Insurance rates have nosedived in the general insurance industry following the IRDA decision to deregulate the market in phases from January 1, 2007. Says Pavanjit Singh Dhingra, Vice President, Prudent Insurance Brokers: “Clearly, a price war has broken out among insurance companies as they compete to woo clients.” Prices have slumped in all major categories. In property and engineering insurance, prices have crashed by 50 per cent on an average.
- De-regulation leads to price war
- Rates tumble in major segments
- Free pricing increases the role of insurance brokers in negotiating deals
- Prices unsustainable say experts
The general insurance industry in India was de-tariffed from January 1, 2007, giving insurance companies the freedom to decide their premium rates. Earlier, tariff regulations ensured fixed prices for products. The authorities, though, felt that the nonlife insurance market had matured enough, and to grow further, this protection had to be removed. While free pricing was introduced in 2007, a floor price (51.25 per cent discount to existing tariff rates in 2006) was set as a precautionary move. This restriction, too, has been withdrawn from January 1, 2008, putting further downward pressure on prices. Says Dhingra: “These rates are clearly unsustainable”.
For customers, there is more good news. In the last phase of deregulation, companies will be allowed to offer customised products to clients from April 1, 2008. This, analysts say, will force general insurance companies to think out of the box.— Rishi Joshi