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Insurance regulator IRDAI plans to standardise insurance guidelines for houses and shops

The Insurance Regulatory and Development Authority of India (IRDAI) is coming out with standard guidelines for products aimed exclusively at units like 'dwelling houses' and small commercial establishments.

IRDAI is expected to come out with norms in the next few months, said a source close to the development. Standardisation would entail affordable insurance products to help cope with and recover from common risks while adhering to certain levels of cover, premium and benefit standards.

In the last few years, the need for such standardisation was accentuated by increasing loss of small houses and commercial establishments due to natural calamities.

In May, IRDAI had come out with an exposure draft on revisiting the product structure for dwellings, offices, hotels, shops and micro, small and medium enterprises (MSME) against fire and allied perils. It constituted a working group to look into the specific needs of the segment. The working group made various recommendations, after which it was decided to work on the product design and draw up the proposed policy wordings. These include the terms and conditions in plain language, keeping the target segments in mind.

The group also recommended standardisation of products in the segment. It suggested that all perils relevant to a segment be covered in the base product itself to avoid mis-selling.

Also, the working panel suggested a system of default sum insured for all dwellings. It recommended that the General Insurance (GI) Council or Insurance Information Bureau of India (IIB) create a database of cost of construction for each square feet carpet area for different geographies and construction types. The insured will declare only the carpet area and the sum insured of the dwelling will be auto-calculated at the given rate. At present, there are around 91 products offered by registered general insurance companies, targeting low income segment of the population, according to IRDAIÆs annual report for 2017-18.

Some other recommendations of the group included insurance of houses in multi-storied apartments on the total saleable price of the apartment based on 'ready reckoner' rates published by each state government.

The group also recommended restricting tenure of the dwelling structure policies to five years.

It also talked about doing away with upfront discount and providing in-built sum insured auto-escalation at the rate of 10 per cent per annum.
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