What is deregulation of insurance tarrif?

Answer 1

Deregularisation of insurance tarriff means the rules and regulations of calculating the risk (premium).

In simple terms, earlier the Insurance and Regulatory Authority of India (IRDA) had the authority to decide how much a person pays for the any insurane he would take. This calculation was based on the Claims Data or Claims Amount every year and the trends on it.

However, this rule will end on 31st December, 2006 and the companies will be free to calculate the risk themselves. In this case, what will happen is, the premiums will be calculated based o the risk an insurance company would take in insuring the risk.

For example, for a Motor Insurance, lets say that you are paying Rs. 800 for a bike insurance. From Jan, 2007 onwards this amount will vary drastically from company to company depending on varous risk factors.
These risk factors are like age of the driver, model of the bike, age of the vehicle, health of the driver, habbbits of the driver (like smoking,drinking), place the vehicle is kept, ownership and the list goes on.

Answer 2

Presetnly tariff is fixed by tariff advisory committee which is uniform across the insurers. Shortly each insurer will decide the tariff themselves. It is almost like banking where the interest rates on deposits are decided by the banks themselves than RBI.