In General Insurance

Abhishek Gupta 49/07

 Flow of Presentation
 What is De-tariffing
 Before and after de-tariff regime
 Advantages and Fears
 De-tariffing to Insurers PROBLEMS AND
PROSPECTS :
 DETARIFFING TO INSURED –PROBLEMS
AND PROSPECTS :
 SWOT
 Role of TAC
 Conclusion
 What is de-tariffing
 Tariff means “ Rigidity”.
 Not only rates are fixed, even terms ,conditions
and wording of policies are to be as laid down in
tariff.
 “Detariffing” is the pricing of Insurance
policies by individual insurance company’s
concerned , to decide and offer ,based on their
analysis and perception of risk. In short, making
all insurers free to decide the premium rates
based on their in-house guidelines of pricing.
 TariffAdvisory Committee (TAC) established
under the Insurance Act 1938

 The major classes of general insurance

business under tariff regime as in 2006
before detariffing of the market were Fire,
Petrochemicals, Engineering and Motor.
Before and after de-tariff
regime
 price > linked to the scope of the cover
 Data flow reduced after 1972 because
nationalization
 Pricing was done on scientific rating on ad- hoc
basis
 did not have flexibility in pricing or
innovation of products .
 had to adhere to the terms and conditions of
the tariff with the standardization of covers,
freezing of rates, terms and conditions,
Before and after de-tariff
regime

 De-tariffing increased the role and

responsibility of the underwriter
 Shift from rule-based underwriting to risk-
based decision-making.
 engineering and fire insurance premiums,
lucrative business- fall,
 in the loss-making motor insurance segment
–increase
The advantages projected
are:
 Competition will improve efficiency

 Efficiency
will lead to reduction of
premia and benefit policyholders

 It is part of the reforms towards

liberalized economy
The fears apprehended are:
 De-tariffingmay make insurance
unavailable at reasonable premia.
 Companies may form cartels and jack
up the premia
 Free market may lead to insolvency of
companies and loss of protection for
policyholders.
De-tariffing to Insurers
PROBLEMS AND
PROSPECTS
 Collection of Risk- wise claims linked data is
a Herculean task

 Data mining, collation, storage and MIS for

data - based underwriting strong in support
is the dire need of the situation

 stiff
competition and ruthless/ aggressive
marketing.

 Pricing befitting to survival in the market

 ProductInnovation to suit market
requirements.

 Reduction of response time

DETARIFFING TO INSURED-PROBLEMS
AND PROSPECTS

 There may be some degree of disappointment

among large corporate on the delay in
opening up with new product development

 Main focus on negotiation with the Insurers

and brokers for the lowest price

 The customer need to be more aware of the

product he is buying .apart from prices , the
intricacies of the policy coverage would
definitely play a crucial role
 SWOT analysis
 Strength  Weakness

 Innovation of products  Poor customer service

 Focused penetration  High operational cost
 More operational  Distrust in the system
flexibility  Lack of fairness in dealings
 Standardized risk  More demanding customers
assessment  Delay in settlement of claims
 Appropriate customer  Stress & strain in product
segmentation marketing
 Targeted service
offerings
Opportunities Threats

 High growth potential  Intense competition

 Increased savings  Unique position of LIC

 Attractive middle class  Increasing customer

expectation
 Expansion through
competition  Shrinking profit margin

 Enhanced consumer  Ensure quality service

awareness

 Marketing tie ups with

professionals
Role of TAC
 Collection of data on premiums and claims, analysis of
such data and dissemination of the results to the insurers.
 Report to IRDA on the underwriting health of
the market and any aberrations in market behaviour.
 Constitution of Expert Groups at the request of the
General Insurance council, to look into
underwriting issues and recommend necessary
action.
 Organize training to underwriters at the market level and
 Attend to public grievances on non-availability of
insurance and try to resolve the issues by discussion
with insurers
CONCLUSION:

To conclude “ Detariffing” is
benefiting the industry as a whole. The
many survey results show similar
opinion of Insurers and Insured with
respect to different variables.

De-tarifing does not mean that

the companies can set the premium
whimsically
THANKS…