IRDAI group recommends setting up loss prevention entity for non-life insurers

A working group set up by the Insurance Regulatory and Development Authority (IRDAI) has recommended that a body to promote safety and loss prevention in the general insurance industry be set up.

This body will suggest ways to prevent losses to the non-life insurers. Here, customers could also be charged penalties in form of higher premium for violation of rules. This initiative could come handy in segments like motor insurance where loss ratios are high due to larger amount of claims.

"The recommended body could advise insurers on the framework for encouraging focus on improving safety and loss prevention in their organisations through a system of benefits and penalties in premium rates and terms and conditions of insurance policies," said the IRDAI working group report. The 10-member IRDAI working group was set up in December 2019 to look into loss prevention and minimisation for non-life insurance players.

The working group in its report said the loss prevention body that is set up should focus on creating an environment of safety and loss prevention among industries, businesses, insurers and society. This body would be funded by the insurance regulator and the general insurance companies.

Further, the report said this body should not be directly involved in commercial activities like risk inspection, risk management, project monitoring among others. This report said this body will initially work in the areas of property and motor insurance.

In property insurance, activities like setting benchmarks and reviewing earthquake-resistant constructions and developing/reviewing a map on flood-prone risks and earthquake zones in India could be taken.

In motor insurance, the body will look into mapping high exposure accident spots across the country and collaborating with vehicle manufacturers on better safety aspects in vehicles. Apart from handling safety awareness campaigns, this body will also collaborate with insurers and police to reduce stolen vehicles and quick recovery of and disposal of stolen vehicles.

The industry stakeholders have time till September 4 to present their views on the working group recommendations. After this, the final guidelines will be released.

Source: Money Control

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