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CCI slaps Rs 671-cr penalty on four PSU insurance firms

Non-life insurers termed the order as “surprising” adding that legal remedy would be sought.

By: ENS Economic Bureau | Mumbai | Published: July 17, 2015 2:19:50 am

The Competition Commission of India (CCI) has imposed a penalty of Rs 671 crore on four public sector insurance companies for manipulating the bidding process initiated by Kerala government for selecting insurance service provider for Rashtriya Swasthya Bima Yojna for 2010-11, 2011-12 and 2012-13.

“The final order was passed by CCI on July 10, 2015, in a matter which was taken up suo motu pursuant to an anonymous information received by the Commission under Section 19(1) of the Competition Act, 2002, against National Insurance, New India Assurance, Oriental Insurance and United India Insurance alleging contravention of the provisions of section 3 of the Act which deals with anti-competitive agreements including bid rigging.”

The commission noted the impugned conduct of these companies to have resulted in manipulation of the bidding process in contravention of the provisions of Section 3(1)read with Section 3(3)(d) of the Act.

According to the CCI, the case related to bid rigging in public procurement for social welfare schemes, the beneficiaries of which were BPL and poor families and “as such the same was taken as an aggravating factor”.

Accordingly, penalties of Rs 162.80 crore, Rs 251.07 crore, Rs 100.56 crore and Rs 156.62 crore were imposed upon National Insurance, New India Assurance, Oriental Insurance and United India Insurance, respectively…”

Meanwhile, state-owned non-life insurers said they were “surprised” at the Rs 671-crore penalty CCI slapped on them 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.

“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 said. 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.

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