial category and hence would follow the use-and-file system of product approval. However, for retail products of these companies, if any, they will need to follow the file-and-use system," the group said.

According to the working group, there is a need for due diligence in the case of use-and-file products taking into account the interests of all stakeholders and hence recommends creation of a board-led product management committee.

"This committee may be headed by any board member who does not have executive responsibilities and will include CEO, appointed actuary and chief underwriter, at the minimum," the group recommends.

According to the group, all the insurance policies either under file-and-use or use-and-file will be approved by product management committee.

Products under file-and-use will be sent to IRDA after product management committee's approval for regulatory approval process. Products under use-and-file may be sold by insurer after product management committee's approval under information to IRDA, the group recommends.

The group also recommended to IRDA to look at the possibility of creating a forum that has representatives from all stakeholders-customer groups, loss assessors, lawyers, motor manufacturers and garages.