Householder's policy to cost half

The free pricing regime in the general insurance industry has come into force, with the Insurance Regulatory and Development Authority (IRDA) clearing all the revised rates filed by general insurers.

The revised rates will see the premiums for householder's policy dropping by as much as 50 per cent for customers with a no-claim history. For other fire risks, engineering risks and motor own damage, the premiums could be lower by up to 25 per cent, industry sources said.

A senior Oriental Insurance Company official said the company could give discounts of up to 35 per cent on individual premium rates, while for others they could extend up to 25 per cent.

CS Rao, chairman, IRDA, told Business Standard, "All the (revised) rates that had been filed by insurance companies have been cleared." Insurers could follow the approved rates depending on how quickly they prepared their systems for the change, he added.

A householder's policy is basically a fire and allied perils policy that covers damage to a house building and contents in the house against fire, lightning, explosion of gas, riot, strike, malicious damage or terrorist attack, earthquake, flood and storm.

Most general insurers have been encouraged to offer large discounts on householder's policy on account of a good claims experience for this risk, barring exceptions like Mumbai floods last year.

A senior official of a public sector general insurer said the premiums for householder's policy in Mumbai might not be lowered this year as several companies had suffered large underwriting losses due to the floods.

With the revised rates cleared by IRDA, insurers will now not be required to follow a circular sent earlier for rates to be charged for renewals taking place this month. The IRDA circular had set a discount limit of up to 20 per cent on fire and engineering and a maximum of 10 per cent discount on motor own damage.

The premium rates for fire, engineering and motor risks were fixed by the Tariff Advisory Committee till the pricing controls were lifted with effect from January 1, 2007.

The total premium of the non-life insurance industry was Rs 20,421 crore in 2005-06, up 16.48 per cent from a year earlier.

Given that the fire and engineering portfolios are profitable, a price war is likely to take place among the dozen non-life players.