In previous articles we have reported on the proposed
de-tariffing of the Indian general insurance market. As of
1st January 2007 the IRDA (the Indian insurance
market regulator) freed pricing within certain parameters, but
Insurers were to continue using the forms approved by the
Tariff Advisory Committee until 31st March 2008.
The IRDA roadmap to a detariffed market envisaged Insurers
filing the policies they proposed selling in the de-tariffed
regime but in recent months there appears to have been a
re-consideration of whether complete de-tariffication will in
fact take place. India's General Insurance Council (GIC),
which is a statutory body established under §64C of the
Indian Insurance Act 1938 and represents the collective
interests of the non-life Insurance companies in India, was
given the responsibility of developing Standard Market Wordings
for fire, engineering and motor risks to be followed by
Insurers after de-tariffication. The GIC says its objective is
the 'smooth transition of the market from tariff to
tariff-free regime; assurance of minimum standards to buyers of
insurance; clarity of policy terms and conditions and avoidance
of differing interpretations; bringing in best global
The GIC has now published its proposed Minimum Standard
Wordings (MSW) for fire, engineering and motor risks and says
these wordings 'have been developed, as base level with
scope for customisation through endorsements for
addition/deletion of covers'. Endorsements have also been
drafted by the GIC.
Although the wordings are lengthy and currently under review
by various interested sections of the market, and although the
GIC has said that the MSW are not intended to restrict insurers
from creating their own wordings, some fundamental questions
have already been raised in a number of quarters by reference
to the GIC's stated objectives.
In terms of achieving a 'smooth transition of the
market from tariff to tariff-free regime' the more
liberal elements of the market have asked why the MSW is needed
at all. Those who believe in the principle of allowing the
market to determine wordings, subject of course to oversight by
the IRDA, ask whether the publication of such MSW is not simply
The laudable intention of an assurance of minimum standards
for the insurance buying public has also been drawing comment.
Apart from the absence of any discernible public demand for
MSW, the fact remains that insurers wishing to sell and policy
in the de-tariffed regime will first have to file it with the
IRDA and get it approved before being able to market the policy
to the public. The public appears to have taken well to new
Insurers post-liberalisation in 2000 and to the new products
these insurers have offered – in the life and general
field – without expressing concerns over the supposed
absence of minimum standards in the form of MSW. Those minimum
standards have hitherto been apparently satisfied by the File
& Use procedure for all policies that will continue after
Some have therefore asked whether a 'smooth
transition of the market from tariff to tariff-free
regime' is not better achieved by, for example,
obliging Insurers to offer the existing tariff covers alongside
new de-tariffed wording for a period of time so the market
could take its own time to gain confidence in the new covers.
Alternatively, the MSW should comprise broad guidelines rather
than actual wordings.
Whether the GIC objective of clarity of policy terms can be
achieved is again debatable simply because the policy that is
not susceptible to challenge has yet to be created. Dovetailing
with this point is the fact that decades of case law and
familiarity with tariffed products is to be replaced by brand
new MSW. Again, the question is asked, why not mandate Insurers
to offer tariff wordings alongside new covers for a transition
period that may, perhaps, extend to a number of years? The
existing tariff covers may not be perfect, but they are at
least familiar to the insurance buying public, the Courts and
to those who work within the insurance industry.
In essence, the differences of opinion that seem to be emerging
are not about the GIC's stated objectives, but whether MSW
is the right way of achieving those objectives. Even if it is
the right way of achieving those objectives, issues arise as to
the implementation of the MSW concept. For example, the time
for considering the MSW is short and it is not entirely clear
whether this is necessary. The insurance industry and those who
work in it and for it, as well as the insurance buying public
(which is not an homogenous mass), needs a proper period of
consultation and debate so that end product is capable of
standing the test of time as well as meeting the other GIC
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