Industry Burning Cost – only a reference, not minimum mandated rate
IRDAI has clarified that it does not mandate any minimum rate for premium setting by insurance and reinsurance companies. It has come to the notice of IRDAI that policyholders are being led to believe that the Burning Cost released by Insurance Information Bureau of India (IIB) is ‘minimum mandated rate’. Industry Burning Cost is only a reference point to understand claims experience in fire perils across the industry. It is not to be construed as a minimum mandated rate laid down by IRDAI. A circular clarifying the same has been issued on 12th May, 2022 reiterating to the insurance companies the purpose of publishing the Industry Burning Cost by IIB. The insurance companies have also been advised to ensure that there is no mis-information to policyholders and other stakeholders regarding the same.
Relevant IRDAI circular is as follows:-
Insurance Regulatory And Development Authority Of India
Circular Ref: IRDAI/NL/CIR/MISC/95/05/2022 | Dated: 12th May, 2022
ALL GENERAL INSURERS CARRYING ON THE BUSINESS OF FIRE INSURANCE
Re: Pricing of products covering Fire and Allied perils
Insurance Information Bureau of India has been periodically publishing the industry Burning Cost for Fire perils (FLEXA). All insurers have been informed that the purpose of this is to give an indication to insurers of the industry Burning Cost for various occupancies, for appropriate use in the matter of pricing the various risks.
2. The Authority has been receiving several complaints from policyholders, both directly and through various platforms such as industry associations, that insurers are referring to the Burning Cost as a ‘mandated minimum rate’.
3. The objective of IIBI publishing details of Burning Costs occupancy-wise is only to give information to insurers with regard to industry-level experience for appropriate use while rating risks. By no means does this even remotely imply that this is a `mandated minimum rate’. It is expected of insurers to consider all applicable risk factors for rating a risk and give appropriate discounts or charge loading as warranted –the rating approach shall be part of the technical note filed under the Use and File/File and Use procedure as the case may be.
4. It is reiterated that insurers shall ensure that policyholders are not mis-informed that the Burning Cost is a ‘mandated minimum rate’ for insurers to charge.
Please acknowledge this circular.
(Yegnapriya Bharath)
Chief General Manager (Non-life)
