Giving further freedom to insurance companies, sector regulator IRDA has announced removal of all pricing controls on general insurance products, including fire and engineering, beginning next year, which is expected to bring down premiums.The new regime is likely to usher in intense competition among the players leading to reduction in premiums.
However, any revision in rates will only be effective on renewal date of the insurance and insurers shall not be permitted to cancel existing insurances and replace them by new insurances at revised rates, it said.
This is the second round of detariffication in the general insurance sector as the regulator had earlier allowed limited price freedom to the players beginning this year.
"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," IRDA said in a release.
The move by insurance regulator is expected to bring down the premium rates on motor own damage (insurance cover over the vehicle), fire and engineering. IRDA, however, said the premium rates for Motor Third Party risks will continue to be regulated by the Authority.
Insurers would be free to quote premium rate as per the schedule of rates and rating guidelines with the IRDA or can maintain the schedules and rating guidelines that have already been filed.
The boards of general insurance companies will assume effective control of the underwriting policy of the insurer. IRDA will accept the rate schedules and rating guides as filed by the insurer on the premise that these are in compliance with the underwriting policies approved by the board.
"All the CEOs have given an assurance that insurers will maintain high standards of underwriting and market conduct even after price controls are removed," the release said.
Besides, IRDA also said, the terms and conditions of cover and the wordings of policies, endorsements, warranties and clauses set out in the erstwhile tariffs shall continue to apply until fresh market wordings are examined and accepted after considering the views of various stakeholders.
General Insurance Council, the association of non-life players have already floated draft guidelines for detariffication of terms of policy.
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