New India Assurance Co Chairman and Managing Director Girija Subramanian has expressed concerns over the intense competition among general insurers, which has led to significant discounting and price undercutting, even for critical products such as natural catastrophe insurance.
Perils of Discounting High-Risk
As natural disasters — landslides, cloudbursts and floods — are becoming more frequent, Subramanian said selling discounted insurance in affected areas is concerning. Such practices could potentially harm insurance companies, she said, adding that natural catastrophe insurance should be priced based on risk zones. “We must start charging the right price, which should reflect the associated risks.”
Speaking on the sidelines of the two-day Indian Marine Conclave, organised by the National Insurance Academy in Pune on Wednesday, Subramanian noted the industry’s tendency to cross-subsidise products. This practice, however, might become challenging with the new accounting standards, as each line of business must stand on its own strength, she said.
New IFRS Norms
The domestic insurance industry is highly competitive, and the new International Financial Reporting Standards will require insurers to recognise losses in each segment. Companies will no longer be able to rely on cross-subsidisation, and each segment must be independently profitable, Subramanian said.
As the new accounting framework is expected to be implemented in 2027, New India Assurance will hold trial runs in 2026. This will provide the insurer one year to make necessary adjustments and establish more disciplined pricing practices, she said.