Detarriffing Means Less Money

In the three months since detarriffing was introduced, only Bajaj Allianz General Insurance has shown an increase over the past two years, according to the IRDA’s 2005-06 annual report. This was not really what was supposed to happen.

There are two things that detariffing was supposed to do, it was supposed to break apart the large groups of customers and price ther car insurance appropriately – instead of leaving some people paying more because of other people in their group. Therefore you put like people together, with same driving histories and patters, and they pay more or less for their car insurance depending on what group they end up in.

The second thing it was supposed to do was change the pricing itself. It made rates for car insurance go down across the board, but sometimes that was not what should have happened. Instead of it making people pay for what they are supposed to pay, it ended up resulting in a 20% decrease for almost everyone.

While this is great for the drivers, the car insurance companies are cutting into not only their profitability, but their ability to pay claims if the numbers continue to go down. There needs to be a certain amount of cushioning in the car insurance business, as with any insurance. If there are claims that need to be made, then you want to ensure that you will be able to meet the demand.

Back to May 07 Archives