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.
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