We would like to inform you about significant developments in the pricing of Property and Business Interruption Insurance policies in the Indian market, effective for policies incepting from January 1, 2025, or later.

While the announcement of “de-tariffing” from April 1, 2024, initially brought temporary price reductions, it has become evident that these pricing strategies are not sustainable in the long term. As a result, the following changes will be introduced:

1. Risks with sum insured INR 500,000,000 or above:

All general insurers in India will adopt a standardized pricing structure, which includes:

  • Minimum burn cost
  • Additional load for natural catastrophe (NatCat) rates covering Acts of God perils
  • Terrorism coverage, if opted, as per local market pool terms

These pricing changes are supported and endorsed by respective reinsurers.

2. Risks with sum insured between INR 50,000,000 and INR 500,000,000:

Similar pricing structures as above will apply to this segment. Notably, insurers in this range had previously followed “free pricing,” which will now be discontinued effective January 1, 2025.

3. Withdrawal of favourable claims discounts:

Discounts previously extended for favourable claims history will no longer be applicable.

4. High loss ratio cases (>100%):

Risks with loss ratios exceeding 100% must be referred to the State Reinsurer, GIC Re, for review and rate confirmation. The process for handling such cases is still evolving.

It is important to note that these changes are not mandated by the regulatory authority but rather represent a market agreement aligned with reinsurers’ underwriting guidelines. Insurers retain the flexibility to price risks based on their own underwriting assessments and loss experiences, provided they secure adequate reinsurance support.

Implications for Upcoming Renewals

For policies renewing from January 1, 2025, onwards, we do not anticipate major changes in most renewals we mutually service, as a similar rating pattern was applied during the January 1, 2024, period. However, minor corrections may affect quotes previously issued in October or November 2024 for risks incepting January 2025 onwards.

It is also worth noting that between April 1, 2024, and December 15, 2024, some insurers experimented with free pricing for certain accounts. This approach proved unviable, and as a result, policies in this segment renewing next year may experience upward price adjustments, depending on the occupancy involved.

For further information, please contact us: info@trustrc.com