Indian insurance regulator adopts industry software for product vetting

India’s Insurance Regulatory and Development Authority (Irda) has sought to improve the way insurance products are approved in the country by becoming what is believed to be the first regulator globally to adopt the same pricing software as its insurers.

The Indian insurance regulator licensed SunGard’s iWorks Prophet software, an actuarial software system, late last year and has now developed stress-testing procedures around the platform. SunGard says it is having discussions with similar regulators in both Thailand and Indonesia, and is hopeful of similar breakthroughs.

“We are building a stress-test model for life insurance products, for and together with the regulator in India,” says Peter Haslebacher, chief operating officer for SunGard’s iWorks business, based in Hong Kong. “They are going to use this afterwards for their product approval process for insurance products in India.” Haslebacher notes that SunGard has 23 insurers in India that are already using the Prophet system.

“Because the regulator needs to give sign-off and approval on those products, they are using Prophet on the regulator side. They are using the same system as the insurers on the product development and pricing side,” says Haslebacher.

“It’s really powerful, and a very innovative, progressive way to do things – where a regulator says let’s use the same applications as the market is actually using. It’s not just that they can review and sign off products developed using Prophet, they can do this for products developed using any other risk management solution as well.”

Haslebacher adds that in terms of talking to other regulators, “we’re sharing this experience, and the regulators are sharing their experience as well – I’m not so sure yet what is going to happen, but I wouldn’t be surprised if more regulators followed India with a similar system – whether it’s based on our solution or another solution”.

The Indian insurance market was brought to a halt early in 2010 by the Irda, which made insurance companies reapply for the licences for all their products, while it conducted a review of the market. Through this process, according to Haslebacher, the regulator learned a lot about the different insurance products, which sparked discussions about whether they should use a similar system to the industry.

One regional actuary at an international firm based in Hong Kong noted that he was somewhat surprised that regulators weren’t already using such software, but said the move “definitely makes sense”.

However, there are some concerns that any flaws within an off-the-shelf system could be replicated in the product approval process. The Irda was not immediately available to comment.