Non-life insurers may soon get the freedom in pricing their products with the Insurance Regulatory Development Authority (Irda) asking them to file their revised-base rates along with the discounts they wish to offer to their customers, supported by adequate statistical information justifying the discounts.
When representatives of all the 12 general insurance companies met Irda chairman C S Rao on Monday, they had asked him to do away with caps on discounts. The insurance regulator had capped discounts that general insurers can offer on the base rates when it lifted the price controls with effect from January 1, 2007.
Irda has agreed to give insurers the freedom in pricing their products, CS Rao told Business Standard . Rao further said, “Each insurance company will have to give a rating structure to us as each insurer’s rating philosophy differs. On the base rate filed by an insurance company, there will be a set-off.” Rao noted that six months of detariffing had also helped companies “gain experience” to deal with new market situations.
The Irda has left it to insurers to file their revised rates whenever they are ready with them.
The non-life insurance industry was detariffed from January this year. Though Irda lifted price controls on insurance products (fire, engineering and motor) from January 1 this year, it had put caps on the discounts, fearing a price war between them.
Insurers can give a maximum discount of up to 51.25 per cent of the erstwhile tariff rates on individual rated products (those risks where the sum insured is more than Rs 10 crore), up to 43.75 per cent in case of class-rated products (those risks whose sum insured is less than Rs 10 crore) and 20 per cent on motor own damage for private vehicles.
At the meeting with the Irda chief, insurers also reiterated their demand to advance the second phase of detariffing to January 1, 2008, from March 31, 2008, which was accepted by the regulator.
The second phase of detariffing will allow insurers the freedom to change wordings, terms and conditions of insurance policies. The demand of preponing the second phase is keeping in mind the renewals of major corporate insurance policies which falls on April 1 so as to give insurers a three-month time to prepare.
Rao said, “Insurers will have to identify the revised terms and conditions, flexibility they want in terms of packaging of insurance products, alternative wordings in respect of certain areas. However, in certain conditions there will be no changes in terms and conditions and the interests of the insured will be protected. The initiative has to come from the insurance companies.”
Meanwhile, the General Insurance Council ( a self-regulatory body of all insurers) is working on developing common market wordings that can be used by all insurance companies once Irda allows insurers the freedom to frame their own wordings.
About the demands put forth by insurers at the meeting, an insurance official said, “Let there be competition on product innovation and packaging of insurance policies. The limitations by the Irda are restricting competition. Insurance companies have requested Irda that these restrictions may be dispensed with and they be allowed to rate the policies based on their perception of risks so that the benefits of competition can go to the customer.”
When representatives of all the 12 general insurance companies met Irda chairman C S Rao on Monday, they had asked him to do away with caps on discounts. The insurance regulator had capped discounts that general insurers can offer on the base rates when it lifted the price controls with effect from January 1, 2007.
Irda has agreed to give insurers the freedom in pricing their products, CS Rao told Business Standard . Rao further said, “Each insurance company will have to give a rating structure to us as each insurer’s rating philosophy differs. On the base rate filed by an insurance company, there will be a set-off.” Rao noted that six months of detariffing had also helped companies “gain experience” to deal with new market situations.
The Irda has left it to insurers to file their revised rates whenever they are ready with them.
The non-life insurance industry was detariffed from January this year. Though Irda lifted price controls on insurance products (fire, engineering and motor) from January 1 this year, it had put caps on the discounts, fearing a price war between them.
Insurers can give a maximum discount of up to 51.25 per cent of the erstwhile tariff rates on individual rated products (those risks where the sum insured is more than Rs 10 crore), up to 43.75 per cent in case of class-rated products (those risks whose sum insured is less than Rs 10 crore) and 20 per cent on motor own damage for private vehicles.
At the meeting with the Irda chief, insurers also reiterated their demand to advance the second phase of detariffing to January 1, 2008, from March 31, 2008, which was accepted by the regulator.
The second phase of detariffing will allow insurers the freedom to change wordings, terms and conditions of insurance policies. The demand of preponing the second phase is keeping in mind the renewals of major corporate insurance policies which falls on April 1 so as to give insurers a three-month time to prepare.
Rao said, “Insurers will have to identify the revised terms and conditions, flexibility they want in terms of packaging of insurance products, alternative wordings in respect of certain areas. However, in certain conditions there will be no changes in terms and conditions and the interests of the insured will be protected. The initiative has to come from the insurance companies.”
Meanwhile, the General Insurance Council ( a self-regulatory body of all insurers) is working on developing common market wordings that can be used by all insurance companies once Irda allows insurers the freedom to frame their own wordings.
About the demands put forth by insurers at the meeting, an insurance official said, “Let there be competition on product innovation and packaging of insurance policies. The limitations by the Irda are restricting competition. Insurance companies have requested Irda that these restrictions may be dispensed with and they be allowed to rate the policies based on their perception of risks so that the benefits of competition can go to the customer.”
Source: Business Standard
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