As insurance regulator Irdai has allowed general insurers to design new and customized products for homes, micro and small businesses for fire and related risks, this new directive will provide policyholders with more options to select products. In addition, competition between insurers on product features should bring innovation to the sector.
Insurers should continue to price new bespoke products and coverage extensions more competitively in order to gain greater market share in fire and related risks insurance, which has been a profitable line of business, according to the industry experts.
In its effort to increase insurance penetration and offer greater choice to policyholders, Irdai authorized general insurers on May 12 to design new and personalized products for homes, micro and small businesses against the fire and related hazards. Currently, insurance companies offer standard fire and special risk insurance policies, which provide insurance coverages for physical loss, destruction and damage to insured property due to fire, lightning, storm, explosion, flood, earthquake, landslide, cyclone, riots, strikes and terrorism, among others.
“Irdai’s new guidelines allowing insurers to design new personalized insurance products for fire and similar risks are a very welcome initiative for the benefit of policyholders. Giving insurers the freedom to sell personalized products and policyholders having more options to select from will greatly benefit customers, as competition on product features will bring innovation,” Director Sanjay Kedia told FE. national and CEO of Marsh India Insurance Brokers.
According to Kedia, competition on price, coverage and service has been seen globally to help customers and lead to rapid market growth. “It is a good step to boost insurance penetration in the country,” he said, adding that the leading insurance broker hopes the regulator will soon also start licensing insurance companies and intermediaries to bundle allied services to truly extend solutions to customers and not just insurance products. . “A concrete example is that already for car insurance, roadside assistance related services are allowed to be sold together with the insurance,” he pointed out.
The insurance regulator had allowed freedom of pricing, ie; in 2008-09, which allows price competition in the general insurance sector. Previously, the pricing of almost all general insurance products was determined by the Tariff Advisory Committee, overseen by Irdai. In addition, during the 2021-22 financial year, the regulator decided to authorize insurers to file three insurance policies for home risks, micro risks and small and medium risks and allowed insurance companies decide premium rates based on their own experience. and the quality of the underlying risk. This resulted in advantageous pricing for policyholders.
“In our view, the trend would continue and insurers would continue to price new products and coverage extensions more competitively to gain greater market share in this profitable line of business (fire and related risks),” said Kedia about the pricing of the new and personalized fire and related risks insurance.
According to him, reinsurance companies should enable insurers to innovate in coverage and can help by aligning their support for reinsurance by providing reinsurance capital and extending product knowledge expertise and enabling insurers to cede risks. “They can contribute further by offering their global expertise in these segments and helping insurers develop more innovative covers,” Kedia added.
Irdai has enabled general insurers to design and deposit alternative products covering fire and similar risks after taking into account the growing demands for new cover in the fire sector. “These alternative products may be variations of the standard product and may include add-ons already approved as part of the base product or may remove an existing provision,” the regulator said.
However, the definitions and formulations of the terms used in the standard product will serve as a point of reference for these terms when they are also used in the alternative products. In addition, the price of new products will be proportional to the risks incurred.
For the country’s non-life insurance sector, the gross premium written by insurance companies under fire insurance stood at 21,545.25 crore for the last fiscal year, registering a growth of 7 .02% YoY.