IRDA REGULATION RELATING TO PRODUCTS APPROVAL :
An insurance company cannot launch any product unless the product specifications are filed with IRDA and are approved by them. This procedure is popularly called “file and use” procedure under the IRDA Regulations. This procedure is required to be followed whenever a new product is launched or whenever an existing product is withdrawn or modified.
IRDA have recently issued the following two Regulations, subsuming all the existing notifications with reference to Product design:
(a) IRDA (Non-Linked Insurance Products) Regulations, 2013
(b) IRDA (Linked Insurance Products) Regulations, 2013
A linked life insurance product is one which combines the benefit of insurance coverage and investment in one product. Under this type of product, the balance amount available after appropriation of charges, including the mortality charges, in invested in market linked investments. For example, investment in listed equities or bonds. The Policyholder, in addition to providing the fundamental risk coverage, a linked insurance product also provides an investment management service and the value of investment is reflected in the form of Net asset value from time to time. The risk on the investment portion lies with the Policyholders.
A non-linked life insurance product, on the other hand, does not provide the investment management service on behalf of the policyholders. Typically, the following are the benefits under a non-linked insurance product:
(a) Covers risk of mortality – i.e. risk of dying early – provides sum assured on death, e.g. Term insurance policies or whole life insurance policies which provide sum assured only on death
(b) sum assured which can be provided on survival to the maturity of the policy, e.g. Endowment Policies which provide for sum assured on death or on maturity whichever is earlier
(c) Annuity contracts, which covers the risk of living longer, by providing periodic payments as long as the policyholder is alive
(d) Health insurance contracts, which cover the risk of hospitalization (General insurance companies also offer health insurance contracts on indemnity basis)
(e) Rider benefits e.g. Accident Death Benefit rider (where an additional sum assured is paid on death due to accident)