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General insurance sector

One of the fastest growing General Insurance companies in India and also won awards for Best General Insurance Company & Claims Innovation awards.

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General insurance sector

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  1. General Insurance Sector In India, the general insurance business was nationalized on 1 January 1973 by the merger and grouping of more than 107 non-life firms into four public sector companies. In 1999, the Insurance Regulatory and Development Authority of India (IRDA) paved the way for the entry of private players into the insurance market in order to preserve the public sector. In December 2006, IRDA announced the rates for tariffed products would be freed as of 1 January 2007.

  2. Advantages of DE tariffing The IRDA has prepared a road map for DE tariffing all categories of general insurance business from 1 January 2007. According to the IRDA, the advantages of the DE tariffing are encouragement to scientific rating and adoption of better risk management practices, elimination of cross-subsidization leading to independent pricing for each line of business, development of innovative practices, and generating customer-friendly options for the policyholders.

  3. DE tariffing entails moving from rule-based underwriting systems and practices to risk-based decision-making of the subject matter offered for underwriting. It means that the pricing of insurance policies is left to the individual insurance company and it is based on an analysis and perception of risk. Competition is expected to whittle down the fat margins that insurers enjoy in fire and engineering insurance, eliminate cross-subsidies and force companies to look at small businesses.

  4. The proposed DE tariffing in the general insurance industry would lead to a major shift in the focus of the companies. DE tariff will further result a higher penetration of general insurances in the country. How does it matter to consumers? I will say that the consumer has not been benefited much from the insurance liberalization process. Under the market regime, the insurance companies will be forced to rate risks scientifically. The only way insurance companies can make profit in order to maintain their solvency ratio without going back to their shareholders is by prudent underwriting.

  5. The downside is that the balance-sheets of non-life insurance companies could be splashed in red, and buyers with small insurance needs may be ignored. On DE tariffing, the rating will be based on the risk profile of the customer; it will be in the customers' interest to make his risk profile better. A risk should be judged on its own merits and DE tariffing will force insurers to scale up their risk-assessment capability and give the underwriting function its due importance in the insurance process. After all, this is the core function of analyzing and pricing transfer of risk.

  6. By far the biggest impact of DE tariffing would be on motor insurance. Here too, good customers would gain. Now, a car-owner with no claims subsidizes another who makes large claims. In the DE tariff regime, car-owners with a good track record will gain. For example, a driver will bad record will be charge on a higher premium than a driver with good record in an exactly same policy. In forecast, the barring commercial motor vehicles and medical insurance, premium on assets (that is, fire, engineering and property risk covers) will drop by at least 40% in a DE tariffed regime because the intense competition.

  7. The premium for trucks and other transport vehicles is expected to go up substantially as the related claims ratio, especially for the third party legal liability segment, has been very high and the premium charged has not been commensurate with the risk exposure. Impact on Insurance Companies Only the fire and engineering risk business is profitable based on current tariffs, and the profit margins on these segments would now be put to severe strain due to competitive pressures.

  8. Falling premium income without a concomitant reduction in claims is likely to bring down the profits of insurance companies and their solvency ratios. Consequently, their international rating will be affected. Then, it would also affect their reinsurance placements and underwriting capability. Besides, customers must also be on their guard to keep an eye on the financial health of their insurance company to avoid bankruptcy, which is a common phenomenon in the international market. Automobile companies will also be under pressure to reduce repair cost.

  9. Role of Professional Intermediaries World over, the concept of risk management has now become a part of corporate governance. Professional risk managers enable cost-effective protection through scientific methods of identification, evaluation and management of risk exposures. Faced with daunting choice in selecting the right insurance cover at the right price from the right insurer, consumers will look up to domain experts such as insurance brokers for advice to get the best that the market has to offer.

  10. Insurance Broker vs. Agent Agent As per IRDA norms, an agent can only represent a single insurance company and market its products. Insurance brokers Insurance brokers obtain clients the best possible coverage from any insurance company. Insurance brokers are professionals who assess risk, design the optimal insurance policy structure, obtain the best terms, execute insurance contracts and assist in the settlement of claims. Value-addition is provided in the form of innovative tailor-made products. Insurance companies are legally mandated to absorb their service charges within the premium paid by the insured. It will be the insurers who will be under pressure to justify the rates and performance and yet earn profits.

  11. The move to DE tariff is also likely to hasten the process of infusing more capital into the private insurance companies as and when the parliamentary approval is obtained for the Finance Ministry proposal for increasing the foreign direct investment limit from the present 26% to 49%. 3.2 Detoxification of General Insurance in China

  12. Retief In year 2007, severe drop in insurance premiums and CIRC decided to re-impose tariff on the motor mandatory Third Party Liability coverage. After ret riff, it is compulsory for consumers to buy a minimum coverage. Besides, when the general insurance companies approached by a car owner, it is compulsory for insurance companies to provide the cover. The rates are fixed and the same for all policyholders (no rating variables) but is meant to be on a “break-even” basis. There have been consumer concerns that the prescribed tariff is higher than “break-even” but no credible loss statistics are available to confirm.

  13. Since the mandatory limit is rather low, additional cover can be purchased on a voluntary basis. Even through the additional cover is voluntary for the customer to buy it is also very strictly regulated by the CIRC. Insurance companies have been provided with advisory policy wordings as well as advisory rates to charge. Besides, limited rating variables are used and maximum discount allowed from the advisory rate is 30% (which almost every insurer gives). Source: [https://justpaste.it/General-Insurance-Sector]

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  15. Click to know more on“General Insurance” http://www.bajajallianz.com/Corp/general-insurance/general-insurance.jsp

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