There’s a New Car­tel in Town: In­sur­ance Firms

Gen­eral in­sur­ance cos are work­ing to­gether to cre­ate uni­form terms for seven in­dus­tries

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Mumbai: Gen­eral in­sur­ers are co­or­di­nat­ing prod­uct de­sign and pre­mi­ums by shar­ing data on oc­cu­pan­cies where claims are high in what ex­perts call the first signs of carteli­sa­tion of the in­dus­try which could have a big im­pact on cus­tomers and it is likely that the Com­pe­ti­tion Com­mis­sion of In­dia (CCI) in­ter­venes.

The uni­form word­ings on pol­icy doc­u­ments for in­dus­tries such as steel and power and iden­ti­cal pre­mium rate and de­ductible may in­vite the at­ten­tion of the monopoly watch­dog. The CCI had come down heav­ily on the tyre and ce­ment in­dus­tries for their car­tel model which fleeced cus­tomers.

The gen­eral in­sur­ance sec­tor has­come­to­geth­erto­fol­lowu­ni­form­premi­um­rate­andde­ductible for seven in­dus­tries and add an­other five in the next fi­nan­cial year. In­sur­ers have de­cid­ed­min­i­mumpremi­um­rat­esthat will be charged in case of seven in­dus­tries in­clud­ing pa­per, ce­ment, tyre, IT/soft­ware and alu­minium, zin­can­d­cop­per.

The in­dus­try has also de­cided that ex­pir­ing lead in­surer would no­tify other in­sur­ers about claim ex­pe­ri­ence of pre­vi­ous years.

“The in­dus­try has de­cided to not charge rates that are un­sus­tain­able,” said A Hoda, of­fi­ci­at­ing chair­man,Unit­edIn­dia.“No­body­is­go­ing to charge be­low a cer­tain per­cent­age be­cause com­pe­ti­tion is lead­ing to death of the in­dus­try.”

Net in­curred claims ra­tio has been on rise for sev­eral years. The net in­curred claim ra­tio was 94% for 201112 and 2012-13, 97% in 2013- 14,101% in 2014-15 and 102% in 2015-16, ac­cord­ing to Irda’s an­nual re­port.Amongth­e­var­i­ous­class­esof health in­sur­ance busi­ness, the ra­tio is par­tic­u­larly high for group busi­ness, which was more than 100% for ea­chof thep­re­ced­ing­fiveyears,con­sis­tently in­creas­ing over the same pe­riod.

“In­sur­ance com­pa­nies are shar­ing data on oc­cu­pan­cies where c l a i ms a r e h i g h , ” said G Chan­drasekha­ran, sec­re­tary gen­eral,Gen­er­alIn­suranceCoun­cil.“It take­spla­ceinany­mar­ketinde­te­ri­o­rat­ing claims en­vi­ron­ment.”

In2012,the­gov­ern­men­thadasked fourstate-runin­sur­ance­com­pa­nies to share data on pre­mium and claims with re­spect to ma­jor ac­counts to en­sure there was no com­pe­ti­tion amongst them. Pub­lic sec­tor gen­eral in­sur­ers have had more than 100% claim ra­tio for all the past five years. This has gone up in the past two years. “The in­dus­try has come to­gether to jack up prices and kill free pric­ing,” said head of an in­sur­ance broking firm. “This is vi­o­la­tion of free mar­ket.”

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