Page 19 - Insurance Times April 2019

2015, had slapped the penalty on National Insurance, New efficiency. Accordingly, the four insurers were not a single
India Assurance, Oriental Insurance and United India economic entity.
Insurance for cartelisation and indulging in anti-competitive
practices. These companies had manipulated the bidding Non-compliance of Regulations:
process initiated by the Government of Kerala for selecting The IRDA (Protection of Policyholders' Interests)
insurance service provider for Rashtriya Swasthya Bima
Regulations, 2017 (Policyholders' Regulations) provides for
Yojna (RSBY). COMPAT agreed that appellants should suffer
protection of the interest of the policyholders. Pursuant to
the penal consequences as law was breached and the legal the Policyholders' Regulations every insurer is required to
conclusive presumption is that there was an appreciable have in place a board approved policy for protection of
adverse effect on competition.
policyholders' interests which shall prescribe certain
minimum parameters and procedures as mentioned in the
It recognised however that the burden of penalty will Policyholders' Regulations. With the complex products of
ultimately be transferred to the public as the appellants are the past now difficult to market, distribute and underwrite,
owned by the Government. The appellants who were public insurers can no longer rely on uniqueness alone to establish
sector companies, in their zeal to participate in a market differentiation.
Government sponsored Health Insurance Scheme benefiting
the poor, ignored prudence and the restraints of the
Instead, they're learning that their products have to go
competition law. Such conduct cannot constitute an beyond the basics of indemnification to deliver continuous
aggravating circumstance. Reducing the quantum of fine, value. Indian insurers are permitted to place reinsurance
COMPAT ordered that penalty has to be calculated with business with cross border reinsurers (CBRs) not having a
reference to the gross premium received by the insurance physical presence in India and doing reinsurance business
companies as insurance provider under RSBY scheme and with Indian insurance companies, who comply with the
penalty for each of the appellants will be a proportion of eligibility criteria specified by IRDA, which are, inter alia,
their share in such premium.
maintenance of solvency margin/capital adequacy as
stipulated by the home regulator of the CBR.
However, CCI had imposed the penalty on the insurance
companies based on 2 per cent of the average turnover of
Insurance Regulatory and Development Authority of India
the last three financial years. Now, COMPAT has imposed a
imposed penalty of Rs. 20 Lacs to M/s. ICICI Prudential Life
penalty of Rs 1.56 crore on United India Insurance, Rs 20 Insurance Company limited due to several non-compliance's
lakh each on New India Assurance and National Insurance
of its regulations. Authority instructed to insurer to deposit
and Rs 4 lakh on Oriental Insurance. By way of a December
the amount by debiting shareholders account. Authority had
9 2016 order,(1) the Competition Appellate Tribunal inspected books, documents of the insurer for the financial
(COMPAT) upheld a Competition Commission of India (CCI) year of 2011-12 and 2012-13. Total charges made to insurer
order dated July 10 2015 which found four public sector are 11 and out of them penalty are imposed on 4 charges.
insurers guilty of bid rigging under Section 27 of the Total Penalty imposed by Authority to Insurer is Rs.
Competition Act, but reduced the penalty from Rs6.7 billion
20,00,000/- (Twenty Lacs only). The inspection activities of
to Rs20 million.
IRDA of India has always protect interest of Policy Holders
and make strong believe towards safe insurance amongst
This new penalty was calculated based on the relevant
all people of the country. The summary of areas where
turnover of the product in question. COMPAT, confirming
penalty has imposed are as under:-
the CCI's decision, held that in terms of the General
Insurance Business (Nationalisation) Act 1972, the four
companies were created in order to encourage competition
and function according to business principles.

COMPAT further held that the influence of the Department
of Financial Services did not detract from the independent,
commercially and economically separate status of the four
companies which, as per the General Insurance Business
(Nationalisation) Act, were created as independent entities
in order to compete with each other in the interest of

The Insurance Times, April 2019 19