IRDAI proposes regulations for designing, pricing of insurance products

Regulator IRDAI on Monday came out with draft regulations for the designing and pricing of general insurance products with a view to protecting the interest of policyholders.

The proposed regulations provide the basic framework and reflect the fundamental principles to be followed in respect of product design and pricing, said Insurance Regulatory and Development Authority of India (IRDAI).

The IRDAI (General Insurance Products) Regulations, 2021, which will apply to insurance products as well as add-ons, are aimed at promoting efficiency in the conduct of the general insurance business, said the draft on which the regulator has invited comments from stakeholders by April 26.

Guidelines for product filing have been in vogue since 2000 and have been revised from time to time.

"It has been felt necessary to have Regulations governing general insurance products, even while having a provision thereunder for issuance of guidelines for various segments as may be necessary," IRDAI said.

One of the objectives of the draft regulations is to provide framework for designing and pricing of general insurance products.

It also aims to ensure that the interests of policyholders are protected while promoting efficiency in the conduct of the general insurance business.

The regulations, if approved, will apply to all general insurance products and add-ons marketed or offered by general insurers.

"The general insurance package product consisting of various covers/sections including Health section/s shall also be covered by these Regulations in so far as non-health covers/sections are concerned," the proposal said.

For the purpose of these regulations, general insurance products are classified into retail products and commercial products on the basis of who buys the product or on the basis of sum insured, the draft said.

It is proposed that retail and commercial products will be distinguished from one another with a suitable name change or pre fix or suffix as the case may be and need to have a separate Unique Identification Number (UIN) obtained from the IRDAI.

Further, it says the design of products should take into consideration the policyholders' interests in terms of suitability and affordability even while catering to their changing needs through evolving risk coverage.

The pricing of products/add-ons should generally be based on appropriate data and/or technical justification, the draft said

"Insurers, while pricing products/add-ons, have to factor in risk exposure, claim/loss experience, expenses, reinsurance, solvency requirement, and factor in a reasonable amount of surplus and/or economic cost of capital," it said.

Further, insurer may consider the investment return in the pricing based on experience, it said, and added premium rates shall neither be excessive nor inadequate.