CHENNAI: The Insurance Regulatory and Development Authority of India (IRDA) has issued a draft of revised guidelines on "file and use" for general insurance products in the context of the proposed de-tariffing of several lines of business next year.

The revised guidelines, to which responses have been invited before August 25, will come into force on September 30, 2006. Products which are currently under tariff but which will be underwritten with modified rates after the tariffs are moved, should be filed under these guidelines after September 30.

Tariffs or regulated charges, in the case of the insurance sector, generally stipulate the minimum rather than the maximum that companies can charge as premium, with a view to ensuring that competitive undercutting does not jeopardise the viability of insurers.

The "file and use" guidelines also emphasise this by saying that besides basing the pricing of products on appropriate data and technical justification, insurers should confirm that they have taken necessary steps to ensure that competition will not lead to "unprincipled rate cutting and other improper underwriting practices".

As per the draft, any non-tariff insurance issued in the past on the basis of "individually rated risks" assessed through individual experience and risk evaluation without reference to a class product design or rate and which were not filed with the IRDA earlier should henceforth be filed with the authority before being sold, whether as a new insurance or as renewal.

Each insurer should appoint a senior officer as a Compliance Officer and such officer should not be the senior officer holding responsibility for underwriting.

For the purpose of the guidelines, insurance products will be classified into five categories: internal tariff rated products, individual experience rated products, exposure rated products (where typically the occurrence of a risk is too uncommon to enable the development of a statistically supported rating basis), packaged or customised products and insurance of large risks. The `mega policies' under the present rules of the Tariff Advisory Committee (TAC) will fall in the last category of large risks.

"It is not permissible to place a product under this (large risks) category by merely referring to a reinsurer for the rates and terms. It should genuinely relate to the risks that are not within the underwriting or rating capability of Indian insurers", says the revised draft.

In respect of such products, the insurer "shall quote terms faithfully following the terms quoted by reinsurers.''

The guidelines stipulate the role that the Appointed Actuary of each insurer will play in ensuring the collection and analysis of data of premium and claims right at the stage of design of the products.

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