Hyderabad:
The general insurers will now be allowed launch 30 -year fire insurance policies.
Taking in to consideration the need for long-term coverages in fire Insurance products, , it is proposed to permit general insurers offer “long-term products” covering Fire and Allied perils in variation to the ‘standard product’ or as ‘alternative products’ for a, maximum up to 30 years in respect of dwellings, said IRDAI in its draft exposure on the proposed policies on Wednesday.
Long-term policies can be issued for dwellings including standalone residential houses, residential villa complexes as well as residential apartment blocks managed by Housing Cooperatives or Resident Welfare Associations or any other body representing the home-owners, said the draft.
However,in respect of risks with sums insured up to Rs. Five Crores (any one risk accumulation) for Offices, Hotels and Shops (as per Section III Simple Risks of erstwhile All India Fire Tariff) the duration can be only for five years.
Some of the features of the long term policy as proposed by the IRDAI are-
-All add-ons will be co-terminus with the base product
-Long-Term Fire insurance can be cancelled during the tenure of the policy. The refund of premium in such instance would be as under:
-Future Year Premiums – to be refunded in full
-. For the policy year in which policy is cancelled:
-Where no claims are reported during the year – Refund of prorata premium pertaining to the year of cancellation
-Where claims are reported during the year – No refund of premium
– GST and other government taxes – refund to the extent permissible as per the applicable norms.
-Commission is payable once premium is recognised.
-Such new long-term policies shall have a 30-days free-look period from the date of inception of the policy, to enable the policyholder to review the terms and conditions of the policy.
The policyholder is entitled for refund of premium on pro-rata basis in the event of exercising the free-look
cancellation. Any claims during the free-look period shall be admitted by the Insurer.
Pricing of long-term policies is to be made based on sound actuarial principles considering all the relevant aspects of rating including claims experience, lower anti-selection, reduced policy administration and acquisition costs given higher renewal rates, long-term discount,
The pricing of add-on and optional covers may likewise consider the cost efficiencies of policy administration.
There general insurers need to have a ‘Board-approved policy’ set up by the Insurer containing aspects relating to operational matters, accounting (including provisioning requirements) and disclosures for addressing the issue pertaining to cancellation of policy including claw-back of commission.
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