The Insurance Regulatory & Development Authority (Irda) has issued fresh fiats to the domestic general insurance companies restraining them from undercutting each other through heavy discounts in premium-pricing. The regulator was of the view that such steep discounts were leading to unfair competition among players.
Irda, has reportedly hauled up one prominent player indulging in such practices that has led to a rapid expansion of its premium share in the market.
Though Irda had in-principle approved the freedom to fix pricing for most of all general insurance portfolio from November 2008, it later modified its stand and made it mandatory for companies to seek rate reduction approvals after justifying the same with it.
A few aggressive players, including some state-owned general insurance players went ahead with discount schemes in a bid to make a killing in the hope that Irda would later succumb to their pleas. They are now required to recall their quotes that have been sent to their customers.
Also, till the revised rates were approved by Irda, no requests for additional discounts other than approved by the regulator would be entertained by it. The regulator has also directed the general insurance players not to have discounts in excess of 51.25% from existing Irda approved premia, in the case of individually rated risks and 43.25%, for class-rated risks till their new low rates were approved by it. The General Insurance Council (GIC), the association of the domestic general insurers met on December 1 in Mumbai and all the chief executive officers had agreed to the comply with the new Irda fiat without any exception with immediate effect.
In motor policies, maximum discount allowed is 20% only on erstwhile tariff terms for two-wheelers and private cars. The regulator has further said that all discounts to consumers should be strictly as per Irda specified norms and with no extra over-riders. There should also be no de-tariff discounts to be given to brokers of commercial vehicles.