Expanding the adoption of fire insurance for homes and small businesses requires a strategic approach. Simplifying products to be both easily comprehensible and attractively priced is pivotal in encouraging widespread acceptance of insurance coverage.

Assessing Risk Dynamics: Severity vs. Incidence

The choice between insuring 100 warehouses with inflammable chemicals in 100 drums each or a single warehouse with 10,000 drums involves weighing severity risk against claim incidence risk. IRDAI’s recent regulatory move recognizes these distinct risk profiles and has introduced specialized fire insurance products for homes and small businesses.

Revamping Regulatory Framework

Previously governed by the All India Fire Tariff, 2001, fire insurance products are now undergoing a transformative shift. Effective April 1, 2021, dwellings and commercial risks below Rs 50 crore in sum assured are excluded from the tariff. Instead, they fall under three standardized products: one for dwellings, another for commercial risks up to Rs 5 crores in sum assured, and the third for risks between Rs 5 and 50 crore. This regulatory evolution simplifies products, ensuring a streamlined claims process, while allowing insurers to differentiate their offerings through up to three add-ons.

Tailored Solutions for Hassle-Free Coverage

The new standardized products are designed to cater specifically to the needs of homes and small businesses. By moving away from a one-size-fits-all approach, insurers can now offer customized solutions, fostering a more inclusive and responsive fire insurance landscape.