Explained: How ‘Use and File’ system will bring new health insurance products faster

What is the News?

The Insurance Regulatory and Development Authority of India(IRDAI) has decided to extend the ‘Use and File’ procedure to all health insurance products. The move is expected to facilitate faster customer access to health policies.

What is the Current System?

Under the current system, an insurance firm wishing to introduce a new product has to first file an application with the IRDAI and use the product for sale in the market only after getting all regulatory approvals”.

What is the “Use and File” procedure?

Under ‘Use and File’, insurance firms are permitted to market products without the regulator’s prior approval, thus avoiding a long wait.

This means insurance firms can quickly introduce new schemes with innovative features, enabling people to participate and cover their health expenses. 

How will this be beneficial?

The move offers flexibility to insurers to offer products that may cover the immediate needs of customers on account of a changing environment.

For instance, if there is a new disease that emerges, ‘Use and File’ will allow insurers to design a product covering that disease and offer it immediately, rather than waiting for approval.

What if the IRDAI raises concerns over such a product later?

If a customer has already taken an insurance policy launched under ‘Use and File’, and the IRDAI later raises concerns about it, then it can lead to some rethinking. 

The customer will continue to get the benefits of the policy for the first year, and if the insurance company makes amendments in line with the regulator’s apprehensions, the customer will still get these benefits. 

However, if the policy is withdrawn as a result of IRDAI’s intervention, the product will no longer be available for renewal in the second year. 

What is the status of the health insurance business in India?

The health insurance business is the fastest-growing segment in the insurance sector and accounts for a 33.33% market share in the general insurance industry.

For instance, there were 26.54 lakh claims under the Covid health insurance category until April 2022. These claims are reimbursement for treatment and hospitalization expenses. Many insurers have seen over 100% claims during the peak of the pandemic.

Source: The post is based on the article “Explained: How ‘Use and File’ system will bring new health insurance products faster” published in Indian Express on 3rd June 2022.

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