The Insurance Regulatory & Development Authority (IRDA) of India announced that fire, engineering and motor insurance, which make up over 50% of the India insurance market, will move from a tariff rated system, to a non-tariff, more open rated system effective January 1, 2007. Under a tariff rated system, coverage and rates are set by the IRDA.
The exact form of the proposed “de-tariffing” is not entirely clear. Many different options were considered, including: de-tariff all lines except motor vehicles, permit price changes but within a band of + or – 20% of the current tariff rates.
Mid-term policy cancellation may be allowed so organizations can take advantage of potential lower pricing and not have to wait until their current policies expire.
The current plan does not permit fronting of local policies. Eliminating the tariff rating system in India does not automatically ease the process to place a local policy in India as part of a Controlled Master Program out of the United States. The IRDA makes it mandatory for reinsurance quote requests to be sought by insurance companies and not directly by composite brokers.
Health premiums, which have been low due to subsidized tariff fire premiums, are expected to increase. Companies with large property and health premiums may have property premiums savings offset by increases in group health premiums.
The IRDA requires monthly reporting of premiums collected by product line from brokers and underwriters, so it can develop year-over-year premium comparisons to determine the degree of rate reduction and price cutting.
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