When Phileas Fogg embarked on his world tour, he didn't have travel insurance. But today’s traveller is better prepared for the hazards that Fogg and his companions faced during those incredible 80 days.
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Customisation is the keyword in today’s travel insurance plans. A student will be sold a policy that’s very different in scope and content from one offered to a tourist or to a businessman who travels across continents.
Also, the policy can now be for the exact length of the travel plan instead of the 15-day and month-long blocks that used to be sold earlier. Says Khalid Sohail, head of Travel Insurance Services at Tata-AIG General Insurance Company: “You decide a travel destination and there will be a plan to cover you accordingly.”
And there are plenty of innovations on offer. The insurance company flies in a relative from home if the insured person takes seriously ill in a foreign land.
Besides death and personal accident, travel insurance also covers trip cancellation, baggage loss, natural calamities and contingencies.
Incomplete Freedom
The long-awaited detariffing of the general insurance sector became a reality on 1 January 2007. However, I would not term it full freedom in underwriting. Motor third party continues to be under administered price mechanism and enough restrictions have been placed to guard against reckless underwriting. The detariffed scene is a bouquet of roses and thorns. While most profitable segments of fire and engineering would see a reduction in rate, motor third party still continues to hog the limelight. Although Insurance Regulatory and Development Authority (Irda) has considered reducing the thirdparty rates of commercial vehicles to a more balanced level of 70%, insurers foresee a quicker rise in thirdparty premium. Insurers are also taking up the issue of a large number uninsured vehicles on the roads.
Fire insurance is the single largest gainer for customers. Probably because under the tariff mechanism, fire premiums were loaded to cross subsidise the rising motor claims. With more balanced rating in all portfolios we would see a greater fall in fire premium.
 M RAMADOSS, Chairman & MD, Oriental Insurance |
New policy wordings and clauses are permitted only after 1 April 2008 and as of now the leverage is only in respect of rating. Strangely, detariffing took an impact in a peculiar segment which was already free priced—medical claim.
Earlier health insurance covers were considered as a marketing tool to attract more profitable portfolios. With premium in fire and engineering showing a down trend on detariffing, health premiums are going up. Even before detariffing, we conducted an internal examination of the rate scales in health and effective September 2006, brought about rationalisation of premium rates based on claims incidence and impact.
The customer is now the king. But the king has a larger responsibility. In order to derive better benefits of detariffing, insurers expect from him certain rational actions. The first is the availability of risk information. Some customers have started focusing their attention towards risk management and improvement.
Good customers are expected to monitor their work process to remove any possible known risks. Any money spent on security will be worth the same.
The second area of caution is the selection of an appropriate intermediary. To derive best benefits from the intermediary it is necessary for the customer to be clear about his expectations. To avoid conflicts it is always better to issue mandate to a single intermediary, who will examine the manufacturing process or asset accumulation, make suggestions for risk improvement, suggest additional covers and policy modifications. The intermediary should also be knowledgeable enough to suggest covers to be avoided. He should also be of assistance in claims.
The current phase of detariffing is only the first step. There is more to come. And when motor is also underwritten freely, full-scale free market will have truly arrived.
