With a free-pricing regime taking effect from Tuesday, the chase for profitable corporate accounts by 13 general insurers will turn more intense as each will attempt to best the other with hefty discounts. These insurers had made efforts to bag such accounts earlier with substantial markdowns, but the Insurance Regulatory & Development Authority had stepped in to officially cap discounts they could offer to customers.
But now, any general insurer, on the basis of merit, can decide the discounts, and analysts believe official discount rates can exceed 65-70% for some large profitable accounts. However, despite free-pricing, general insurers are expected to be cautious with accounts that are not highly profitable.
Also, Irda has prescribed an overall framework within which any tariff in the general insurance industry can be set. According to Irda norms, claim ratio, expense management and commission to intermediaries should not be more than 98 % of premia.
Not just this, any new tariff has be approved by Irda. ?We still have to follow file and use procedure, and have to justify ourselves before the regulator,?? said KA Somsekhar, president and CEO , Reliance General Insurance.
In a scenario like this, pricing will be based on merit. Therefore, those with a lower risk profile would experience lower premia, said Vishakha Mulye, executive director, ICICI Lombard General Insurance. ?Our rating engines would be designed based on past claims experience and estimation of future claims incidence,?? she said.