IRDAI Frees up Insurance Cover Wordings

Mumbai: In a historic move, the insurance regulator has freed up policy wordings in non-life insurance contracts, opening up the sector to innovation. Till now, non-life insurance companies could offer standard base policy wordings for motor, property, and engineering insurance cover on which they could provide add-on covers/riders. They would however compete against each other on pricing. The Insurance Regulatory and Development Authority of India (IRDAI) has denotified policy wordings for motor, property and engineering insurance covers effective April 1, 2024 sources told DC. However, the policy wordings for the mandatory motor third party cover will continue to remain the same.

Policy wording is the terms and conditions and definitions of insurance coverage as they are written down in the insurance policy.

So what does this mean for you and me?

Anurag Rastogi, a senior independent Actuary told DC, “Suppose you have a car which you drive only on weekends. Till now, you had no option but to buy the comprehensive motor own damage policy for all 365 days which is very expensive. But now the insurer can offer you a cover for “Only when you use your car” for a significantly lower price.”

“Also for very safe drivers, who believe they can meet minor damages from their pocket but want to insure their car only for total loss, it will be possible for insurers to offer such covers. These are just some examples and the innovative minds of product managers and actuaries are expected to come up with many new offerings customised to needs of different customer segments,” added Rastogi.

Similarly, for business like shop keepers or businesses who don’t want to buy fire insurance policy covering 12 perils (as in the erstwhile base cover), but want to buy specific covers, say for Fire only or Flood only or Earthquake only policy, the insurers will be free to design such covers at affordable premiums.

“Every insurer shall have in place Board approved policies covering all areas of product design, underwriting, advertisements and overall management of the insurance products. The Board constituted Product management committee shall be responsible for implementation of the Board approved policies and ensuring adherence to principles of design and pricing of insurance products,” said the IRDAI in the notification.