Report Of The Working Group On Essay Example

coverages. Although these guidelines promoted regulated and structured product development and pricing, ERDA observed that the actual product development process deviated from what was originally envisioned.With the experience and changing needs of all stakeholders, ERDA found it necessary to review the existing guidelines. To do this, a working group was formed with terms of reference including the review of File and Use guidelines issued in 2006 and related circulars. The group aimed to recommend new guidelines based on changed requirements in the De-terrified regime for non life products. Health insurance products are governed by regulations from February 2013, which were not within the scope of the working group's terms of reference. As part of their methodology, the group gathered views from stakeholders and studied product approval processes in other countries as well as relevant Indian laws and regulations. The recommendations on page 9 largely reflect stakeholder input and are based on prevailing laws and regulations. A major departure in product classification is recommended.

The current system of classification for insurance products is based on pricing, but the working group suggests changing it to be based on who the buyer is. This shift in philosophy aims to ensure proper due diligence for products sold to vulnerable individual customers while allowing insurers to handle some regulatory functions for commercial customers' products. This would result in two main categories: Retail products, which cater mainly to individual customers, and Commercial products, which cater primarily to non-individual entities such as companies, trusts, associations, societies, government bodies etc. Products designed for retail customers could be sold to commercial ones but not the other way around. All types of general insurance products

can be categorized into one or both of these groups. In addition, the working group recommends creating standard India Market Wordings for various products, clauses, conditions, and add-on covers through committees of underwriters and actuaries under the General Insurance Council's guidance. These standardization efforts will aid the industry's transition to a Use and File system and make simple standard products more accessible for mass sale.

After extensive deliberations, it is recommended that a Use and File system be implemented for commercial products. While retail products will continue to follow the File and Use system, most specialist mono-line companies' products should fall into the commercial category and thus adopt the Use and File system. However, any retail products by Hess companies must still adhere to the File and Use system. In addition, minor product modifications may be approved by the company's internal MAC without filing with ERDA, subject to confirmation from the Appointed Actuary. The current File and Use system limits innovation by requiring all products to be filed before use. Therefore, a new category of product called "Pilot Products" has been proposed to allow experimentation, testing, refinement, and finalization.The General Insurance Industry can offer various types of products that fall into either retail or commercial categories. These may include standard products, long term products, government products, pilot products, package products, add-on products, group products, reinsurance-driven products, broker-led products, large risks, and special contingency contracts. During a pilot phase in a defined area with defined exposure limits, insurers can launch a product for a short period and inform the ERDA. Once the necessary experience is gained, the product can be finalized and taken through an approval process

depending on its nature. The working group and ERDA agreed that existing guidelines did not provide sufficient due diligence in the product development and filing process. As a result, the recommendation is for proper due diligence to be conducted during the product development process, especially for arduous types of Else and File processes.The working group suggests creating a Product Management Committee led by a board member without executive duties to structure the insurance product process in a way that benefits all stakeholders. The committee, which includes the CEO, Appointed Actuary, and Chief Underwriter at minimum, will act similarly to a regulator within the insurer. It will provide an internal self-regulatory mechanism that will establish structures and processes for managing operations throughout the entire product lifecycle. All products approved for either File and Use or Use and Fill will also require approval from the Product Management Committee. If a product falls under File and Use, it must gain approval from the committee before being sent to ERDA for regulatory approval. Should a product fall under Use and Fill, it may be sold with Product Management Committee approval under notification to ERDA. Once given the board-led committee's endorsement, insurers with a strong internal due diligence system should receive ERDA's observation within 30 days of product filing; if not, they may sell the product freely. Every insurer will possess a board-approved Underwriting policy.The Product Management Committee will be responsible for ensuring the Underwriting policy remains relevant and up-to-date, including the product management policy of the insurer. Each product will have a Unique Identification Number (IN) that will be allotted through an automatic online process, creating a unique number

for each company, product, and add-on cover. The General Insurance Council is expected to play a crucial role in standardizing Indian Market Wordings and benchmark prices for various general insurance products and add-on covers. Under the proposed changes, approved products will be valid for five years, after which they will need to be filed again. A structured process for product withdrawal will take into account the interests of policyholders. With relaxation in the product approval process, the monitoring process becomes critical, and Appointed Actuary, Product Management Committee, and Board will actively review each product and submit their observations and actions to ERDA at least annually.The Financial Condition Report requires the Appointed Actuary to review the performance of each product. The report's recommendation aligns with regulatory thinking. The issue of pricing flexibility between insurers and ERDA has been problematic. The working group suggests that the Appointed Actuary may allow pricing flexibility to the extent of acquisition costs and profit margins built into the product, subject to ERDA approval and the condition that the product's combined ratio remains below 100%. The Appointed Actuary will review pricing deviations annually and can withdraw them if the product's combined ratio exceeds 100%. Each insurer must establish a Technical audit team responsible for ensuring compliance with File and use guidelines for underwriting and pricing. The audit team must conduct technical audits at least once a year for all lines of business and submit its report to the board through the Product Management Committee. The report proposes an effective transition process for a smooth shift into the new product approval process.Although the General Insurance Council has effectively self-regulated the Indian general insurance

industry, it only consists of insurers and does not include other stakeholders such as loss assessors, motor manufacturers and garages, lawyers, and customer groups. Therefore, ERDA may consider establishing a forum inclusive of all stakeholders, including insurers. The working group has thoroughly considered all aspects of product development process and approval, but still recommends exposing the report to stakeholders for their views and opinions. Insurance plays a crucial role in the growth and development of an economy by mitigating risk impacts for organizations and individuals. This positive effect on industry growth allows entrepreneurs to concentrate on their business without worrying about potential risks. India's General Insurance (GIG) industry has seen significant growth in recent years with an annual growth rate of roughly 17% and provides coverage of RSI. 1,000 lack core.

The potential for growth and value creation in the insurance industry is significant. The availability of insurance products and services is critical to the penetration of insurance. The competitive structure of the industry is shaped by various forces, such as the huge untapped market, proliferation of schemes, new product innovations, Indian consumers' perception of insurable risks, competitive pressures arising from integration of bank and insurance, impact of information technology, and the role of insurance industry in financial services industry.