The Hindu Business Line : Insurance cos against marine cover de-tariffing

According to shipping companies that have been seeking de-tariffication of hull and machinery policies, public sector insurance companies are not in favour of free pricing for this segment.

At a recent meeting convened by the Tariff Advisory Committee (which fixes the premium for the regulated scheme) to discuss the subject, the PSU insurers are said to have opposed the proposal arguing that deregulation should not be on a selective basis. They want free pricing to be introduced simultaneously for all regulated insurance schemes.

Shipping companies said their insurance cost is 25-30 per cent higher compared to that of their competitors abroad. "In the international market, we can get a discount of at least 30 per cent over the rate being charged by the Indian companies," said a shipping company official. Insurance cost of Indian companies, based on the current value of ships, vary between 10 per cent and 20 per cent of their total operational cost, he said.

The marine hull and machinery insurance business in India is estimated to be around Rs 350-400 crore annually. Indian shippers allege that public sector insurers are worried that they may lose the business once the scheme is deregulated.

A senior official with one of the four public sector insurance companies said that the insurers are not against deregulating tariff, per se. "We are only saying that de-regulations of all schemes, at least in one sector, should be done simultaneously. If it is not done so, the Government-owned companies will be left with only loss-making schemes. We also need a level-playing field," he said, asking that who would otherwise bear losses in motor vehicles insurance. Ship owners appear to be unconvinced of insurers' logic as they are planning to approach the Insurance Regulatory Development Authority to take up the issue again.

Meanwhile, the Government has discontinued the war risk insurance scheme with effect from January 1 on the ground that Government should not be in the insurance business.

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