Changes in non-life covers to aid clients

With insurers switching to liberalised terms and conditions, major coverage changes are expected in non-life insurance policies when they come up for renewal next month.

As a result, companies are likely to opt for more industrial all-risk policies, which cover risks ranging from fire, machinery breakdown and loss of profit under a single roof. The pricing for this policy has also been liberalised and major discounts in premium rates are expected, industry sources said.

Under the standard fire and special perils policy, everything is excluded other than whatever is named specifically in the cover. Removal restriction on an all-risk policy will also result in greater adoption of loss of profit insurance, which is a critical risk for any company.

Similarly, motor owners will get more benefits at a slightly higher price. Insurance companies are likely to offer value-added services like a replacement car in case of a car breakdown and full compensation (without any depreciation) if the car is damaged. At present, the claim is settled after deducting the depreciation.

Private general insurance companies have already started filing new product offerings with the Insurance Regulatory and Development Authority (Irda) and are likely to be ahead of public sector general insurance companies in offering new product lines in motor insurance.

The all-risk policy was earlier restricted to those risks that had more than Rs 100-crore sum assured at a single location. This restriction will go from the next month, when Irda provides freedom to general insurers to frame terms and conditions without resulting in any loss of benefit to policyholders.

“There will be a greater adoption of industrial all-risk policy than before. Different deductibles should be allowed for lower sum insured. Otherwise, the whole exercise will be meaningless,” said Pavanjit Singh Dhingra, vice-president, Prudent Insurance Brokers.

At present, there is a deductible of a minimum Rs 5 lakh per claim (the amount a policyholder bears in case of a claim), which was not an issue when the sum insured was Rs 100 crore. However, the regulator is yet to take a call on allowing lower deductibles for sum insured of less than Rs 100 crore.

Insurance industry sources said leading private players are likely to offer almost similar products.

Of the 16 players in the country’s general insurance sector, four are state-owned and the rest are private players.

Private players, who had a market share of 41 per cent in the first six months of the current financial year, are likely to be aggressive in motor insurance to increase their market share.