General insurers in the country are likely to hike rates of property and fire insurance post July, after the Insurance Regulatory and Development Authority of India (IRDAI) asked them to submit revised rates to the Insurance Information Bureau (IIB).
This move by the IRDAI comes in view of the huge losses witnessed by the property and fire insurance industry after being liberalised in 2007. The loss arose due to intense competition and aggressive pricing among insurers in an effort to get bigger market share.
In 2015, the regulator stepped in to curb the growing losses and came out with the first set of regulations. These rates are revised periodically since then and the latest revisions were brought in recently. Another development is that the IRDA has also increased the number of risk occupancies on its list from 90 to 109, which will be effective from July 1.
According to an industry insider, the new guidelines stipulate that an insurer can set his own rate or take IIB’s rates. However, the base rate that an insurer can set shall not be lower than IIB’s rates in any case. This is done to ensure that premiums are not charged other than what is considered financially prudent.
The IRDAI has also issued guidelines pertaining to burning costs, and has said that it does not include natural disasters such as typhoons, flood, inundation, and earthquake. The regulator also urged insurers to come up with their own pricing for add-on coverage for property insurance, though this will not be applicable to FLEXA (Fire, Lightning, Explosion, and Aircraft) risks.
Source: Times of India
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