Premiums should ensure that the product or add-on is sustainable, with a fair margin that is not subsidized by any other product or add-on. The Insurance Regulatory and Development Authority of India (Irdai) has released draught regulations for the design and pricing of general insurance products to protect policyholders’ interests. Non-life insurance policies can be divided into two categories: retail and commercial.
Commercial goods are classified based on who buys them or the amount insured, as determined by the regulator. Retail and commercial goods must be distinguished from one another by a suitable name change, prefix, or suffix, as applicable, and each must have its Unique Identification Number (UIN).
Pricing and product design
According to the draught guidance, the design of general insurance products must take policyholders’ preferences into account in terms of suitability and affordability, as well as their changing needs through evolving risk coverage. The policy or add-on cover must cover an insurable risk with a real risk transfer and follow common insurance standards. Insurers will have to factor in risk exposure, claims/loss history, costs, reinsurance, solvency requirements, and a fair amount of surplus and economic cost of capital when pricing products, which will be based on sufficient evidence and technical justification. Premium rates can be neither excessive nor insufficient and should try to be in the middle.
ensuring that the product or add-on is viable and generates a fair profit margin without relying on cross-subsidies from other products or add-ons The regulator has stated that pricing would be based on sound actuarial principles and data and that any discounts or loadings offered should be objective. Sufficient justifications must be given, as well as certification from the appointed actuary. Insurers are unable to charge different rates for similar risks. If the premiums are based on the historically prevailing market level of premium rates, the insurer must show that the deviation from the currently prevailing level of rates is fair and that it is viable in terms of its own business.
The norm for underwriting and risk management.
Insurers must adhere to the terms of the arrangement notified by the appropriate government for insurance policies funded entirely or partly by the state and federal governments. They may also amend the requirements following the improvements that have been communicated to them. from time to time, the government All packaged goods will be required to follow the regulator’s applicable rules for accounting premiums, related costs, claims, and expenses. All pilot products must have “Pilot Product” as a prefix or suffix to the product name. a name Based on the experience gained, a pilot product can be turned into a standard product. Current policyholders will be able to select another existing product that may or may not be equivalent to the pilot product if a product is discontinued. Optional extras According to the proposed rules, add-ons must adhere to the base product’s classification, filing, and labeling.
procedures for approval The addition to a base policy, on the other hand, must not alter the basic structure of the base product. The add-on will have its deductibles and limits. The total premium for all add-ons plus the premium for optional covers incorporated into the base product will not exceed 100% of the base product’s premium. Covers are available as options. Add-ons would not be included if they are used as part of the base product. Insurers may remove a product or add-on and send a proposal to Irdai with justification. Current annual and long-term plans that were released before the withdrawal of an existing product will be able to continue in effect until they expire. the datesInsurers will be held solely responsible for any service deficiencies or complaints resulting from add-ons. They will have to answer policyholder complaints about these assistance programs.