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.
To stabilize the property/Assest Insurance in india and to protect the interest of larger public, our central government should merge the PSU genereal insurance companies immediately. So that may avoid cut-throat competition.
The competition is from Private Insurers as well who always take a lead in granting higher and higher discounts.
Tumkur
It is wrong on the part of the General Insurers in India, citing intense competition in the market, to adopt price cutting to the extent of almost 99% of the Company’s Scheduled premium. Assuming liability in many crores of rupees for an unmatching meager premium will land the Company into a tragedy. All the Insurers–Private and Public–must underwrite the business prudently.
Only sick PSU wants to get merged with stronger ones
A timely step by IRDAI. Extreme discounting to meet targets compromises actuarial standards and ultimately puts claim settlement capability at risk. Fair pricing and strict regulation are essential for the long-term sustainability of the general insurance sector.”
Greatly admire equality and levels playing field in the 3rd largest Economy in the world
Pricing is de tariffed in 2007 wording are de tariffed from April 1 2024. From 2019 to 2024 rates were controlled by GIC and other insurer through treaty agreements.
Now discounts or not 99% but greater than that and also discounts are given on AOG premium perils also.
Reduction in prices led to denial of
Claims on filmsy grounds.
There is no discipline in insurer and reinsurers as of now.
Indian insurance market is competing on ground premium instead of better customer service
P K Jain
IRDA Should take EDs help whenever and wherever the pvt players give discount in any other form
Eg Cut and Pay it is a roundrobin of black money
How many more years will the regulator take to understand that Indian Insurance Industry will always remain immatured as far as Risk based rating is concerned. Detariff the rates and see the naked dance is what we have seen on multiple occasions before.
The only way to save this Industry is to fix prices and let the competition be on service parameters.
Why discounts, reduce premiums on Fire, Motor OD to avoid unethical business, should standardise all premiums
Belated decision. Already pvt players have taken away cream of PSU share of premium.
It is the duty of Authority to chech health of insurers.If 99,% discount is offered than how the balance sheets of Insurers can be strong.In my opinion RBI must give freedom to banks to allow 12% interest on Fixed deposits and lower the interest on landing as IRDA has allowed to Insurance Industry.
DISCOUNT ON FIRE ND MOTOR INSURANCE SHOULD BE TOTALLY ABOLISHED TO KEEP INSURANCE INDUSTRY ALIVE
IRDAI’s advisory is a timely and welcome step. Intense competition among both public and private sector insurers has, over the years, resulted in unsustainable discounting at the cost of underwriting discipline. Global experience—including the UK and Australian property insurance markets—has shown that prolonged underpricing inevitably leads to sharp market corrections. Sustainable, risk-based pricing, not price wars, is the foundation of a resilient insurance industry and ultimately serves the best interests of policyholders.
IRDA must take a stand and fix the minimum prices across all the insurers specially under Fire LOB. Increasing penetration is needed under MSME’s not the larger corporates or industries like chemicals and pharma etc. wherein insurers are providing discounts like anything without analysing the risks involved
The property underwriter needs to be respected and others should understand that – Top line is vanity and bottom line is sanity.