Over a period of time, tariffs have become a source of vested interest for insurers. In addition to tariffs, insurers began to enter into market agreements in the post nationalization era to cut down price competition even in the non-tariff sector. The general insurance industry has been accustomed, for several decades, to operate in a tariff regime for pricing and distribution of 70% of its insurance products, particularly, in fire (20%), engineering (8%) and motor (40%) portfolios. The tariff rates were initially structured by an Industry Association of Insurers and were binding on its member insurers by a voluntary code of practice.

In 1969, when insurance became subject to social control by the government, the industry's rating association was renamed as the Tariff Advisory Committee (TAC) and was given a statutory status. A breach of the prescribed rating became a breach of a legal provision. Payment of premium in advance of assumption of risk was also made mandatory. This situation has remained the same till now, though there have been revisions to the rating structure periodically.

It must also be recognized that the tariff rates in India are the minimum chargeable by insurers to bring rating discipline among them for ensuring their financial survival and growth in the nascent stage of building the industry. Over a period of time, tariffs have become a source of vested interest for insurers. In addition to tariffs, insurers began to enter into market agreements in the post-nationalization era to cut down price competition even in the non-tariff sector. As insurance is not a subject under the MRTP Act, rate cartels are permissible for insurers to indulge in such practices.

The consumers threw a spanner in to this comfortable rating zone, particularly the motor lobby, when they demanded that insurers must establish good faith and due process of law when they increase the rates. Under a court dispensation that upheld this principle, insurers had to show their statistical basis and not merely their overall experience in support of their rate increasing strategies.

Insurance Chronicle Magazine, Non-tariff Regime, Post Nationalization era, Insurance Industry, Tariff Advisory Committee, Product Innovation, Liberalization, Non-tariff Business, Corporate Governance, Insurance Products, Insurance Regulatory Development and Authority, IRDA.