General insurers seek Irda nod to increase deductibles.
You may have to shell out more to make insurance claims in the coming months.
Insurance companies such as ICICI Lombard, Bajaj Allianz General Insurance, Reliance General and Royal Sundaram have sought regulatory approval for hiking deductibles. Deductible is the portion of the final claim amount that is not paid by the insurance provider.
The Insurance Regulatory and Development Authority (Irda) has allowed variation in deductibles for motor, fire and engineering policies. It has relaxed the terms for coverage of policies in these segments with effect from January 1, 2009.
Industry experts say that the deductibles will only increase in the coming years as they are among the lowest in the world. Deductibles charged in the fire and engineering segments are Rs 10,000, while in motor it starts from Rs 500 depending on the engine capacity of the vehicle and the sum insured. Since a Mercedes will carry a higher premium, it will also come with a higher deductible compared with, say, a Maruti 800.
| RISING BURDEN |
| *Deductibles for motor insurance start at Rs 500 per claim, Rs 10,000 for fire and engineering policies |
| * Insurers are pushing for an increase because they are among the lowest in the world |
| *The lower the premium, the higher will be the deductible |
| *ICICI Lombard, Bajaj Allianz General Insurance, Reliance General, Royal Sundaram seek regulatory approval for a hike |
So, if a product is available at a lower price, policyholders will have to shell out more at the time of damage or claim. The general rule is that higher the deductible, lower is the premium and vice versa.
Insurance advisors said that buyers should not merely look for the premium rates but also read the fineprint to ensure that they are not asked to pay higher deductibles. Higher deductibles is also expected to help insurance companies discourage policyholders from making smaller claims.
“The deductibles are low when compared with the international market. Post January 1, 2009, we expect that the insurers will have the freedom to charge a higher deductible with a suitable correction in the premium,” said Tata AIG Managing Director Gaurav Garg.
“This gives an additional option to the customers to either go in for lower premiums and higher deductibles or vice versa depending on their claim experience,” added ICICI Lombard Managing Director and CEO Sandeep Bakshi.
“Insurers will have to give higher discounts if they increase the deductibles on fire, engineering and motor. The rates will however, remain same on these products,” said Pavanjit Dhingra, CEO, Prudent Insurance Brokers.
Most of the insurers are waiting for the renewal of the reinsurance treaty, which is due in March to file for add-ons or change the wordings and offer a variation in deductibles.
After the regulator provided freedom to insurance companies to offer add-on services, there has been a flurry of activity with some insurers filing products that offer 105 add-ons. The regulator will take time to understand the wordings of the policy filed, said industry sources.
