The Hindu Business Line : Insurance body working on common market wording

New Delhi, June 28 The General Insurance Council, a self-regulatory body of all general insurance companies, along with general insurance companies is working on developing a common market wording. The council hopes to complete the formalities by September end and submit it to the Insurance Regulatory and Development Authority (IRDA) for approval.

The IRDA after a meeting with general insurance companies in Hyderabad on June 11 had asked the non-life companies to finalise a common market wording so that it could decide on considering advancing the second phase of detariffing from April 2008 to January 2008. Market wordings is a document which contains all the policy terms and conditions.

“We are working on developing the common market wording and are likely to submit it to the IRDA by September end. After which it would be up to the regulator as to when the date for introducing the second phase of detariffing would be notified,” Mr K.N. Bhandari, Secretary General of the General Insurance Council, told Business Line.

He added that it would take at least 90 days for the regulator to go through the document and suggest if any changes are required.

Explaining the importance of developing the common wording, Mr Bhandari said: “If total freedom is allowed, then each of the 12 companies might have different ways of wording the policy terms and conditions which might create confusion among the customers. In order to avoid such a scenario, the IRDA has suggested that there should be a common market wording that all the companies have to use.”

No timeframe

Meanwhile, Mr C.S. Rao, Chairman of the Insurance Regulatory and Development Authority, said that they have not set any timeframe for the companies to develop the market wording.

“After the meeting I told the representative of the various companies to come back once they are ready with the document. After the submission it might take at least two to three months for us to go through the contents. Only after this we will be able to decide if the second phase of detariffing can be advanced as requested by the general insurance companies,” Mr Rao said. The Chairman also said that insurers will have to identify the revised terms and conditions, flexibility needed in terms of packaging of insurance products, and alternative wordings in respect of certain areas. “However, in certain conditions there will be no changes in terms and conditions and the interests of the insured will be protected. The initiative has to come from the insurance companies,” Mr Rao said.

Insurance companies also feel that there should be competition on product innovation and packaging of products.

Limiting competition

“At the moment the limitations by the regulator is restricting competition. So what we are asking the IRDA is to do away with the restrictions and allow companies the freedom to rate the policies based on their perception of risks so that the benefits of competition may be enjoyed by the customer,” a company official said.

In the first phase of detariffing, which came into affect from January 1 this year, the IRDA had given freedom to insurance companies to fix premium rates. In the second phase, once the regulatory clearances are obtained, companies will be able to customise products for individual clients.