Financial Daily from THE HINDU group of publications
Wednesday, Nov 20, 2002
Money & Banking - General Insurance
Logistics - General Insurance
Transporters seek to chart own insurance course
Sarbajeet K. Sen
NEW DELHI, Nov. 19
IF you cannot fight them, join them. That appears to be the new approach adopted by commercial vehicle owners in their prolonged dispute with the general insurance companies over premium rates and denial of stand-alone third-party liability covers.
Two of the apex transporters' bodies of the country - the All India Motor Transport Congress (AIMTC) and the All India Confederation of Goods Vehicle Owners' Associations (ACOGOA) - have now sought the permission of the Insurance Regulatory and Development Authority (IRDA) to float their own insurance co-operative societies aimed at taking care of the insurance needs of their members.
The issue was raised by the two associations at a recent meeting held with IRDA in the presence of the Chairman, Mr N. Rangachary. According to industry sources, Mr Rangachary asked the representative of transporters to come up with firm proposals in this regard before the authority could give its views on the matter.
The two associations had reportedly told IRDA that the regulatory norm of a minimum paid-up capital of Rs 100 crore for insurance ventures would have to be drastically reduced for making such an co-operative feasible. "We feel that a capital base of Rs 50 lakh to Rs 1 crore should be enough for starting such an insurance venture through a co-operative format since the new entity is being proposed for an extremely limited purpose. The proposed co-operative would also give a commitment to limit itself to activities purely to help its members meet their motor insurance needs," a representative of one of the transporters' body said.
Transporters feel that an in-house arrangement for transacting insurance would be to the benefit of both the transporters as well as the insurance companies. While the proposed co-operative would not deny third-party covers to vehicles, transporters would have the benefit of lower insurance premium for their coverage.
On the other hand, the move would also come as a big relief to insurance companies since they would be able to rid themselves of a large part of the motor insurance relating to commercial vehicles which they feel have been a heavily loss-making portfolio.
AIMTC officials said that the proposal of floating a co-operative insurance body had been taken up earlier with the previous Finance Minister, Mr Yashwant Sinha. "We had discussed the need for such a co-operative arrangement and also the need for lower capital base for any such cooperative entity with Mr Sinha. But the issue got buried in the larger debate on the opening up of the insurance sector," an AIMTC official said.
Transporters pointed out that a provision for floating such an insurance co-operative was in existence prior to the nationalisation of the non-life insurance industry in the early 1970s. The provision was part of the Motor Vehicles Act, 1939, but was subsequently deleted as it was found to have become redundant.
Stories in this Section
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |
Copyright © 2002, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line