Irda rejigs draft guidelines for non-life products

NEW DELHI: Gearing up for a detariffed regime from January next year, insurance regulator Irda has issued a 31-point draft revised ‘File-And-Use’ guideline for all general insurance products.

Products which are currently under tariff but which will be underwritten with modified rates after the tariffs are removed should be filed under these guidelines, after September 30, ’06.

Idra requires that the design and rating of products should provide clear and transparent cover, simple language for product description for laymen to understand and use similar wordings for describing same cover across all products such as clauses of renewal, basis of insurance, due diligence clause, cancellation clause, arbitration clause, etc.

Further, the product should be genuinely an insurance of an insurable risk with a real risk transfer and insurers should not enter the financial guarantee business in any form.

Pricing of products should be based on support of appropriate data and technical justification, and terms and conditions of cover should be fair to both the insurer and insured.

Margins built into rates should be consistent with the experience of insurer in respect of commission, expenses of management, contingencies and profits.

Idra said insurers should take steps to ensure that competition will not lead to unprincipled rate cutting and other improper underwriting practices.

Idra has asked insurers to give their suggestions on the draft by August 25 for consideration and modifications, before the guidelines come into effect from September 30, ’06.