The Insurance Regulatory and Development Authority of India’s (IRDAI) decision to do away with pre-approval for launch of life insurance products will go a long way in providing ease of business, innovation in the industry, according to experts.

The regulator had last week, permitted life insurers to launch products without prior approval by extending the facility of use and file procedures to the insurers. The move will enable the launch of most products (except individual savings, individual pensions and annuity) in a timely manner according to the dynamic needs of the market, according to the regulator.

‘Progressive move’

“This is a forward looking and progressive move for the industry as the principle-based approach encourages insurers to be more responsible and innovative in their product designs. It will add momentum to the insurance sector as we will respond faster to emerging market needs, both in terms of designing and pricing,” Subhrajit Mukhopadhyay, Executive Director, Edelweiss Tokio Life said.

This will significantly improve the time to market by reducing the time between the conception and actual launch of a product, thus, enabling insurers to respond to the dynamic needs of the market at a quicker pace especially in the present digital age, he added.

The nod, however, comes with certain conditions that the insurers should put in place a board-approved policy on product and pricing which should duly be informed. “This makes management of insurance companies more disciplined and steps on focus on corporate governance which is lacking sometimes in the industry,” said Vice-President of a private life insurance company.

Encouraging ideation

In its latest report on life insurance, Kotak Institutional Equities said while product differentiation is broadly limited in most segments of financial services, encouraging innovation, by reducing regulatory procedures, will augur well for insurance companies.

“Life insurance products are often comparable across peers with little differentiation. However, faster and effective new product launch processes and agility of the team can make a difference. We believe that reducing time for new product launch will encourage more companies to increase product ideation as they are enabled to respond faster to changes in the marketplace,” it added.

Reduction in regulatory approvals will reduce the time-frame for launching new products for the innovator and likely encourage more players to launch new products. The exclusivity period enjoyed by the innovator will, however, reduce as well.