Sangeeta Verma ORDER
Order under Section 26(2) of the Competition Act, 2002
1. The present information has been filed by Indian Chemical Council ("Informant"), under Section 19(1)(a) of the Competition Act, 2002 ("Act") against General Insurance Corporation of India ("GIC") alleging contravention of the provisions of Section 4 of the Act.
2. As per the Information, the Informant is an apex national level organization representing all types of chemical industries in India. It was established in 1948, and is representing the interests of all its members.
3. GIC, formed in pursuance of Section 9(1) of the General Insurance Business (Nationalization) Act, 1972, was re-notified as the Indian Reinsurer in November, 2000. GIC receives statutory cession of 5% on every general insurance policy in India subject to certain limits, which means that all insurance companies operating in India have to mandatorily cede or transfer 5% of their liabilities under the insurance policies issued by them to GIC.
4. Insurance Regulatory and Development Authority of India ("IRDAI") is the regulatory authority for the Indian insurance sector, including the reinsurance sector, and the relevant regulations are the IRDAI (Reinsurance) Regulations, 2018 ("Regulations") which came into force on 01.01.2019. The Informant has stated that in terms of the Regulations, GIC continues to enjoy first preference in reinsurance placements of Indian precedents over other reinsurers. The Informant has further stated that GIC is dominant in the overall reinsurance market in India as it held a market share of 87% in terms of the gross written premiums and 90% in terms of net written premium ceded by Indian insurers to reinsurers, during 2017-18.
5. The main grievance of the Informant revolves around a circular dated 12.02.2019 ("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 new parameters for calculating premium have become effective from 01.03.2019 and it has been averred that on account of such change by GIC the insurance companies, in fire insurance segment, would charge premiums multiple times the existing premium.
6. With reference to the said Circular, the Informant has cited the following instances of abuse of dominant position by GIC thereby violating the provisions of Section 4(2)(a) of the Act:
i. GIC has provided no reasonable justification for amending its premium calculation parameters under the treaties. It has also not consulted the general insurance industry bodies, or trade associations, and did not consider the trickle down effect of the changes.
ii. The revised parameters have no causal link to the GIC's underlying costs for providing reinsurance services.
iii. The amendments introduced by the Circular are not equally applied to similarly placed occupancies. GIC relied on the "loss cost" schedule prescribed by Insurance Information Bureau, which prescribes rates for 109 occupancies. However, the GIC chose to apply the amended reinsurance premium parameters only in respect of 8 occupancies (i.e. textile, plastics, rubber goods manufacturing, chemical manufacturing below 32° C flashpoint, storage of category III goods, transporters' godown, steel plant and power plants), without giving any reasonable justifications. Further, GIC has not distinguished between the low risk and the high risk units. There is no provision in the circular for lower premium rates for better protected risks. This is not only against better risk management practices but also against commercial logic.
iv. GIC has neither made any pr........