As insurance regulator Irdai has allowed the general insurance companies to design new and customised products for dwellings, micro and small enterprises for fire and allied perils, this new guideline will provide policyholders more options to select products. And, competition among the insurers on product features is expected to bring innovation to the industry.

The insurers are expected to continue to price the new and tailor-made products and coverage extensions more competitively to achieve greater market shares in fire and allied perils insurance, which has been a profitable line of business, according to industry experts.

In its endeavour to increase insurance penetration and provide a wider choice to policyholders, Irdai on May 12 allowed general insurers to design new and customised products for dwellings, micro and small enterprises for fire and allied perils. Currently, the insurance companies offer standard fire and special perils insurance policies, which provide insurance covers for physical loss, destruction and damage to insured properties due to fire, lightning, storm, explosion, flood, earthquake, landslide, cyclone, riots, strikes and terrorism, among others.

“The new guidelines from the Irdai permitting insurers to design new and customized insurance products for fire and allied perils is a very welcome move for the benefit of policyholders. Allowing freedom for the insurers to sell customised products and policyholders getting more options to select, will greatly benefit customers as competition on product features will bring innovation,” Sanjay Kedia, country head and CEO, Marsh India Insurance Brokers, told FE.

According to Kedia, it has been seen globally that competition on price, coverage, and service helps customers and leads to rapid growth in the market. “This is a right step to boost insurance penetration in the country,” he said, adding the leading insurance broker hopes that the regulator soon also starts allowing insurance companies and intermediaries to bundle allied services to truly extend solutions to customers and just not insurance products. “A case in point is that already for Motor insurance allied services of Road Side Assistance is allowed to be sold along with insurance,” he pointed out.

The insurance regulator had allowed pricing freedom i.e; de-tariff in 2008-09, which allows price competition in the general insurance industry. Earlier, the pricing of almost all general insurance products was determined by the Tariff Advisory Committee, supervised by Irdai. Further, in the financial year 2021-22, the regulator decided to allow the insurers to file three insurance policies for the dwelling risks, micro risks, and small & medium risks and permitted the insurance companies to decide the premium rates based on their own experience and underlying risk quality. This has resulted in favourable pricing for the policyholders.

“In our view, the trend would continue and the insurers would continue to price the new products and coverage extensions more competitively to achieve greater market share in this (fire and allied perils) profitable line of business,” Kedia said on the pricing of the new and customised fire and allied perils insurances.

According to him, reinsurance companies should allow the insurers to innovate on coverage on their part and can contribute by aligning their reinsurance support by providing reinsurance capital and extending product knowledge expertise and allowing the insurers to cede risks. “They can further contribute by offering their global expertise in these segments and helping the insurers develop more innovative covers,” Kedia added.

Irdai has permitted general insurers to design and file alternative products covering fire and allied perils after considering the increasing demands for new covers in the fire line of business. “Such alternative products may be variations of the standard product and may include already approved add-ons as part of the base product or may delete an existing provision,” the regulator has said.

However, the definitions and wordings of terms used in the standard product will be the reference point for those terms when used in the alternative products as well. And, the pricing of the new products will be commensurate with the risks involved.

For the country’s non-life insurance industry, gross premium underwritten by the insurance companies under fire insurance stood at `21,545.25 crore for the last fiscal, registering a 7.02% growth year-on-year.