As we have to price the risk as per our understanding of the risk, we will be focusing more on our skills to assess the risk properly. All property beyond a certain limit proposed by the insured will be inspected and the risk management practices of the insured will be evaluated before calculating the price. Therefore, these basic rules of underwriting will gain more importance in the post detariffed scenario.

Will it be much different than that of the system that is being adopted?

Yes, in respect of fire and engineering business which is tariffed today, we simply look into tariff and calculate the premium. All the possible discounts or loading are also mentioned in the tariff. Hence our underwriter does not apply his mind while evaluating the risk. Presently, it is more column filling in the forms than applying one's mind to the various facts mentioned in the proposal form. To this extent, there will be a sea change in the process of underwriting and the claims settlement.

How do you define a bad risk and good risk?

Bad risk is one which has adverse features and which is more prone to accidents. For instance, if there is a building wherein there are electric wires hanging everywhere, not properly insulated or combustible material strewn everywhere, without proper upkeep discipline, such risks can catch fire anytime and any amount of loading in premium will not make it a good risk. A risk is not considered good just because it does not have a claim in the past several years. The risk has to be assessed more by its housekeeping, risk management features, the design, construction of the building etc.

What are the factors or changes you want to take into account while pricing a product?

As we have explained, we will take into account the risk minimisation factor and risk management efforts taken by the insured vis-à-vis the risk as well as the past claim experience while pricing a product. One would definitely look into the volume and overall profitability while pricing the risk.

Will you completely eliminate the bad risks from your portfolio or accept it with premium overloading?

We would like to eliminate bad risk completely because any amount of loading in premium will not offset the adverse features and a single fire claim can take away more than 10 years premium.

What are the incentives for the good risks?

Incentives for good risks could be discount in premium which can be called 'Good Feature Discount'. Similarly if the insured is confident of the risks and opt themselves for higher deductibles, they will stand to gain in premium.