The IRDAI has asked insurance CEOs to review their products annually and cull poor selling policies.
Mr Subhash Khuntia, IRDAI chairman, said, “I would like to encourage insurance companies to weed out products that are not selling and are simply adding to the numbers. If they do this, they will be able to manage their portfolio well.”
The regulator conveyed the message in a recent meeting with CEOs of insurance companies, reported Moneycontrol.
A cap in terms of the number of products a company can have was not specified. However, data show that insurers typically have only four or five popular products on average.
India’s life and general insurance companies together sell more than 1,500 products.
Having a slew of products leads to additional costs for insurance companies in the form of IT infrastructure and the need for record keeping.
According to estimates, insurance companies could save up to 30% of annual costs if they restrict the number of products being sold in the market.
To be sure, there are also niche products that may not sell too much but serve a need in the market. Such products, say a cancer cover, would still be made available even if they have low traction, says the chief executive of a mid-sized bank-led insurer.
“Through our actuary, we would be able to explain to the regulator why some products are still being sold,” he said