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Expect more consumer friendly products

28 March, 2007

The Indian insurance industry has witnessed an important milestone with the advent of the free tariff regime with effect from January 1, 2007. With this, the market has moved from an environment of tightly controlled tariffs to risk based premiums. Removal of Tariff controls is a natural way for any market to grow and thus is a progressive step toward a free insurance market in the country. De-tariffing will set in motion a more mature and broad based market. It will also lead to specialisation resulting in better risk management practices and will ensure Indian market to achieve global standards in underwriting and risk management. 
De-tariffing is going to be an exciting challenge for all Insurance companies and we at Royal Sundaram are well prepared for business in a free market environment. 
Product differentiation As in developed markets, information provided by customers will play a key role in deciding the pricing. 
In the case of Motor insurance, a combination of a host of factors including make, model, location, driver''''s age and experience, security features of the car and usage will have a bearing on the final premium payable by the customer. 
Another major development will be in ''''Product Differentiation''''. Insurers will be able to provide products packaged to meet unique requirements and price them depending on customer profile and product features.
Abolishing tariffs would enable companies to provide more tailored made products based on the actual risks that customers face, rather than any price set by government. 
Customers to play key role 
It will place huge pressure on companies, ensuring that we listen closely to our customers and underwrite risks well, but we are convinced that we have the skills and the underwriting discipline to rise to this challenge.
Individuals will benefit by the removal of tariff regime. For example, in the motor segment, most customers are likely to gain. In the corporate segment, health and marine premiums would go up, but fire premiums would come down. 
More importantly, insurers will now be able to develop and provide pertinent, world class and customised products to suit the needs of the corporate customer. 
As the industry is permitted to develop products and align prices to customer requirements and risk profile, the boom being experienced by this sector will multiply manifold as will customer satisfaction. 
Increased efficiency In the long run, de-tariffing will be a potent tool to make the industry more market driven, and take the products closer to the consumer. The size of the markets, in terms of premium income, may drop initially due to competitive pressures - but in the long run, the Indian General Insurance market will keep growing and is expected to exceed Rs 300 billion by March 2009. Products will become more consumer friendly due to increased participation from customers in rating a risk. Information provided by customers will play a key role in deciding the pricing. The abolition of the tariff regime will increase the sophistication and globalisation of insurance market in India. 
This has benefits for Insurance Companies, Brokers, Regulators, and most importantly the Consumers and Corporates. It is an exciting challenge that all professional Insurers are looking forward to.