Property insurance might become an expensive affair in India. With the Insurance Regulatory and Development Authority of India (IRDAI) recently directing insurance companies to revise rates, things are likely to change in another couple of months. . IRDAI has also expanded the risk occupancies to include 109 factors. After analyzing the recent developments in the insurance market, experts at Arun Dev Builders reckon that property insurance could become costlier by July 2017.
Until 2007, an insurer could only differentiate between insurance providers only on the basis of service provided by them, since the rates of fire and property insurance had already been fixed. However, once the industry was de-tariffed in 2007, an unhealthy competition among insurance providers gained ground as they tried to get hold of clients by offering them lower rates as incentives. Due to this, the insurance sector incurred heavy losses. According to the panelists at Arun Dev Builders(Real Estate Builder), servicing of claims is heavily affected by lower profitability.
To deal with these issues, IRDAI had issued the first set of guidelines in 2015. These guidelines fixed the maximum amount an insurer could charge for fire policies. The Insurance Information Bureau (IIB) was also instructed by IRDAI to fix the rates that can be charged by different types of insurers. For example, a manufacturing unit would have a much higher risk than a showroom, and hence, must be charged accordingly. These rates have to be revised every three years.
Apart from this, the insurance regulator has also instructed the companies to make sure that their base rate is not lower than the rate set by IIB. However, the insurance companies hold the liberty to fix the rates of their add-on covers, apart from fire, explosion, lightning and aircraft risks. Experts at Arun Dev Builders predict at least 15% hike in property insurance rates due to these developments.
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