DETARIFFING TO TRIGGER SHAKEOUT IN INSURANCE

The detariffing of insurance rates after January 1 in the country may trigger shake-out in Indian general insurance sector. “After post detarriffing, there will be premium volatility, the need for the capital will be higher and the pressure on the profitability in the industry will make the survival of small companies difficult”. Going by the global experience, the premium prices will plummet with insurers opting for predatory pricing resulting the insurance companies suffering underwriting losses after the detariffing begins. “The price differentiation will have a social implication as those who can least afford the insurance premium will be excluded.” There will be substantial cross-subsidisation in the industry and the insurers will re-focus on under-writing/ technical pricing, emphasis on data quality and there will be a need for internal control/ guide-lines for the insurers. The regulator IRDA will have to be very active to ensure fair practices, transparence and fair competition. The industry on the other hand fear a hefty increase in cost of insurance. The silver lining is in the expected new products, new features and better coverage.