The Hindu : Business : General insurers free to quote tariffs from January 1

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Wednesday, Dec 19, 2007
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General insurers free to quote tariffs from January 1

Special Correspondent

IRDA retains right to require changes to any rate schedules

Insurers are asked to file a fresh schedule of rates
Motor Third Party risks will continue to be regulated by the regulator

MUMBAI: The Insurance Regulatory and Development Authority (IRDA) on Tuesday removed the controls on pricing of risks in the general insurance business with effect from January 1, 2008.

“Except for Motor Third Party risks, for all other new insurances and renewals effective on or after January 1, 2008, insurers shall be free to quote rates of premium in accordance with the rate schedules and rating guidelines that have been filed with the Authority,” C. S. Rao, Chairman, IRDA, stated in a communication to all CEOs of general insurance companies. However, the premium rates for Motor Third Party risks will continue to be regulated by the Authority.

Further, risks qualifying as large risks would be insured at the rates, terms and conditions and basis of insurance exactly as the rates and terms as developed from the reinsurers with no variation.

Insurers are asked to file a fresh schedule of rates and rating guidelines with the Authority or may maintain the schedules and rating guidelines that have already been filed. IRDA also stated that the requirements of the circular issued on September 28, 2006, with regard to the filing of products and rates schedules and rating guides and manuals would continue to apply as amended from time to time.

The Authority will accept the rate schedules and rating guides as filed by the insurer on the stipulation that these are in compliance with the underwriting policy as approved by the respective boards of directors and on the condition that they are designed so as to produce an operating ratio (incurred claims plus commission and expenses of management) not exceeding 100 percent on a gross underwriting basis. However, the Authority retains the right to query or require changes to any such rates schedules and rating guides, at its sole discretion.

Any revision in rates would only be given effect to on renewal date of the insurance and insurers would not be permitted to cancel existing insurances and replace them by new insurances at revised rates.

The insured has, however, the right to require cancellation of his insurance in which case, premium at short period scale as applicable would be chargeable.

The terms and conditions of cover and the wordings of policies, endorsements, warranties and clauses set out in the erstwhile tariffs would continue to apply until fresh market wordings are examined and accepted by the Authority after considering the views of various stakeholders.

Mr. Rao also informed that the issues relating to the removal of controls on pricing of risks in the general insurance business was discussed at a meeting with the CEOs of general insurers at Hyderabad on December 14, 2007 and the CEOs assured the Authority that the high standards of underwriting and market conduct will be maintained by all insurers even after the price controls are removed.

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