Imprudent decisions by 4 PSU insurers caused Rs 122cr loss:CAG

Four state-run insurers, including National Insurance and Oriental Insurance, suffered loss of Rs 121.81 crore due to their "imprudent" decision to enter into business pact with private player Star Health and Allied Insurance Company, official auditor CAG said today.

National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company suffered loss during the four-year period ending June 2012, said the Comptroller and Auditor General (CAG) report, tabled in Parliament.

In November 2007, Tamil Nadu invited bids from general insurers to provide health cover to the state government employees and local bodies, among others.

Star Health and Allied Insurance Company won the bid, in which the four PSU insurers too had participated.

Even though the premium quoted by the PSU insurers was much higher than finally agreed to by Star, they entered into a co-insurance agreement with the private firm as the leader.

From June 2008 to June 2012, the four PSU insurers received premium of Rs 137.33 crore and accepted expenditure of Rs 259.14 crore towards claims, administrative charges and other expenses, CAG said.

"The PSU insurers suffered a total loss of Rs 121.81 crore on this insurance scheme... A substantial part of claim was borne by the four PSU insurers, who accepted the co- insurance in spite of low premium and without putting in place appropriate checks and balances to safeguard their financial interests," it added.