India’s insurance regulator has issued a firm warning to general insurers to halt aggressive discounting in fire cover policies, aiming to prevent jeopardising underwriting stability amid declining premiums and significant potential claims risks.
India’s insurance regulator has warned general insurers against offering fire cover at giveaway prices, including discounts of as much as 99%, as it seeks to curb a race to the bottom in a business line that can produce huge losses from a single claim. The Insurance Regulatory and Development Authority of India said in a letter to chief executives that intense competition, year-end sales pressure and demands from clients and intermediaries were pushing prices down to unsustainable levels, according to reports by The Economic Times and Asia Insurance Post.
The concern centres on large industrial fire risks, which the regulator described as low-frequency but high-severity exposures. In plain terms, that means claims may be infrequent but can be enormous when they do occur, far exceeding the premium collected. The regulator said pricing should rest on sound actuarial principles and remain consistent with board-approved underwriting policies, rather than be driven by aggressive deal-making.
The warning comes after a sharp fall in fire insurance premium income in the first quarter of the current fiscal year. Asia Insurance Post reported that collections in the segment dropped to ₹8,087 crore from ₹11,206 crore a year earlier, while Reinsurance Asia said industry premiums in the line fell 27.8% year on year. That follows a stronger showing in the previous fiscal year, when fire insurance premiums rose about 13.4% to more than ₹27,500 crore, making the segment one of the industry’s better growth drivers.
The price war is already showing up in company results. Girija Subramanian, the managing director and chief executive of New India Assurance, said the property insurance business fell 27.8% in the April-June quarter, helping keep overall gross written premium growth at just 2.9%, according to Asia Insurance Post. The regulator’s intervention suggests that while insurers in India’s de-tariffed market can set their own prices, that freedom does not extend to undercutting risks so deeply that underwriting discipline, reinsurance costs and claim-paying capacity are put at risk.
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