Insurance products likely to become cheaper

Kolkata: Prices of general insurance products in the detariff regime are slated to fall by over 60 per cent with the onset of the second phase of reforms in the next couple of months.



Aggressive pricing is already beginning to trigger serious price wars in the market. This is set to intensify once the terms and conditions of policies or product formats begin to change over the next few months.

The sense of aggression in the detariffed general insurance market is already palpable, with cash discounts of almost 20 per cent being offered by some insurance companies over and above the maximum 51.25 per cent discount on individually rated risks.

A possible trend of market segmentation is likely to emerge as well. Each segment in the general insurance business is expected to become competitive and a clear segmentation in terms of the insurer’s experience on various portfolios within motor, fire and engineering are likely to emerge.

“While there would be an expected drop in fire and engineering premiums, companies would have to rake up big volumes through retail. For example, we expect to garner larger volumes from retail, which includes motor, shopkeepers and householders’ insurance, and the SME sector,” Ajit Narain, managing director and CEO, Iffco-Tokio, told DNA Money.

“Absolute premiums may not go down but what will happen is that the cash discounts which are offered may get absorbed in the product pricing. Hence prices on fire and property could go down by 61-70 per cent. The next one year could see aberrations in prudent underwriting at times and grabbing of market shares,” Rahul Agarwal, CEO, Optima Risk Management Services, told DNA Money.

“However, some of general insurance products will see an increase in prices over the next one year and competition will further hot up with three to four companies to start business,” he said.

While the general insurance market has grown by 12.03 per cent over the first quarter of the current fiscal, 8 private companies have grown by 26.11 per cent and have notched up almost 35 per cent of the over Rs 25,000 crore general insurance market.

Source: DNA MONEY