One word will define non-life or general insurance in 2007: Detariffing. Beginning January 1, 2007, insurers have got near-complete freedom to price their motor, fire and engineering policies — three major business lines, which accounted for about 70 per cent of the non-life business in 2005-06. It’s a move that will shape the business in the foreseeable future, drive key numbers of insurers, and lead to significant changes in the way non-life policies are sold to consumers.

Detariffing is expected to spark off a recalibration of premiums. So far, in a price control scenario, fire and engineering has been subsidising motor insurance, which has been losing money. Such cross-subsidisation is expected to reduce sharply — and eventually end. Once detariffed, the cost of fire and engineering will drop. Says M. Ramadoss, managing director, The Oriental Insurance Company: “Fire and engineering will come down by 20-25 per cent.”

Prices will fall. Some insurers who have already got a nod from the regulator have given discounts ranging from 15 to 20 per cent in motor own damage and about 20 to 30 per cent discount in fire insurance. These discounts are across the board based on the insurers claim experience in the past years.

Individual risk based pricing will take time and won’t happen in 2007. Says M.K. Garg, chairman and managing director, United Indian Insurance: “For own damage we are offering discounts up till 15 per cent and for fire it is up till 30 per cent. However, for individual risk assessment and discounts depending upon the assessment we don’t have sufficient data and it will take another three to four years before we can offer more nuanced rates.”

... contd.