General insurers to challenge Rs 671-crore CCI penalty

State-owned non-life insurers are "surprised" at the Rs 671-crore penalty that fair trade watchdog CCI today slapped on them for allegedly forming a cartel and rigging the tender floated by Kerala government to select insurance provider for Rashtriya Swasthya Bima Yojna.
Stating that they will seek legal remedy, they termed the Competition Commission order as "surprising". These insurers also pointed out that they don't make any money from this government-run social security scheme where the claim ratio is too high.
Earlier in the day, the CCI ordered the four state-run general insurers to collectively pay Rs 671 crore for alleged cartelisation and rigging the price bids for the Rashtriya Swasthya Bima Yojna (RSBY) scheme of the Kerala government.

The following is the break-up of the penalty -- New India Assurance Rs 251.07 crore, National Insurance Company Rs 162.8 crore, Oriental Insurance Company Rs 100.56 crore and United India Insurance Rs 156.62 crore.
"We are surprised by the CCI order. This is one business where the claim ratio is 150 per cent. We have been serving the public through various social security schemes," General Insurance (Public Sector) Association (GIPSA) chairman G Srinivasan told PTI.
The GIPSA is the umbrella body of all the four state-owned non-life insurers and G Srinivasan is also the chairman and managing director of New India Assurance.

"We are examining legal remedies and will approach appropriate forum on the issue," he added.

The order follows a probe by the CCI into charges of cartelisation by these insurers "in rigging the bids submitted in response to the tenders floated by the Kerala government for selecting insurance service provider for the RSBY."
The CCI began looking into the matter following an anonymous letter that charged these companies of rigging the tender and forming a cartel for the same.
The letter alleged that these four companies rigged the tender floated by Kerala on November 18,2009 for selecting an insurance service provider for rolling out RSBY in 2010-11.

A senior official of National Insurance said, "We will definitely go for appeal against the CCI order. The fact is that we don't make any money on any of the government-run schemes and there is something wrong with the order."
The CCI said it conducted a detailed investigation into the actions of the four insurers on the matter for 2010-11, 2011-12 and 2012-13 for the RSBY and a comprehensive health insurance scheme. The probe found these firms colluded with each other and manipulated the tender put out by Kerala.
An official of another company said "the question of cartelisation arises only when there was some profit involved.