Competition Commission of India

Indian Chemical Council Vs. General Insurance Corporation of India

MANU/CO/0029/2019

26.07.2019

MRTP/ Competition Laws

General insurance companies have freedom to decide their premium rates as well as their re-insurer

The present information has been filed by Indian Chemical Council ("Informant"), under Section 19(1)(a) of the Competition Act, 2002 against General Insurance Corporation of India ("GIC") alleging contravention of the provisions of Section 4 of the Act. The main grievance of the Informant revolves around a Circular dated 12th February, 2019 ("Circular"), issued by the GIC to all its ceding insurance companies with whom it has entered into reinsurance treaties, notifying certain amendments to the method of calculating premium that the ceding insurance companies need to comply with, within the fire insurance segment.

The Informant has prayed that, GIC be directed to withdraw the Circular dated 12th February, 2019, issued by it, to its ceding insurance companies under their respective treaties. The Informant has also filed an application under Section 33 of the Act praying that, GIC be restrained from implementing the Circular against the ceding insurance companies under its reinsurance treaties.

IRDAI being the sectoral regulator, upon reference by the Commission, has given its opinion that, the Circular, dated 12th February, 2019, of GIC is not in breach of relevant regulations and guidelines issued by it. The said Circular cannot be said to be anti-competitive, merely because it leads to enhancement in premium. It may not be appropriate on the part of the Commission to delve into aspects relating to quantification of premium and deciding whether any enhancement thereof is unjustifiable, since a pure pricing decision cannot be said to give rise to any competition concern unless, it is a manifestation of abuse of dominant position.

The Commission further notes that, the said circular, neither prevents a general insurance company/insurer to offer premium at lower rates to a primary insured/policy holder nor does it prevent general insurance company from opting for an alternate reinsurance company, other than GIC. Therefore, general insurance companies have the freedom to decide their premium rates as well as their reinsurer, irrespective of the said circular.

The Commission does not find alleged contravention of the provisions of Section 4 of the Act against GIC. The Commission is of the opinion that there exists no prima facie case and the information filed is closed under Section 26(2) of the Act. Consequently, no case arises for consideration of interim relief claimed by the Informant under Section 33 of the Act.

Tags : Circular Premium Enhancement Legality

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