There's a New Cartel in Town: Insurance Firms

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 has come together to follow uniform premium rate and deductible for seven industries and add another five in the next financial year. Insurers have decided minimum premium rates that will be charged in case of seven industries including paper, cement, tyre, ITsoftware and aluminium, zinc and copper. 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, United India. “Nobody is going 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. Among the various classes of health insurance ..

“Insurance companies are sharing data on occupancies where claims are high,“ said G Chandrasekharan, secretary general, General Insurance Council. “It takes place in any market in deteriorating claims environment.“ In 2012, the government had asked four state-run insurance companies to share data on premium and claims with respect to major ac counts to ensure there was no com petition amongst them. Public sector general in surers 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 bro king firm. “This is violation of free market."