Assume I drive a scarlet hatchback at 70 km per hour to office and back, and a female colleague drives a grey sedan at a sedate 45 kmph over the same route. After 1 January 2008, the motor insurance premium I pay might be far more than what she will pay.
Several factors work against me. Strike one: male drivers will pay a higher premium than female drivers, who are considered more cautious. Strike two: driving above the speed limit could mean I am a rash driver. And strike three: research shows that red cars are more likely to be involved in accidents than cars in sober shades.
| Bad driver: Higher premiums will be charged if you fit a specific risk profile or have a bad record |
| Good driver: You will pay less if you're a good driver and fit the lowrisk profile |
| Job related: Get insurance to cover you for specific job-related or lifestyle ailments like eye strain |
| Stress related: You can even get niche covers like a policy to cover your hand in case of repetitive stress injury |
Charging premiums according to risk profile is thanks to the new, de-tariffed regime in the insurance sector. In the case of motor insurance, this could mean that a sales and marketing executive spending several hours on the road (and on the phone while driving) might pay a higher premium than a doctor who drives a shorter distance to reach the hospital.
There’s more. You might soon be able to get a health insurance policy that covers only the possibility of you getting carpal tunnel syndrome or any other repetitive stress injury caused by long hours in front of a computer. Or you could get a policy that covers only spinal problems. Or, if you’re a musician, get your voice insured.
And yes, all of this will happen in the foreseeable future. In fact, some of this has already happened. Renowned singer Shubha Mudgal and tabla player Aneesh Pradhan have already managed to persuade their insurance companies to provide them with customised covers.
The cover provides them a percentage of their income in case they are unable to perform for a 15-day stretch or more. With de-tariffing, it is expected that more such covers will be offered.
But what is de-tariffing? Till 2007, insurance was a strictly regulated sector and the industry regulator, the Insurance Regulatory and Development Authority (Irda), had fixed a minimum tariff for premiums. Insurance companies were also not allowed to change the scope of the covers. While Irda claimed that the tariff was only the recommended lowest rate that a company can offer, market dynamics made it impossible for any company to charge more.
While the move to de-tariff is historic, change might be slow. The products that are likely to see an immediate change will be motor and health. The biggest change, a direct result of opening up the sector, is likely to be the role of the broker. Unlike an insurance agent, the broker is not affiliated to any insurer, and so works in your interest.
He can understand your requirements and then structure a policy that you need and not something that’s sold to you perforce. So far, insurance brokers worked mainly for corporate clients and not with individuals, as there was generally little that could be done to personalise individual covers. With the tariff structure removed, insurance brokers can truly come into their own.
