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Come January 2007, and the non life insurance sector will witness detariffing. Its effect- corporates insuring the health of the employees will have to pay higher premiums. It would mean that the premiums costing for corporates will be much higher than those of the individuals. Corporates usually take a series of covers to insure their assets like machinery, plant etc. against fire, floods, earthquake and other natural calamities. This will mean more premium outgo at the end of the corporates because with detariffing, cross-subsidisation will become unfeasible meaning when the corporates buy insurance cover for their assets, health insurance for the employees is also negotiated at a lower price.
With detariffing, cross subsidisation will come to a standstill. Due to this, the premium of health insurance given to corporates are expected to soar up.
Detariffing of non life stretches its ambit to fire, engineering and motor insurance. As it is, motor insurance does not yield much profit and detariffing would lead to further loss. In addition to this, the premium rate would fall for fire and engineering insurance. On the contrary, premium would rise for miscellaneous products like group health mediclaim, third party motor and high end vehicles. Presently, 70% of the premiums come from tariffed products.
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