Insurance regulator IRDAI has cautioned insurers against offering steep discounts on fire insurance premiums.
The regulator says aggressive underpricing could weaken insurers’ financial health and impact claim settlements.
Key Highlights
- IRDAI warns insurers against excessive discounts on fire insurance policies.
- Discounts of 60–75% on catastrophe covers and 85–90% on preferred risks have raised concerns.
- Regulator says fire risk pricing should follow actuarial principles.
- Aggressive pricing may hurt insurers’ ability to settle future claims.
- Fire insurance premiums grew to ₹8,087 crore in Q1 FY27, up from ₹7,206 crore a year earlier.
- Industry asked to maintain underwriting discipline despite intense competition.
The Insurance Regulatory and Development Authority of India (IRDAI) has warned general insurance companies against offering deep discounts on fire insurance policies, saying such aggressive pricing could threaten insurers’ financial stability and weaken underwriting discipline.
The regulator issued the advisory after receiving complaints about exceptionally high discounts being offered on large industrial and commercial fire insurance policies. According to the advisory, insurers have reportedly been offering discounts of 60–75% on catastrophe covers and 85–90% on preferred risks, primarily due to intense competition, business targets and pressure to acquire large corporate clients.
IRDAI said fire insurance is a low-frequency but high-severity business, where a single claim can be several times larger than the premium collected. Therefore, premiums should be determined using sound actuarial principles and should adequately cover expected claims, operating expenses, reinsurance costs and a reasonable margin for uncertainty.
The regulator cautioned that unsustainably low premiums could affect insurers’ ability to honour claims during major fire incidents or natural disasters. Industry experts also warned that if such pricing continues, insurers may struggle to maintain profitability and financial strength over the long term.
Although fire insurance tariffs were de-regulated in 2024, insurers are still required to follow board-approved underwriting and pricing policies.
Despite these concerns, the fire insurance segment continues to grow strongly. Industry data shows fire insurance premiums rose to ₹8,087 crore in the first quarter of FY27, compared with ₹7,206 crore in the same period last year. The segment accounts for around 8.2% of the general insurance industry’s premium pool.
The latest advisory signals that IRDAI wants insurers to focus on sustainable growth and disciplined pricing rather than aggressive discounting to win business.
