According to the 'use and file' system, insurers can design a product and use it in the market first before filing the model policy with the regulators. The main features under this method are that:
On the other hand, the 'file and use' system requires an insurer to fill in an application form according to the instructions of the regulator. The main purpose is to ensure that the products manufactured by the insurers are for the interest of the public society and that the product should be financially viable and does not create insolvency for the insurance company.
Under the 'free system' there is no intervention whatsoever from the regulators. This may also be referred to as 'freedom with responsibility'. Under this system, the philosophy is that the market will take care of the price and hence the fittest only will survive.However, the insurer will be monitored by the regulator through tests like the 'solvency test' and 'asset-liability matching' test and so on.
In all the above options available, the customer is the main focus. The customer should have a choice of product. The products should be within reach of the customer.
- The insurer is given freedom with restrictions
- The main aim is to provide opportunity for the insurer to innovate in the product design
- No technical analysis is done by the regulators
- The regulator will ask the insurer to stop further sales if it is felt that the product is no longer in the interests of public.
- The regulator will take action as and when he receives complaints about the product from the public.
- The main risk is that there could be a possibility of insolvency due to the product which may need to be resolved.
On the other hand, the 'file and use' system requires an insurer to fill in an application form according to the instructions of the regulator. The main purpose is to ensure that the products manufactured by the insurers are for the interest of the public society and that the product should be financially viable and does not create insolvency for the insurance company.
Under the 'free system' there is no intervention whatsoever from the regulators. This may also be referred to as 'freedom with responsibility'. Under this system, the philosophy is that the market will take care of the price and hence the fittest only will survive.However, the insurer will be monitored by the regulator through tests like the 'solvency test' and 'asset-liability matching' test and so on.
In all the above options available, the customer is the main focus. The customer should have a choice of product. The products should be within reach of the customer.
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