Saturday, November 11, 2006

What is detariffing in insurance?

Insurance premiums are fixed by a body known as the Tariff Advisory Committee which controls and regulates the rates, advantages, terms and conditions that may be offered by insurers in respect of General Insurance Business relating to Fire, Marine (Hull), Motor, Engineering and Workmen Compensation. Detariffing refers to doing away with such fixation of tariffs.

Responding to the demands from the industry, the IRDA has notified in September 2005, that a detariffing regime in respect of non-life insurance viz., liability insurance, indemnity insurance, personal lines like health insurance, and marine hull insurance, will come into place with effect from January 1, 2007.

Detariffing is expected to make the prices of these premiums market driven. It is expected that the premiums will take a southward direction. In a detariffed regime insurance companies are expected to focus on personal lines of business like health and motor insurance in a stronger way than at present.

2 comments:

Ramakrishna said...

IRDA sets floor rate for motor cover tariffs:

The IRDA has pre-empted a rate war among the insurance companies for motor insurance by asking companies not to offer insurance for automobiles at rates that are lower than 10% of the tariff.

A floor rate is already there for property insurance at 20%.

The floor rates will be applicable from January 1, 2007.

IRDA has allowed insurers to marginally increase the rates for third party insurance, which is an unprofitable business for insurance companies. They have been demanding an increase of about 200% under some categories; but it allowed them an increase of about 150%.

Average losses in motor insurance were around 85% and the expenses work out to be more than 100% after factoring the acquisition costs and management expenses.

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