Fine Slapped on Four Insurers for Cartelisation

Published: 20th July 2015 01:05 PM  |   Last Updated: 20th July 2015 01:05 PM   |  A+A-

KOCHI: The Competition Commission of India’s decision to fine four public sector insurance companies a cumulative Rs 671.05 crore for cartelisation has exposed the conspiracy hatched by four state-run insurers in the financial capital of Kerala, which allegedly gleaned away hundreds of crores of public money as they joined hands to rig the auction for a centrally- sponsored key insurance scheme for poor people during 2010-13 period in the state.

The scheme in question was RSBY, a health insurance plan for BPL workers launched by the Union Government and the companies that were slapped fine were United India Insurance, New India Assurance, National Insurance and Oriental Insurance. According to sources, the cartel was allegedly led by United India Insurance. The minutes of the Inter Company Co-ordination Committee (PSU general insurance companies) meeting held at United India Insurance regional office in Kochi on December 7, 2009, which was accessed by ‘Express,’ shows that the four companies effectively undermined the competitive bidding process by fixing the lowest bid amount on premium per family in advance among themselves. The minutes also reveals that the four companies colluded to rig the competitive bid process in advance by deciding who should submit the winning bid on RSBY contract to be awarded through a competitive bidding process. According to the Competition Commission of India guidelines, such a move is illegal and anti-competitive.

When the cartelisation was came to light, ‘Express,’ contacted the representatives of the four insurance majors. However, they denied charges and pleaded innocence. But now their arguments were rejected by the Commission and slapped a hefty fine on them for forcing the state government to pay extra for the social welfare scheme of the poor.

 According to Dr V K Vijayakumar, investment strategist, Geojit BNP Paribas Financial Services Limited, the Competition Act 2002 clearly mentions that no enterprise or association of enterprises or person shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. If such a cartelisation was held and subsequently rigged the competition bid, it was the violation of the provisions of the Competition Act, 2002, which deals with anti-competitive agreements, including cartels, he said.

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