The Insurance Regulatory and Development Authority of India (IRDAI) has cautioned general insurers against offering extreme discounts of up to 99% on fire insurance policies, warning that aggressive price-cutting could weaken underwriting discipline and affect insurers’ ability to meet large claims. (Asia Insurance Post – Magazine)
In a letter issued on July 22 to chief executives of multiline general insurers, IRDAI said it had received representations regarding unusually low pricing for large fire risks. The regulator attributed such pricing partly to intense competition, year-end business targets and pressure from clients and intermediaries. (Asia Insurance Post – Magazine)
IRDAI stressed that large industrial and fire risks are generally low-frequency but high-severity exposures, where a single major claim can be many times greater than the premium collected. It therefore urged insurers to ensure that pricing is based on sound actuarial principles and remains consistent with their board-approved underwriting policies. (Asia Insurance Post – Magazine)
The regulator warned that inadequate pricing and excessive discounting could result in underwriting losses, higher volatility and mismatches between premium income and reinsurance costs. Such practices could ultimately affect the financial health of insurers and their capacity to settle major claims. (Asia Insurance Post – Magazine)
The intervention comes amid a sharp decline in fire insurance premium collections. Premiums from the fire segment fell to ₹8,087 crore in the first quarter of FY2026-27, compared with ₹11,206 crore in the corresponding period of the previous year. (Asia Insurance Post – Magazine)
This decline contrasts with the segment’s performance in FY2025-26, when fire insurance premiums grew by about 13.4% to more than ₹27,500 crore, making it one of the stronger contributors to overall general insurance premium growth. (Asia Insurance Post – Magazine)
The impact of the price war has also begun to reflect in insurers’ financial performance. New India Assurance CMD Girija Subramanian said the property insurance segment saw a 27.8% decline in premium during the April-June quarter, contributing to muted overall gross written premium growth of 2.9% for the insurer. (Asia Insurance Post – Magazine)
While insurers have flexibility in determining prices in a de-tariffed market, IRDAI’s intervention signals that competitive pricing cannot come at the expense of actuarial adequacy and prudent risk management. The regulator’s concern is particularly significant for large industrial risks, where losses from a single fire, explosion or catastrophe event can be substantial.
The development highlights the need for insurers to balance market competition with sustainable, risk-based pricing and adequate reinsurance protection.
