New Delhi: In response to industry demands for better risk assessment, the insurance sector is gearing up for a major change. The General Insurance Council has started work on a CIBIL-like credit score system for insurance. Once in place, this system will help insurers identify high-risk individuals especially those with a history of fraud who may then face higher premiums or even denial of coverage, as per reports by ZeeBusiness.
The new score will track a person’s financial behaviour related to insurance which could affect their creditworthiness in the future. This means it may also influence their chances of getting loans. With this move, the insurance sector is taking a big step toward creating a risk profiling system that could directly impact future customers.
Insurers under this system will also consider the applicant’s existing credit score when reviewing insurance applications. With the new system in the works, insurance buyers with a good credit history may enjoy two key benefits:
– Lower premiums
– Faster, smoother approval process
Earlier, insurers had called for a dedicated credit score system for the industry to help expand coverage and curb fraudulent claims. Much like how credit scores work in banking, this system would help spot individuals who repeatedly file false insurance claims.
How Fraudulent Claims Hurt the Insurance Industry
Fake or dishonest insurance claims have been a long-standing issue. Every year, they:
– Cost insurance companies around Rs 12,000–15,000 crore
– Make up about 10–15 per cent of all insurance claims
– Lead to higher premiums—honest policyholders end up paying 18–22 per cent more
This not only causes huge financial losses but also makes insurance costlier for genuine customers.
Benefits of a Credit Score System in Insurance
– Honest customers rewarded with smoother approvals and lower premiums
– Reduced fraudulent claims, making the system more reliable
– Improved reach as insurers can confidently expand coverage
– More stable premium rates for everyone
Who Makes Up the General Insurance Council?
The General Insurance Council, set up under Section 64C of the Insurance Act, 1938 by IRDAI, includes representatives from general insurance, health insurance, and reinsurance companies operating in India.
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