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Poor renewals and low levels of penetration of general insurance products in the retail line of business have prompted insurers to move the regulator to allow issuance of longer term policies with renewal every 3-5 years.
The retail line of business includes health, home, personal accident and motor insurance.
Currently, general insurance products are renewed annually. However, some insurers issue health insurance policies up to a maximum of three years.
Regulatory concerns
“The ticket size is small in the retail line of business so a longer term renewal will definitely be less cumbersome for customers,” said M. Ravichandran, President Insurance, Tata AIG General Insurance.
For insurance companies, customer acquisition, printing and issuing of policies are big one-time costs. For customers, long-term policies offer better value as insurers propose to price them lower by factoring in the no-claims discount into the premium. Also, a long-term policy reduces the possibility of it lapsing.
“There were some concerns that the regulator had expressed (regarding longer term policies). Long term policies mean we must have proper accounting in place and adequate actuarial support to calculate premiums on a long-term basis,” said G. Srinivasan, CMD, New India Assurance.
According to industry estimates, nearly 70 per cent of two-wheelers and 35 per cent of four-wheelers are uninsured even though they are legally required to have a cover, which is a huge structural problem for insurers.
“The third party premium could be levied for a longer duration akin to that of a one-time registration or road tax,” added Ravichandran.
Sanjay Datta, Chief - Underwriting and Claims, ICICI Lombard General Insurance, said longer term renewals would be beneficial for two-wheelers too, where again the ticket size is low and renewals are poor.
“I am confident that long-term policies will come into play very shortly and the industry will address the concerns of the regulator. If not very long term at least up to 3-5 years will be in place, said Srinivasan.
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