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Chennai, Oct 18 (IANS) Withdrawal of service tax on reinsurance and allowing banks to sell more than one non-life insurer's products figure in the wish list non-life insurance companies will present to Finance Minister P. Chidambaram in New Delhi Monday.
Their other demands are removal of administered pricing mechanism/tariff for commercial vehicles, capping of liability on third party motor insurance policies and extension of tax benefits on other policies.
Chidambaram, while announcing measures for the life insurance sector after a meeting with company heads Oct 1, had said a similar meeting would be held for non-life insurance sector.
Senior officials from sector regulator Insurance Regulatory and Development Authority (IRDA) will also attend the Monday meeting.
"Lots of issues are impacting non-life insurance sector like inadequate pricing of third party premium in respect of commercial vehicles, tax matters and allowing banks to sell products of more than one non-life insurer," said Amarnath Ananthanarayanan, CEO and MD, Bharti Axa General Insurance Company.
According to him, third party premium on commercial vehicles is not adequate since liability under the policy is unlimited as per the Motor Vehicles Act.
"Earlier, courts use to award compensation to family of road accident victim taking into consideration the person's past earnings. But now, courts take into account victim's earning potential while determining the claim," CEO of a private non-life insurer told IANS on conditions of anonymity.
He said companies were not allowed to charge adequate premium because IRDA had fixed the rates.
Technically though, there is indefinite liability for non-life insurers to third parties, while the premium is definite, say industry officials.
The average pay out per third party claim for the industry is said to be around Rs.200,000.
When asked why the industry can't come out with a premium rate for that pay out, the official said: "I won't know who will meet with an accident and the kind of liability the company will have to foot that year."
He said the risk profile of each company would differ and hence they should be given the freedom to fix the rates.
He said the motor third party claims would be around Rs.15,000 crore per year for the industry whereas the premium income would be around Rs.9,000 crore.
"APM (administered pricing mechanism) and free market economy do not go together. Hence the motor third party premium rates should be freed," K.K. Srinivasan, a former IRDA member, told IANS.
The other issue the industry would place before the minister is deduction of service tax on reinsurance premium.
"Overseas reinsurers do not agree to pay service tax on reinsurance premium whereas the income tax department has told insurers to deduct tax at source. Hence, service tax on reinsurance premium should be scrapped," official of a private life insurer told IANS not wanting to be named.
Amarnath Ananthanarayanan said the system of "use and file" in respect to new products would be a welcome move for the sector.
Chidambaram had earlier said that IRDA, in consultation with life insurers, might introduce the use and file system and identify/design certain standard products which could be used by the industry under the proposed system.
"Use and file for simple products looks fine. But IRDA should have the right to recall and stipulate refund of premium and payment of intervening claims when a product is found defective," K.K. Srinivasan said.
The other issue that non-life insurers might raise at the meeting is calculation of solvency margin by including outstanding premium under Rashtriya Swasthya Bima Yojana (RSBY), a union government health insurance scheme for the poor.
Insurers get their premium from the government after a long delay whereas solvency norms stipulate that any dues outstanding for more than three months should not be taken into account for calculating the solvency ratio, an official of a private insurer said.