According to the IRDAI, in the current situation, there are no real free market price discovery, no risk-quality based price discrimination, and no  incentives for policyholder to adopt better risk management and insurer to price per own portfolio experience.

What insured’s need is freedom to determine extent of protection and credit for risk management investments, recognition for risk quality / risk features and price discrimination reflecting own exposure profile, said the IRDAI

Mumbai:

As part of broader reforms, the insurance regulator IRDAI is now keen to shift to a total detariffed general insurance market excluding motor third party business.

Recently, led by Thomas Devasia, member(Non-life), IRDAI, it has already held two rounds of discussions with general insurers on the range of new measures, which are on the anvil, to provide larger freedom to insurers to design policies.

Though, the general insurance market, except motor third party portfolio, was detariffed in 2008, a lot of existing tariffs and areas remain regulated including general rules and regulations, standard policy wordings, standard wordings for endorsements and standard proposal forms, said the IRDAI in its presentation to the general insurers.

According to the IRDAI, in the current situation, there are no real free market price discovery, no risk-quality based price discrimination, and no  incentives for policyholder to adopt better risk management and insurer to price per own portfolio experience.

It has led to innovation lethargy and monopolistic situation due to IIB (Insurance Information Bureau) rates remaining in play via reinsurance treaty prescriptions.

The risk appetite of Insurance buyers are not recognised via optional structures such as First Loss,Excess of Loss,Peril-specific, Short-term, Agreed value, pointed out the IRDAI.

IRDAI is now discussing with general insurers a new set of plans to unleash innovations in Rs 2.25 crore general insurance market and has proposed following changes in the existing norms.

-Insurers/ Reinsurers to align towards affording fair choice to discerning insurance buyers,:

-IIB referenced rates or any other model of minimum pricing restrictions not to be reintroduced,

-No prohibition on ‘Excess of Loss’ insurance,

-No prohibition on ‘First Loss’ insurance,

-No prohibition on ‘Agreed Value’ insurance,

-No prohibition on ‘stand-alone peril’ insurance  on any line of business including via treaty conditions or market agreements other than for new or volatile lines of business provided agreed to in prior by IRDAI,

What insured’s need is freedom to determine extent of protection and credit for risk management investments, recognition for risk quality / risk features and price discrimination reflecting own exposure profile, said the IRDAI.

It has further proposed changes like de-notification of tariffed wordings, terms, conditions of the following:

-Fire insurance tariff, engineering insurance tariffs and motor tariff(own damage)

Insurers will  continue to offer existing products (filed and UIN allotted) including ‘standard products’, tried and tested, market familiarity and market enabled to evolve best practices.

The IRDAI also wants  that all terrorism coverage must be offered to be ceded to the Indian Market Terrorism Risk Insurance Pool though cedants can continue to retain part of the risk, to their unprotected net account, as per their risk appetite.

“Cedants should not be not permitted to set up and utilise own reinsurance arrangements or access other facilities in priority over the Pool,’’ said IRDAI.

‘‘Insured Interests’ that fall within the exclusions of the Terrorism Pool will continue to be offered to the Terrorism Pool. However cedants have liberty to arrange own Terrorism/ Political Violence capacity in excess of Pool limits.

Terrorism Pool Technical Board is recommended to review current structure and scope of coverage, to afford every feasible enhancement to the Indian market.

The IRDA has said the reforms will encourage risk specific underwriting based on risk quality than just ‘portfolio loss experience’ basis.

It will improve the risk portfolio assumed by insurers since contractually assumed peak exposures (100% Sums Insured) get pared to ‘Loss Limits’. .

It will also afford ‘capital relief’ in the transition towards Risk Based Capital (RBC) regime.