New generation insurers play dirty

Venkatachari Jagannathan
11 January 2002

Chennai: Contrary to the pro-liberalisation arguments of expanding the insurance market, offering innovative risk covers, the new players particularly general insurers have done little beyond tapping the existing government insurers clientele using dubious means.

Some of the fears expressed about liberalising the underwriting sector like questionable selling tactics, undercutting, avoiding underwriting motor insurance, higher compensation for agents are coming true.

The most infamous episode was the one practised by Citibank to sell personal accident and credit insurance policies of Royal Sundaram Alliance and Tata AIG. The Insurance Regulatory and Development Authority (IRDA) had asked the insurers to keep the insurance schemes in abeyance.

When the new general insurers entered the fray, the first complaint voiced by the nationalised players was about undercutting the premium rates fixed by the Tariff Advisory Committee (TAC) while quoting for industrial projects. For the uninitiated, TAC fixes the premium rates for most general insurance products.

Such complaints soon stopped as the new players realised that rate-cutting is a bottomless pit and would also result in crossing swords with TAC. However, they continue to quote for risks even before getting IRDAs nod to sell a particular product.