Short notes on Underwriting In Detariffed Era

Short notes on Underwriting In Detariffed Era

The non-life insurers would go for detariffed era since January 1, 2007. Detariffing refers to freedom to the underwriters to conduct the business with their own individual experience. Underwriting had been understood as routine work of accepting the proposals to be operated under restricted and regulated market.

Now underwriting is total management of product to be sold considering all factors influencing sale-decision i.e., loss or profit related to underwriting, income generated through premium and investment and expenses of the company.

The underwriting is designing the product to cover the risks price to be charged and claims management. In tariff regime, designing the product and pricing was done by Tariff Advisory Committee (TAC) and claim management was left to the insurance companies.

Detariffera is expected to make the insurer free to design the products and pricing them as per their insurance experience. The tariff will be deregulated with effect from January 1, 2007. Thus, the current product i.e., perils covered, exclusions, add-one terms and conditions etc.

Will continue to be regulated by TAC till 31-3-2008. Now the insurers will be free to design their products as per their exposure to risk, expense management, premium rate and underwriting losses. The insurers assess the risk and fix the premium as per their experiences.

But they will fix the price judiciously in the competitive market. The insured will be benefited with the lower price in the competitive situations.

Detariffing refers to differential rates depending on the rate factors but unfair discrimination i.e., differentiation not based on scientific and credible structure should not be practiced. It emphasises a higher regulatory role of IRDA.

Tele Underwriting :

Underwriting is estimated to be more than USD 1500 billion world-wide. The IT industry is helping insurance business to grow. The process of modernisation and IT services has started gaining ground. In near future, the insurance will depend on tele-communication.

The old system of underwriting was slow and expensive. The present system of computerisation, intermeeting, websites and satellite communication have accelerated growth of insurance business.

The risk evaluation was slow process, issue of policy took long time and price fixation was manually done. Not only underwriting but serving the policyholders and payment of claims was time consuming.

The IT facilitates faster, cheaper and better service. The processing and evaluating of risk will be done mechanically. Applications of electronic gadgets make underwriting, price determination serving policyholders and claim-payment easy and faster.

Teleunder writing starts with telephone interview with insurance applicants. It saves times and money. Similarly the policyholders ask for the services on telephone. Gradually it will extend to mail, fax, internetting and so on.