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August 8, 2014
General insurers in India are planning to introduce a “base rate” system to price premium rates. The move is expected to arrest the rise in underwriting losses in the face of intense competition.
The General Insurance Council, which represents non-life insurance companies, discussed the idea last month at a meeting attended by the heads of New India Assurance, GIC Re, ICICI Lombard, HDFC Ergo and Tata AIG General Insurance, reported the Press Trust of India.
“We are in discussions to standardise best practices in underwriting property and health risks,” General Insurance Council secretary general, Mr R Chandrasekaran, said. He added that the move is to ensure that the risk is properly evaluated by general insurers and taken into account in pricing.
New India Assurance chairman and managing director , Mr G Srinivasan, said: “There is a feeling that premium rates in the domestic market are on the low side. Insurers have been discussing for some time how to ensure that the rates are at the right level and that there is some semblance of uniformity.
“At the July meeting, we had discussed how to bring the rates to the right level across the sectors, including health, motor and fire & engineering.”
“The Insurance Information Bureau is already trying to do it in the fire segment. Along similar lines, we want to have some kind of technical rates in the industry,” he added.
Fixing minimum rates could take insurers back to pre-2007 when tariffs were in force. Insurers have been slashing premium rates since 2007 when the Insurance Regulatory and Development Authority (IRDA) removed its fixed-tariff system for all business lines except for third-party motor insurance. De-tariffing allows insurers to price their products freely.