New Delhi: Come January and insurance companies will have to answer to the Insurance regulator IRDA (Insurance Regulatory Development Authority), if they overcharge consumers.
Currently 75 per cent of the products in the general insurance sector are ‘tariffed’- meaning their premium rates are pre-decided by the insurance regulator. But come January the sector will be ‘de-tariffed’ and insurers will be allowed to decide their own premiums.
Presently, if a 30-year-old male were to take a medi-claim policy for 1 lakh, he has to pay about Rs 1,200 a year. Post 'de-tariffing' if an insurance company has to make any changes in the insurance policy, it will have to seek approval from IRDA and also justify as to why it has to increase the charges.
The regulatory body says that all products, which will be sold in the market post ‘de-tariffing’, will need to be approved. Also, any change in price or terms and conditions will need approvals.
IRDA is hoping to safeguard the retail consumers by this move. Most of the people do not understand the intricacies of insurance, as it remains a complicated subject.
The body aims to protect the consumers from being overcharged by the insurance companies.
It has also specified the process in which an insurance company should decide its premiums making the CEO and the broad of directors accountable for the process.
Apparently, there are two possible course of action that might be followed by the insurance companies after the new terms and conditions come into effect.
The companies selling corporate insurance policies might undercut their prices as they are already facing severe competition. This is due to the fact that corporate policies are often large scale and their premium runs into several crores of rupees.
On the other hand, motor and health insurance companies say they crumbling under pressure due to the number of claims they receive every year.
Hence a hike in the price of health and motor insurance policies may come into effect with the IRDA approval becoming mandatory from January 1, 2007.
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