In a New Year gift to general insurance companies, the Insurance Regulatory Development Authority of India has agreed to give them full pricing freedom from January 1.
The decision was taken by the regulator at a meeting with chief executives of all insurance companies last Friday.
This means buyers of general insurance covers with a better claims record can expect to get huge discounts on their premiums.
The industry can expect to see plenty of innovation since insurers will be free to change the standard terms and conditions of policies from April 1, 2008.
Seventy five per cent of the non-life insurance industry, which consists of fire, engineering and motor covers, was subject to rates prescribed by the Tariff Advisory Committee up to December 2006, irrespective of whether the risk was good or bad.
The industry was partially detariffed on January 1, 2007, but the regulator restricted the discounts insurers could give to minimise the dangers of an irrational price war.
Insurers could offer discounts up to 51.25 per cent of the earlier tariff rates on individual rated products (those risks for which the sum insured is more than Rs 10 crore or Rs 100 million); up to 43.75 per cent for class-rated products (those risks for which the sum insured is less than Rs 10 crore or Rs 100 million); and 20 per cent on motor own damage for private vehicles.
KN Bhandari, secretary general of the General Insurance Council (a self-regulatory body of insurers), said the caps on the discounts that insurers can offer are likely to be withdrawn from January 1.
However, a section of the industry experts said customers may not get a significant reduction on their premiums since they already enjoy 40 to 50 per cent discount on the tariff rates.
