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| Irda asks non-life insurers to adopt risk-based pricing |
| BS Reporter / Mumbai Aug 14, 2009, 00:58 IST |
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The Insurance Regulatory and Development Authority (Irda) has asked non-life insurance companies to move towards risk-based pricing.
“Ever since we moved towards a de-tariffing regime, there is a natural compulsion on the part of non-life companies to adopt risk-based pricing,” Irda said.
However, insurers have been facing underwriting losses post de-tariffing. Insurers are offering discounts in the range of 80-85 per cent in fire and engineering. Since risk based pricing requires strong database and also various analyses regarding pricing, it is not easy to measure the underwriting impact, testing the profitability of products.
“We have reached a situation where the role of appointed actuaries has to be enhanced significantly so that general insurers are in a position to cope with public demand for non-life products and at the same time ensure the availability of solvency on a continuous basis,” Irda said.
The regulator emphasised on profit to be generated by each product. In order to improve the profitability, the insurance regulator has recommended necessary infrastructure to appointed actuaries in the office of non-life insurer. Also, the appointed actuary should be invited for all the board meetings. It said that the products have to be certified by the actuaries to make it financially viable.
In addition, they should help the insurer to ensure the availability of required solvency of the company. The regulator has asked appointed actuaries to prepare the financial condition report of the non-life insurance company for the financial year ended March 31, 2009.
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