SHIPPING COMPANIES ALLOWED 5% DISCOUNT
ON RISK COVER
In what could bring down shipping costs, the insurance regulator,
Insurance Regulatory and Development Authority (IRDA), has
allowed shipowners to claim a special discount of 5% from
insurers in addition to the 10% rebate on premium of marine
hull cover.
The
special discount can, however, be claimed if the shipowners
cover their risks directly with insurance companies instead
of going through brokers and corporate agents, IRDA chairman
CS Rao said in a circular.
Quashing
the previous guideline, Mr Rao said, "In addition to
owners' discount of 10% wherever applicable, the shipowners
will also be eligible for 5% special discount in lieu of agency
commission, brokers remuneration if the business is placed
with the insurance companies directly."
The
move comes after the Indian National Shipowners Association
(INSA) made a representation to IRDA against the earlier order,
which barred the 5% special rebate. INSA pointed out that
absence of rebate was making the premium rates offered by
Indian insurers uncompetitive when compared to international
rates.
Most
of the non-tariff businesses - fire, engineering and marine
- were eligible for the special discount.
Although
the discount was retained for fire and engineering, IRDA had
recently decided to discontinue it for marine in an order
dated June 8. IRDA had earlier mandated that corporate agents
would be eligible for 10% of the final premium and direct
brokers would get 12.5% on marine hull insurance.
Although
the special discount was scrapped by IRDA to encourage brokers
and corporate agents, it proved to be a dampener to the shipping
industry as domestic rates for covering marine risks became
costlier than what prevailed in global markets.
Marine
hull insurance covers any loss or damage to ships, tankers,
bulk carriers, smaller vessels, fishing boats and sailing
vessels and owners or bankers of ships and vessels.
The
decision by IRDA on marine hull insurance follows the recommendations
made by an expert committee that examined the remuneration
system for insurance brokers and insurance agents in general
insurance business. Marine hull insurance policy covers loss
or damage to the property due to fire or explosion, stranding,
sinking, overturning or derailment.
IRDA
had earlier fixed agency commission and brokers remuneration
for tariff and certain non-tariff businesses except marine
hull business.
