The Insurance Regulatory and Development Authority (Irda) is set to go slow on the recommendations of the Mukherji Committee report on de-tariffing in the insurance industry. | |
| The Mukherji Committee which was constituted in September last year had recommended that the Irda, the TAC (Tariff Advisory Council) and the general insurance council of the Insurance Association of India, should collaborate with each other to ensure a smooth changeover to the non-tariff system not later than April 1, 2006. |
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| Speaking to Business Standard, C S Rao, Chairman, Irda said that while the regulator was all for de-tariffing in the insurance industry, it would not like to rush into the whole issue. |
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| "De-tariffing is a serious issue and it has to be handled carefully. The real test of de-tariffing is that insurance companies should be able to find re-insurance," Rao said. |
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| "My personal opinion is that we should not rush into de-tariffing as the ultimate aim of the whole issue is that in a free market everyone should survive. De-tariffing the entire industry at one go in 2006 is in my opinion too early," Rao said. |
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| Additionally, the Irda may moot the de-tariffing of loss making portfolios of the insurance industry first rather than going de-tariff the profitable portfolios like fire initially. |
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| Rao's remarks are significant as the insurance industry in India is getting ready for its second experience with de-tariffing when the own damage portion of automobile insurance will be de-tariffed from April 1, 2005. |
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| Incidentally, the motor insurance portfolio is the fastest growing segment of the general insurance industry, but is also loss making. In 1994, marine insurance was de-tariffed and the experience has been that what was once a profitable business has now become a loss making portfolio. |
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| Rao pointed out that the advantage of going about de-tariffing in a phased manner would mean that the insurance companies will get time to compile data and analyse trends and build up their own database, rather than depend on historical data. |
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| "We have a problem of not having enough historical data on insurance claims in our hands. If we were to de-tariff then on what basis will tariffs be based upon. By going about de-tariffing in a phased manner we will also have time to compile and analyse data which will in turn help the companies arrive at the pricing of their products in a scientific manner," Rao said. |
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| Rao also said that the thrust for the Irda would be to ensure that the retail, health and the rural insurance markets actually perk up. |
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| "We want to concentrate on these three sectors as this will ensure that the volumes will go up, there will be more coverage and their will be better assurance," Rao said. |
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