IRDA frees prices (this time totally) of Fire, Engineering and WC

Today there was a significant news item.

This was a directive from the Insurance Regulator and was reported in the press including "The Business Line".

The gist of the same is that the regulation on pricing of fire, engineering and workmen compensation insurance is totally gone. Hitherto even after detariffing of the above classes, IRDA had a fixed a ceiling of a maximum of 51.25% discount from the old tariff rates. This had resulted in a drop of the rates by 51.25% in all major risks irrespective of the quality of risk or its experience. Now this cap is gone.

It could either lead to a situation of a bottomless pit as far as discounts go or it may bring semblance of rationality in pricing since there are no benchmarks. The most probable option is the former in the short run and the latter in the long run. Insurers are expecting the short run to be very short.

Time would tell whether the insurance market is mature enough to handle free pricing.