Not all insurers will get free pricing nod

KOLKATA: Not all general insurers will be allowed free pricing on their products from November 1 as was indicated by the regulator earlier. The Insurance Regulatory Development Authority (IRDA) has now decided to allow free pricing for insurers on a case to case basis.

This means that only those insurers who have received clearances from IRDA will be able to rework the price of their products, while others will have to continue with existing prices for their policies.

Interestingly, the regulator, in a letter to chief executives of all general insurers, had earlier said November 1 will be the date for introduction of free pricing. Partial detariffing for segments like fire, engineering and motor own damage was introduced last year and the regulator fixed upper and lower limits of 50% for these categories of products. Free pricing refers to removal of that limit and revising the price of the policies.

Although, the majority of 12 insurers have submitted their proposals for reworking the pricing structure of their products, a number of them are yet to receive the regulator’s clearance and are hence not in a position to offer a new pricing structure for their policies from November 1.

“Approvals will be given on the merit of each case and the basis of the rating structure, profits expected, underwriting philosophies, etc,” IRDA officials told ET.

“We have already submitted the requisite proposals and papers to IRDA, but are yet to receive any go ahead from them. There was a letter from IRDA a few months back that free pricing will be introduced from November 1. However, there is no further notification,” Oriental Insurance CMD M Ramadoss told ET.

Officials from Bajaj Allianz General Insurance also said they were yet to receive any fresh communication from IRDA. “We will allow pricing freedom only after all insurers have submitted the required documents. Earlier, when partial free pricing was introduced in January 2006, insurers were asked to submit their documents a couple of months prior to the date of introduction,” IRDA chairman CS Rao had earlier told ET.

IRDA has asked insurers to submit the rating structure they intend to introduce when free pricing is allowed, as well as the underwriting philosophy and a broad guideline on how they intend to go about free pricing. Additionally, at present, they have to indicate guiding rates for products, discounts offered and the planned loading.

They also need to explain the reasons for allowing discounts or loading. Loading refers to hiking premiums for particular products. All these proposals also require to be passed by the boards of the respective companies before they are submitted to IRDA.
The regulator will introduce free pricing only after all the insurers have presented these documents. Covers for fire, engineering and motor may get cheaper once again if price control over such policies are removed.