Irda to advance phase II detariffing

The second phase of detariffed insurance (that allows insurance companies to offer unique products) is set to be advanced by three months to January 1, 2008. The second phase was earlier scheduled to begin on April 1, 2008.

The key implication for the companies is that they will have more time to take a call on renewing various general insurance policies - for fire, engineering and motor insurance. At the moment, all insurance providers offer standard clauses.

Under a detariffed regime, they will be able to customise products for individual clients.

Companies have benefited from the huge discounts that started with the first phase of detariffing this year.

Around 45 per cent of all corporate insurances is renewed around the beginning of every financial year (April 1 - March 31).

According to sources, the Insurance Regulatory and Development Authority (Irda) is advancing the second phase of detariffing in order to give customers time to understand the changes in the policies.

In the first phase of detariffing, from January 1 this year, the Irda had given freedom to insurers to fix premium rates, which led to a heavy price war, with insurers offering up to 50 per cent discounts on policies to retain customers and attract new accounts.

"The next phase of detariffing is more important because both policy conditions and prices are variable. You could actually get a lower cover than you bargained for," said Pavanjit Singh Dhingra, vice-president of Prudent Insurance Brokers.

On the other hand, this will also allow insurance companies to bring in newer and better internationally accepted products into the Indian market.

"This shows the regulator's comfort level with the maturing market and implement reforms. The market has become mature and people have been able to take advantage of the first phase of detariffing. Insurers have to also settle down to the changed scenario and be able to tackle changes," said Sanjeev Chanana, general manager, Oriental Insurance Company.

The buyers of insurance will benefit from this as there will be many new products to choose from.

"With this change, most companies will specialise in certain kinds of policies in which they have a competitive advantage. This will be better for the whole market," said Dhingra.