General insurers offer beefy discounts, IRDA on the alert

Monday 31, October, 2005 Earlier this month, Reliance Industries Ltd (RIL) and Indian Airlines (IA) walked off with a huge discounts of 10-15% and 28%, respectively in their 2005-06 insurance renewals. Another Mukesh Ambani company, Indian Petrochemicals Corporation Ltd. (IPCL) also renewed its insurance with discounts for its assets worth Rs 17,000 crore. In order to get big accounts, general insurers have given beefy discounts on the premium rates. This move by the insurers has made IRDA sharp-eyed. The sudden spate of disasters like hurricanes Katrina and Rita followed by four major air crashes has resulted in a significant rise in the risk cover in the international reinsurance market. Despite this rise, general insurers have offered hefty discounts which has caught IRDA?s attention. An insurance company can fix up the premium rates for assets having worth more than Rs 100 crore and if the value of the assets is less than Rs 100 crore, it is governed by Tariff Advisory Committee (TAC). Now, IRDA is trying to make sure that the insurers put their reinsurance cover in place so that there is enough back up when there is actual need of it. Though the insurers have the liberty to fix up the premium rates, it needs to comply with the capital adequacy norm and the solvency margin rule. Incase of violation of the rule, it would lead to action against the insurers.

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