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Allow early renewal, India Inc tells IRDA
Freny Patel in Mumbai | March 26, 2003 12:22 IST
Several firms have challenged the Insurance Regulatory and Development Authority's directive of March 11 warning insurers against allowing renewal of cover before the due date. Around 14 companies have taken on the insurance regulator and have advanced the renewal of their policies. The list includes a leading Delhi-based pharmaceutical firm.
The firms have requested IRDA to withdraw the circular. Issuing directives which could not be legally enforced was beyond the authority of the insurance regulator, they pointed out. They have threatened to go to court against the losses imposed by the "unilateral action" of IRDA.
Several companies were planning to renew their insurance covers before April 1 to avoid the hike in service tax. The Budget for 2003-04 proposed raising the service tax from 5 per cent to 8 per cent.
"Failing this, we will have no other alternative but to seek legal recourse and claim losses on account of this unilateral action of insurance companies and IRDA," one of the firms said in an open letter addressed to IRDA chief N Rangachary.
"The insurance regulator does not have the power to prevent us from settling covers before time unless amendments are made to the fire tariff," said a senior official in the company.
The IRDA directive went against the fire tariff and the Insurance Act, company officials said. "If a policy is replaced with the same insurer by an annual policy covering the identical property, a refund of premium may be allowed on pro-rata basis at the original rates," says Rule 10-1(b) of the All-India Fire Tariff Section I.
This means that the insured (customer) is allowed to replace his fire policy mid way and claim refund of the premium paid, provided the property insured is identical and the new policy is for a further period of 12 months.
Companies have expressed concern over "the arbitrary attitude of risk providers to deny policyholders their legitimate rights under the insurance contract".
"One wonders whether directives which are contradictory to the Insurance Act can be issued because there is nothing preventing an insurance company from agreeing with the insured's request to settle its risk cover ahead of time.
"IRDA does not have the power to withdraw the benefit of a policy contract already in force. Besides, the hike in service tax has only been proposed, and is yet to be passed by Parliament," Essar group chief and vice-president (corporate risk, insurance management) Dinyar M Jivaasha said.
The general insurance industry is in a fix. "We cannot go against the regulator. On the other hand, there is the customer, who is our bread and butter," said the head of a private insurance company.
Taking on the regulator