All the insurers are required to comply with the File and Use procedure for each product that is being offered in the market.
However, with regard to the insurance products offered by insurers for schemes sponsored by the State and Central Governments, it is noted that the insurers are expected to adhere to the conditions of the scheme which the Government is sponsoring and are also required to change the conditions as the per the changes proposed by the Government from time to time.
In this context, to meet the dynamic nature of such schemes, the insurers are required to comply with the file and use procedure and other related issues as below:
1. Insurers shall be allowed to participate in the tender process, provided theÂ
a. Proposed insurance scheme is sponsored by Government;
b. Insurer shall be responsible to comply with the provision of Section 64VB.
2. Where the insurer is participating in such tender process, once the tender is awarded to the insurer, the insurer shall file the product as accepted, in accordance with the requirements of the File and Use Procedure within 10 days from the date of such award;
3. If an existing product of the insurer, which is approved by the Authority, is in total conformity with the proposed insurance scheme including the pricing, the insurer shall not be required to submit the product for approval under File and Use Procedure in accordance with point no 2 above. However, the insurer shall inform the Authority of such award and submit all the relevant details.
4. The file and use application shall contain complete details of all the places where the insurance scheme would be offered and the period of insurance for which the insurer is awarded the tender;
5. The pricing of such schemes shall be based on the previous experience of such schemes offered by the insurer, if any;
6. Where the insurer is awarded the tender for different areas subsequently, the insurer shall submit this information to the Authority along with the differences, if any, with regard to the pricing of the contract and features of the contract. In such circumstances, the filing shall include:
a. The method of computation of premium;
b. Source of data, assumptions and loadings made;
c. Expected loss ratios and expected combined ratios across the age groups for non-life insurance products and life insurance products. with policy term less than or equal to two years;
d. In addition to (c) above, expected profit margins along with the risk discount rates across different age-groups for non-life insurance products and life insurance products with policy term greater than two years;
e. The Appointed Actuary certificate on viability of the rates proposed;
f. Features that have been changed from the previous filing;
7. Insurer shall inform the Authority any penalties/termination imposed by the Government, immediately after receipt of intimation of any such action;
8. If the premium is the only variant for the subsequent tender award across various other districts or other areas, the insurer shall state this in the intimation letter to the Authority and shall not be required to submit the file and use application again. However, the insurer shall be required to submit the details of pricing as stated in point no. 6 above;
9. The insurers shall submit its claims experience district-wise/ state-wise/country-wise every half year to the Authority along with an objective analysis giving rationale for such claims experience in relation to the pricing details filed with the Authority;
10. If such claims experience (incurred claims ratio) for the said portfolio turns out to be more than 70% for the consecutive four half years, the insurer may not be allowed to participate in the tender for any Government sponsored scheme for a period of at least two years; However, the insurer shall be allowed to continue to provide services in the areas where the tender is awarded till the agreed period of tender;
Further, where such restriction is imposed, the insurer shall not participate in any Government sponsored tender process unless an explicit approval for such participation is sought by the insurer and approved by the Authority.
(J. Hari Narayan)