Exposure Draft on Long-Term Fire Insurance products

IRDAI has issued an “Exposure Draft on Long-Term Fire Insurance products (“Exposure Draft”)” for seeking comments/suggestions of the stakeholders.

Objective – To allow General Insurers to design and file “alternative products” covering Fire and Allied perils for the risks de-notified vide notification no. IRDAI/Non-life Insurance/5/171/2020

Major highlights of the Exposure Draft are as follows:

• The extant Guidelines, namely, Bharat Griha Raksha (BGR), Bharat Sookshma Udyam Suraksha (BSUS) and Bharat Laghu Udyam Suraksha (BLUS) shall remain applicable on the insurers.
• The norms applicable for the long-term Fire and Allied Perils products are as under:
• The duration of the policy shall be maximum up to 30 years with regard to Dwellings which shall include standalone residential houses, residential villa complex, residential apartment blocks managed by Housing Cooperatives or Resident Welfare Associations etc.
• The duration shall not exceed 5 years with regard to risks where Sums Insured is up to Rs. Five Crores (any one risk accumulation) for Offices, Hotels and Shops.
• All add-ons shall be co-terminus with the base product.
• Long-Term Fire insurance can be cancelled during the tenure of the policy. In such instance the refund of premium shall be as under:

I.

Future Year Premiums

to be refunded in full

II.

For the policy year in which policy is cancelled:

• Where no claims are reported during the year
• Where claims are reported during the year

Refund of pro-rata premium pertaining to the year of cancellation

No refund of premium

III

GST and other government taxes

refund to the extent permissible as per the applicable norms.

• Insurers shall have a Board approved policy in place which must contain aspects relating to operational matters, accounting and disclosures for addressing the issue pertaining to cancellation of policy including claw-back of commission.
• The norms pertaining to accounting and financial disclosure are also specified under the Exposure Draft
• New long-term policies shall have a 30 days free-look period from the date of inception of the policy.
• Commission shall be payable once premium is recognised.
• Pricing of long-term policies shall be made based on sound actuarial principles.
• To monitor pricing, reserving and assessing capital requirements of long-term policies, the insurers shall monitor it’s transaction-level data at regular intervals of at least one year.

Source category: IRDAI