Higher Deductibles to Boost Insurers

Policyholders may have to start paying more to make insurance claims, given that general insurance companies are looking to increase deductibles. A number of big players in the general insurance industry have sought approval from the Insurance Regulatory and Development Authority (IRDA) in this regard. Deductible is the part of the final claim amount that the insurance provider does not pay, and the onus is on the customer. With the proposed hike in deductibles, policyholders would have to shell out more for making insurance claims. In response to general insurers' appeal, the insurance regulator has already permitted variation in deductibles for motor, fire and engineering policies. The IRDA has relaxed the policy coverage terms in these segments with effect from January 1, 2009. While big players like ICICI Lombard, Bajaj Allianz General Insurance, Reliance General and Royal Sundaram have already sought the IRDA's approval for increasing deductibles, small and mid-sized general insurance companies are also planning to follow suit. With insurers now given the freedom to charge a higher deductible from their customers, they are looking to capitalise on this opportunity.According to Mou Chakrobarty, Insurance Consultant, Guardian Life Insurance Company of America, "Deductibles are likely to increase further in the next few years as those charged by Indian insurers are among the lowest in the world. While this may not be good news for the policyholders, this hike however was long due for the domestic general insurance industry." Presently, deductibles charged by insurers in the fire and engineering segments are Rs 10,000. In case of motor insurance, the deductibles start from Rs 500, depending on the vehicle's engine capacity and the sum insured. The general rule is that higher the deductible, lower is the premium amount a customer has to pay, and vice versa.With IRDA's approval set to bring about a hike in deductibles, the burden will be on the customers. Under the circumstances, industry experts opine that policyholders must read the fine print of the policy carefully before opting for the same.