Premiums unlikely to dip

Companies may not get a significant reduction on their premiums when the Insurance Regulatory Development Authority of India (Irda) offers full pricing freedom to insurers on fire and engineering insurance covers in the next couple of months.

At present, the insurance regulator has allowed insurers to offer a maximum discount of 51.25 per cent on erstwhile tariff rates on individual rated products (those risks where the value of insurance-cum-insured is more than Rs 10 crore), up to 43.75 per cent in case of class rated products (those risks whose sum insured is less than Rs 10 crore) and 20 per cent on motor own damage for private vehicles.

Several general insurers, including public sector firms, have filed new premium rates for fire and engineering covers providing for further discounts.

Says K N Bhandari, secretary general of General Insurance Council (self-regulatory body of all insurance companies), "Insurers have not filed the rates with significant reductions. The insurance industry has already seen substantive reduction in premium rates and therefore further significant reduction would be unrealistic and not warranted by the claim exposure and experience of the company on fire and allied catastrophic risk. Some adjustment of rates will take place. A minor reduction of 5 per cent can happen but not more. The market has already seen the bottom of it. Therefore, a further 30-40 per cent reduction is not possible. Insurers have to bear 15 per cent procurement cost, 20 per cent management expense besides reinsurance cost."