General Insurance companies may soon be able to set their own prices for motor (third-party), fire and accident insurance products. The Insurance Regulatory and Development Authority (IRDAI) has set up a task force to draw up the framework, which will guide how these companies can increase or decrease premiums on these products. This comes after existing tariffs were de-notified.
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The task force appointed by IRDAI will have the responsibility to decide the framework which will guide the regulations or the manner in which individual general insurance companies can increase or decrease these premiums. The IRDAI in its consultation paper said that the “conduct of general insurance companies in a de-tariffed environment will be guided by principle-based guidelines”.
The task force will be chaired by Rajendra Beri, Member, Insurance Advisory Committee (IAC) and will have representations from insurers like New India Assurance, HDFC Ergo, Bajaj Allianz General Insurance, GO Digit General Insurance, Royal Sundaram General Insurance and General Insurance Corporation of India (GIC Re).
The three important responsibilities of the task force will be to form prudential guidelines and address associated critical operational aspects, to form a principle-based framework post-de-tariffication, and finally to form a draft of guidelines for de-notified lines of business.
Sources tell CNBC-TV18 that the task force is likely to consider large business segments like Motor Third Party (TP), Fire and Accident for de-tariffication.
Motor TP for 12% of the total General Insurance industry premium and 40% of the total Motor Insurance industry premium. Fire constitutes 10% of the General Insurance industry premium and Engineering constitutes 2% of the total General Insurance industry premium.
Out of the listed General Insurance companies, ICICI Lombard has a 9% share in the Motor TP segment, a 13% share in the Fire segment and a 15% share in the Engineering segment which means an average of 10% of ICICI Lombard’s portfolio will get impacted with the proposed changes.
Another listed peer, New India Assurance has a 12% share in the Motor TP segment, an 18% share in the Fire segment and a 15% share in the Engineering segment which means on an aggregate level 14% of New India Assurance’s portfolio is likely to get impact because of the proposed changes which may come about because of de-tariffication of the regulated lines of general insurance business
The IRDAI task force will have to submit its recommendations by November 24.
(Edited by : Pihu Yadav)
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