Now, the insurers can change terms, conditions, clauses, warranties, policy and endorsement wordings applicable to certain classes of business such as Fire, Engineering, Motor, Workmen’s Compensation and other classes of insurances which were not allowed earlier.
Overall, these market reforms will enhance the financial soundness of insurers, incentivise risk mitigation and product diversification, improve insurance coverage, and bridge the insurance protection gap, said the insurers
Mumbai/ Hyderabad:
Cheering the general insurance industry and India Inc, after detariffing pricing, regulator IRDAI, from Apr 1, has finally allowed the general insurers to change the wordings in all corporate policy documents, except motor third party, enabling customisation of the policy wordings in accordance with the risk profile that would encourage product innovation and will meet the larger customer needs.
With the next step in detariffing, the insurers can now change terms, conditions, clauses, warranties, policy and endorsement wordings applicable to certain classes of business such as Fire, Engineering, Motor, Workmen’s Compensation and other classes of insurances, which were not allowed earlier, said the gazette notification issued by the government on March 21.
Earlier, In India, despite detariffing in all the segments of Indian general insurance industry in 2006 in terms of pricing, except motor third party motor premium, the insurers didn’t have the freedom in issuing customised policy wordings and had to follow a particular set of pre-determined format as far the wordings including terms and conditions in the policy document are concerned.
The Indian insurance market will be now aligned with leading global markets in freedom of pricing and preparing policy documents, said the insurers.
Overall, these market reforms will enhance the financial soundness of insurers, incentivise risk mitigation and product diversification, improve insurance coverage, and bridge the insurance protection gap, said the insurers.
T A Ramalingam, chief technical officer, Bajaj Allianz General Insurance said,“ it will take at least a few weeks to put in place innovative covers after insurers are allowed to customizate the coverages across all the line of businesses(LOBs). It would not immediately impact the forthcoming Apr 1 renewals.”
`After pricing, we are happy that now the restrictions on drafting terms and conditions have been removed. It will help the general insurers to meet the larger requirements of their clients,” said Ramalingam.
The members of General Insurance Council and IRDAI are now busy in discussing the new development and preparing the new master circular for the industry.
Parag Ved, CEO & Whole Time Director, Liberty General Insurance said,“ This landmark development not only underlines IRDAI’s commitment to promoting and ensuring the orderly growth of the insurance industry but also significantly empowers insurers like us to tailor our offerings more precisely to meet the diverse needs of corporate clients. By enabling us to customize wordings in corporate policies, the IRDAI has opened avenues for innovation, allowing us to enhance clarity, transparency, and relevance in our products. This aligns perfectly with our mission to deliver exceptional value and service to our customers.”
“We believe this regulatory advancement is a crucial step towards enhancing insurance penetration, a stride that aligns with IRDAI’s vision of achieving insurance for all by 2047”, Ved added.
Sumit Bohra, president of Insurance Brokers Association of India (IBAI), said, “The de-notification of tariff is very welcome move which has been a long standing demand of the Insurance Brokers. This will provide greater choice and freedom to the consumers in terms of selection of risks to be insured. The move will force insurers to innovate and penetrate the market with newer products.”
“The de-notification of Tariff represents a substantial shift for both insurance companies and consumers, and I believe it carries notable implications. For insurers, it offers the advantage of flexibility in product design and encourages innovation, which I see as beneficial. However, from a consumer perspective, it means policy terms won’t be standardized anymore, necessitating careful scrutiny of policy details. While consumers will enjoy a broader selection of products, making a decision will require a more discerning approach. As for pricing, I don’t anticipate an immediate impact on the sector; rather, I believe it will take time to manifest.” said Kevin Menezes, executive director at PolicyBoss.com.
In exercise of the powers conferred by sub section (1) of Section 64 ULA of the Insurance Act, 1938, the IRDAI has notified the removal of prevailing system of using a particular format, in terms of wordings. in a policy document.
The general insurers now have such freedom while preparing policy documents in the areas including All India Fire Tariff, Industrial All Risks Tariff, Consequential Loss (Fire) Tariff, Petro-chemical Tariff, List of Hazardous Goods, Motor(except Motor Third party ),Engineering Insurance Tariffs, namely,. Contractors All Risk Insurance, Contractors Plant and Machinery Insurance, Machinery Breakdown Insurance,. Electronic Equipment Insurance, Civil Engineering Completed Risks Insurance, Erection All Risk/Storage Cum Erection Insurance,. Loss of profit (MB & BLOP) Insurance, Boiler and Pressure Vessels Insurance, Deterioration of Stocks-(potato) Insurance,Miscellaneous, namely Workmen’s Compensation Insurance Tariffs, Marine, namely Tea Tariff, said the IRDAI.
However , the IRDAI has clarified that no insurer will at any time withdraw or discourage the use of or decline to offer to any customer any of the tariff products which have been in existence prior to this notification.
Now every policy wording need be check by brokers whether there is correct wording or not?.
Yes. It is the duty of the Agents/Brokers, to understand the client’s needs in the of areas of risk mitigation and verify the policy wordings to meet the client’s requirements.
The importance of Agents/Brokers involvement in formulating the Policy is increased.
Right move by the IRDA to globalise of Indian Insurance Industries
Now the role of Brokers/ Agents plays a vital role in placing the risks. It’s a way towards globalization of Indian Insurance Industry.
To cut the long story short…..In the acronym IRDAI D signifies Development for the Private Sector and Demise for the Public Sector.
Now insured choices would be wide with lots of pitfalls, unless it is promptly noted down at the time of contract
It is very dangerous for retail clients, agents and employees and it is beneficial for corporate clients, brokers, fleet owners, private sector insurance companies. Hence withdraw this notification to save general public money and also due to this decision insurance premium may be high and unaffordable for insureds.
Further down fall of PSU general insurers where decision taking processes are slow.
Bad move for policyholders who, as it is find difficulty in understanding standard policy wordings. How would they be able to make a prudent cost- benefit analysis of policies on offer, covering presumably same risks?
It would require more experienced and technical persons to design specific worded policies needed by clients.
Not a healthy move to safeguard the interest of insuring public.
Ready for wiper insurance in the name of car insurance. Broker will be chasing this
Applicable at Branch/DO/RO/HO – which level?
How many have the courage (forget expertise) to ignore scrutiny of Superiors, Plethora of Auditors where the Private Sector is obviously at a distinct advantage?
Signalling a death knell once more for PSGICS?
Just look at the Cheerleaders welcoming the move to find out who are going to be the Beneficiaries.
It is indeed a welcomed move by IRDA. Now there will be a great opportunity for those who are willing to improvise existing product depending upon the specific needs of their clients. If it is done properly, clients would also not hesitate to pay even slightly higher premium. Intermediaries would also have devote time in understanding the modified product in depth so as to protect their client’s interest.
It should not be a free for all situation. Some mandatory provisions need to be stipulated by IRDA for policyholder’s protection as well as fair play and transparency.