India Inc has reaped the benefit of cut-throat competition among domestic insurers with regards to renewal of covers for fiscal 2003-04.
Despite a hardening of global insurance rates by 10 per cent, corporates renewed their policies on April 1 with a negligible hike in premiums.
Corporates reaped the benefits of competition with substantial reductions in premiums on non-tariff business including marine cargo, according to Dinyar M Jivaasha, group head and vice-president (corporate risk and insurance management), Essar Ltd.
"India is immune to the global hardening in insurance rates and the international market. Increases felt outside India are not reflected in the domestic market," said Dhananjay N Date, managing director, Swiss Re Services India Pvt Ltd.
This is also partly attributed to the fact that about 70 per cent of the Indian business falls under tariff rates prescribing the minimum price.
"It is not possible to charge international rates in a tariff-driven market. We are forced to follow what rates are charged by the Indian insurance industry," Date said.
When 14 corporates decided to challenge the Insurance Regulatory and Development Authority and prepone their renewals for 2003-04 to avoid the service tax imposed in the Union Budget, state insurers lost a sizeable number of accounts to private players.
The private insurers were more than willing to renew the covers prior to the due date, which the state insurers were against since the IRDA had warned insurers from adopting such tactics.
Eighty per cent of the fresh business of a leading private insurer was by eating into the state insurers' market.
The new private joint ventures have successfully captured a significant share of the market, Date said.
Private players are expected to capture 15 to 16 per cent of the total market this fiscal, having already mopped up 12 to 13 per cent as of March 2003. Relentless marketing efforts by private insurers have started getting results.
A senior private insurance company chief said, "The industry is facing turbulent times as cut-throat competition intensifies further. Kick-backs and undercutting in premium rates will only continue."
Industry sources said state-owned insurers have lost 11 of the 14 corporate accounts, whose insurance covers were preponed prior to their actual renewal dates to avoid the hike in service tax.
The New India Assurance Company lost the Gujarat Narmada Fertiliser Company account to Iffco-Tokio Marine General Insurance Company when the state body decided to prepone its renewal on March 25 instead of May.