Detariffing Insurance Sector

Detariffing means that the pricing of insurance policies are left to the individual insurance companies concerned, to decide and offer, based on their analysis and perception of risk.

The IRDA Act in 1999 paved the way for private insurance player in to this market. Presently there are 30 insurance companies in the market of which 14 are in the general insurance business. The PSU’s are loosing their market share. The four PSU’s together holds 77 percent of the market as on March.

IRDA has now taken a major decision of detariffing the general insurance industry from January 1, 2007. The Detariffing will lead to higher penetration in the country. The under writing system of the subject matter will change form rule based underwriting to risk-based decision making. So the pricing will differ form one insurance company to another. So the margin will gradually decrease for the insurance companies due to competition. The PSU’s will further loose their market share as the private player will try to get more market by operating at the least margin.


The consumer is going to get the fare value. The risk assessment for each customer will be different. On reinsurance the good customer will lesser claims will benefit because of his low risk profile. But a customer with higher claim will have to pay more because of his high risk profile. Again it is being expected that the premium on commercial motor vehicle, medical insurance are going to decrease. Further 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.

With the difference in premium the consumer will have wider choice which may lead to his confusion. So they may seek the advice of the insurance brokers to get the best of the market offers.

Source: Business Line