The Hindu Business Line : Insurance control on compensation rates goes

New guidelines
Amendments relate only to rates and not terms, conditions, warranties, etc.
No change with regard to motor insurance
Decision taken following meeting with companies on further relaxation of price controls.

New Delhi June 26 The Insurance Regulatory and Development Authority (IRDA) has issued a circular to all general insurance companies stating that the control rates on fire, engineering and workmen's compensation insurance classes shall be totally removed.

"This is effective from September 1 this year. However, the insurers shall not cancel policies that are in force on September 1 in order to revise the applicable premium rates; where the insured chooses to cancel such insurance, premium shall be retained on short-period scale," the IRDA said in the circular.

The regulator has said that a decision to this effect was taken following the meeting with companies on further relaxation of price controls.

Separate instructions

The circular further states that the amendments will only relate to the rates and not terms, conditions, warranties, endorsements, clauses and policy wordings. The regulator is expected to issue separate instructions with regard to the review of the above in due course.

The IRDA, however, said that there should be no change with regard to motor insurance.

"The removal of control on the rates is on the specific assurance by the insurers that underwriting of business will be maintained on sound technical standards," it said.

Underwriting of biz

The IRDA has also made it clear that every company is expected to take all the necessary steps to ensure proper control over its underwriting activities. "In this connection, every insurer shall file with the authority a status report by July 15. The position disclosed in such a status report should be satisfactory to the authority and where any aspects of the operation require improvement, the insurer should ensure compliance before September 1 and file a confirmation of the compliance report," the circular said.

Detailed statement

The regulator also said that all the companies should prepare a detailed statement of their underwriting policy taking note of the developments so far and the concerns of the authority expressed from time to time. "Such a policy shall also contain a clear statement of the operating ratio that the insurer will work on, and the procedures and controls being put in place to ensure compliance with the underwriting policy," the IRDA noted.

The regulator has also said that every company shall file afresh the proposed base rates and the procedures to be followed for rating of individual risks based on its risk features. It also mentions that the insurers should particularly ensure that the individual rating is consistently applied by persons with adequate underwriting knowledge so that risks of similar hazard are rated similarly.

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