Irdai may shift to ‘use and file’ system for product approvals
Under the use and file system, insurers are permitted to market products without the regulator's prior approval.
Mumbai: Insurance regulator Irdai is looking to shift from the ‘file and use’ procedure for product approvals to the ‘use and file’ system, its chairman Subhash C Khuntia said on Wednesday. “We would like to move over from the ‘file and use’ system of product approval to the ‘use and file’ system to the extent possible. We have already started this in some of the segments and we would like to go further,” he said while addressing a virtual actuarial conclave organised by the Institute of Actuaries of India.
Under the file and use system, an insurer, who wishes to introduce a new product, has to file an application for the product with the Insurance Regulatory and Development Authority of India (Irdai) and use the product for sale in the market only after getting all the regulatory approvals. Under the use and file system, insurers are permitted to market products without the regulator’s prior approval.
He said the first and foremost responsibility of appointed actuaries, who play an important statutory role in the insurance sector, is to balance the policyholders’ protection with the prudential operations of insurance companies. Actuaries need to factor in uncertainties and threats such as climate change and future pandemics while designing appropriate products and determining the pricing in a way that it would provide protection to the public at large at the times of need, he emphasised.
Khuntia said actuaries are the eyes and ears of the regulator as it depends on the certification of appointed actuaries for various activities of insurance companies. “Appointed actuaries have a big role to play and if they play that role effectively, then we will have lesser regulatory oversight to do. They can help the regulator to ensure that regulations are properly implemented,” he said. Khuntia asked actuaries to focus on developing innovative products in the annuity space, which is seeing a lot of demand as people are looking for financial protection in their old age. He said actuaries, through a committee system, has helped the regulator to develop a standard annuity product.
“We have also asked a committee of actuaries to develop an index-linked product. The report is also ready. I will continue to depend upon you people (actuaries) to help us in developing new products and methods to improve insurance penetration in the country,” he said. Khuntia also urged actuaries to develop micro insurance products which would be useful for the weaker section of the society in remaining protected.
Insurance industry needs to prepare itself to change over to a digital world and adopt IT and IT enabled technologies, he said, adding that the actuarial profession needs to take a lead in the process. The regulator is in the process of introducing risk-based solvency in which the actuarial staff would have a large role to play, the chairman said. According to Khuntia, looking at the size of our country, the number of actuaries are not adequate and the number needs to be improved drastically.
In 2019, there were 439 full-fledged actuaries and the number increased to just 458 in 2020. Last year, there were 165 actuarial associates and 7,500 student members, he said. “Looking at the number of insurance companies that we have and the size of our insurance business which is at present 1.7 per cent of the global insurance industry, and considering that we have 60,000 actuaries globally, I think we should aspire to have 1,000 to 1,200 (full-fledged) actuaries in the country as quickly as possible,” he added.
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