Mumbai: The Insurance Regulatory Development Authority of India (IRDA) has come down on excessive discounts on fire, engineering and motor insurance policies being offered by general insurers that have come up for renewals.
From 1 January, 2007, 75 per cent of the non-life insurance market comprising of fire, engineering and motor insurance will be freed from tariffs.
IRDA had allowed insurers to offer a maximum of up to 20 per cent discount on fire and engineering and a maximum of up to 10 per cent discount on motor own-damage insurance.
However, insurers are offering excessive discounts above the stipulated ceiling, on condition that if such discounts are not approved by IRDA, then the policyholder/ client will pay back the discount in excess of 20 per cent for fire and engineering and in excess of 10 per cent for motor own-damage.
IRDA has issued a circular on the guidelines for file and use requirements for general insurance product-Issuance for notices for renewals due in January 2007.
The circular says, "It has come to IRDA's notice that some insurers are offering their client / brokers discounts exceeding 20 per cent of the present tariff rate with the condition that if such discounts are not approved by IRDA, the insured shall pay back the discount allowed in excess of 20 per cent.
"We would like to reiterate that any insurer which has quoted for a risk that commences in January 2007 whether fresh or renewal with reduction in tariff rates of more than 10 per cent in case of motor own damage and 20 per cent in case of other classes of business will be guilty of violating IRDA's instruction contained in the aforesaid circular. It is also reiterated that there is no question of any discount in lieu of agency commission or in lieu of broker remuneration in respect of fresh business or renewal effect 1st January 2007.