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C.R. Sukumar

No frequent changes in approved products, insurers told

Hyderabad , Oct. 16

With the free pricing (detariffed) era for general insurance industry nearing, the Insurance Regulatory and Development Authority (IRDA) has announced new guidelines for `file and use' requirements for general insurance products.

The guidelines, set to come into effect from November 1, would apply to all general insurance products, whether currently governed by tariff or not, the regulator has informed the non-life insurance companies.

In the case of products that were filed under the earlier file and use guidelines, the insurers need not re-file them under the new guidelines unless they have made changes in the rates, terms and conditions of cover of such products.

More freedom

While providing adequate freedom to the general insurance companies on pricing their products in the new detariffed regime, the regulator has however, keeping in mind the interests of policyholders, retained the authority of suspending the sale of products at anytime if they appear inappropriate and unfair in terms of rates and terms and conditions.

The IRDA has made it clear that the insurers would be required to justify the rates and terms and conditions of insurance products offered and said it would not accept a mere statement that the risk is rated `on merits'.

The regulator has also prohibited the insurance companies from resorting to variations in tariff coverages, wordings, endorsements and warranties in respect of covers that are currently under tariffs till March 31, 2008.

The insurers can file their proposals for changes in cover, terms, wordings etc., for such products from a date to be notified by the IRDA but to be given effect to after March 31, 2008.

For the purpose of filing the products with the regulator, the insurers were advised to take into account the IRDA requirements relating to design and rating of insurance products.

They were also advised to do an internal verification of the products before filing them with IRDA to avoid queries from the regulator.

Filing of products

The IRDA has made it clear that filing of products would be accepted only after the insurer has filed the underwriting policy as approved by its board and satisfied any queries raised by it.

Once an insurance product has been filed and the IRDA has no queries on the product, the insurer is expected not to make frequent changes in that product.

The regulator said it would allow changes in the product only on sufficient technical justification.

"Any proposals for changes within six months of the first introduction of a product will be subject to strict scrutiny for ascertaining the need for such a change," the regulator said.

The insurers are advised to provide at least 15 days notice for cancellation of cover.

They are also asked not to refuse renewal or cancel covers without providing sufficient justification in the case of policies that are long-term in nature and annual policies that are regularly being renewed or where there is a reasonable expectation of being renewed.

New code of conduct

Aimed at ensuring healthy development of non-life insurance industry in the new free-pricing regime that increases competition in service as well as pricing of insurance products, the IRDA has also come out with new code of conduct for insurance companies and brokers in insurance as well as reinsurance of general insurance risks.

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