ICICI Lombard front-runner in rly insurance

ICICI Lombard has emerged as the lowest bidder for the prestigious Railways passenger cover policy for 2007-08 ahead of its rivals""state-owned General Insurance Companies (GIC) and Reliance General Insurance.

The Railways is expected to take a decision on the winner soon. The cover helps the Railways pay compensation for accident victims.

This is the second year private insurers have bid for one of the largest insurance policies in India. ICICI Lombard submitted a bid covering 6.5 billion passengers quoting a premium of Rs 34.35 crore. Rivals have quoted premiums between Rs 38 crore (by Reliance) and Rs 74 crore.

Competitors contended that ICICI Lombard has been able to quote aggressively because it has not capped its overall risk exposure as well as its liability per accident.

This, they said, might make it difficult for the company to reinsure the cover and, therefore, constrain its ability to actually pay compensation when needed.

The Railways account is conventionally quoted on the support of significant re-insurance because of huge exposure in the aggregate and per event.

For instance, Reliance General Insurance bagged the cover last year "" the first private insurer to do so "" to cover 5.6 billion passengers for a premium of Rs 39.15 crore. Ninety per cent of this was reinsured by GIC and overseas re-insurers.

An ICICI Lombard spokesperson declined to comment. Sources, however, said competitors' contention had no basis since the Indian Railways Act ,1989 limits compensation at Rs 4 lakh for a death and Rs 32,000 for injuries.

"Since conditions for bidding are the same as last year and the exposure is limited by the Act, there is no reason to believe that ICICI Lombard cannot go for reinsurance," said sources.