Fire insurance premium to fall

Insurance Regulatory and Development Authority expects decline in premium rates of fire, engineering and motor own damage covers once insurers are given the freedom to price these businesses from 2007.

"Fire and engineering tariff are expected to fall after it is detariffed. Tariff rate for motor own damage is also expected to fall but that for motor third party liability is expected to rise," C S Rao, IRDA chairman said.

Though IRDA is hopeful of a smooth detariffing of fire and engineering businesses, it apprehends "difficulty" in throwing open the motor insurance for a free-pricing regime contemplating a sudden spurt in motor TPL tariff.  In the past, government had faced stiff opposition from transporters when it tried to hike the motor TPL tariff.

So, the motor insurance in India continues to be under-priced. Considering this, the IRDA chief said he will take up the matter with ministry of surface transport and industry bodies.

"We want to ensure an orderly transition from a tariff to detariff regime...there is some difficulty in detariffing motor insurance. We are trying to overcome the difficulty," Rao said.

Oriental Insurance chairman M Ramadoss said there was no "hurdle" for detariffing fire and engineering businesses.

"Detariffing motor insurance may be delayed". If the motor insurance is detariffed, he said the tariff for Motor OD is set to increase by 20-30 per cent while it could go up by 200 per cent for Motor TPL. IRDA has asked insurers to submit by month end their suggestions on the roadmap for detariffing.

While laying down the roadmap for de-tariffing, Rao said much of the tariff revision would depend on the strategy of the insurer. "Tariff is not the most important thing. But managing that is important," he said, adding the regulator will stress on capability of underwriters.

While announcing a roadmap for de-tariffing all general insurance business from 2007, IRDA had made it clear that the function of underwriting and rating of insurance business should be independent of the business development function.

The roadmap assumes importance, as currently 70 per cent of general insurance products are priced at administered rates, which have not been revised for many years.