There’s a New Cartel in Town: Insurance Firms
General insurance cos are working together to create uniform terms for seven industries
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.”