Although India’s general insurance market has been de-tariffed, allowing insurers to determine their own pricing since Apr 1,2024, the IRDAI reminded companies that premiums must remain aligned with board-approved underwriting policies and prudent risk management practices
Hyderabad:Swinging into action to check cut-throat competition in the domestic general insurance industry, the Insurance Regulatory and Development Authority of India (IRDAI) has asked general insurers to refrain from offering extreme discounts of up to 99% on fire insurance policies, saying such unheathy underwriting could jeopardize insurers’ financial health and their ability to settle large claims.
The IRDAI has received representations regarding very low rates for certain large fire risks including discounts of up to 99 per cent from base or benchmark rates, reportedly due to intense competition, business targets year end pressures or demands from clients and intermediaries, said a letter from IRDAI, on July 22, to CEOs of multiline general insurers.
“Large industrial and fire risks are low-frequency but high-severity and a single claim may many times be in multiples of premium collected. Pricing should therefore be decidedrationallyand in soundacturial basis.Inadequate pricing and excessive discounting would lead to underwriting losses, volatility, mismatch with reinsurasnce costs thus adversely impacting financial health of insurers,” said the IRDAI.
Although India’s general insurance market has been de-tariffed, allowing insurers to determine their own pricing since Apr 1,2024, the regulator reminded companies that premiums must remain aligned with board-approved underwriting policies and prudent risk management practices.
The regulator’s intervention follows a sharp contraction in fire insurance premiums during the first quarter of FY27, highlighting the impact of an intense price war in the corporate insurance market. Fire insurance premium collections dropped to ₹8,087 crore in Q1 FY27 from ₹11,206 crore in the corresponding quarter last year.
The decline comes despite the fire insurance segment having emerged as one of the strongest growth drivers in FY26, when premiums rose about 13.4% to contribute more than ₹27,500 crore to the general insurance industry’s premium pool.
The pricing pressure has already affected insurers’ quarterly performance of general insurers.
Girija Subramanian, CMD of New India Assurance (NIA), described the April-June quarter as challenging for the industry.
“The industry property premium declined by 27.8% during the quarter and, since Q1 is a property-heavy quarter for NIA, our overall gross written premium growth was muted at 2.9%,” she said while announcing the company’s quarterly results.