Private telecom companies Reliance Infocomm and Tata Tele Services Ltd have caused a loss of Rs 184 crore (Rs 1.84 billion) to three state-run insurance firms between 2002 and 2005 on risk cover for mobile handsets and default payments, the Comptroller and Auditor General has said.
National Insurance Company has suffered a loss of Rs 126.58 crore (Rs 1.265 billion), Oriental Insurance Rs 16.05 crore (Rs 160.5 million) and General Insurance Corporation a loss of Rs 41.37 crore (Rs 413.7 million), CAG said in its report tabled in Parliament last week.
These losses are on the basis of paid and outstanding claims and expenses. The losses on account of policies issued to Reliance Infocomm and its associates total Rs 180.66 crore (Rs 1.806 billion), while that on policies to TTSL was Rs 3.34 crore (Rs 33.4 million).
Going into details of the policies issued, CAG noted that the Mumbai divisional office of NIC issued two policies in 2002-03 and 2003-04 to Reliance and one to Tata Tele in 2004-05. OIC divisional office also issued a policy during 2004-05 to Reliance to underwrite risks associated with mobile handsets and default payments without careful evaluation of the risk involved and other technical aspects.
Pulling up the insurance companies, CAG said divisional offices of NIC and OIC failed to comply with regulatory norms while offering 'tailor-made' risk covers to Reliance and Tata that led to the losses to the general insurers.
The two firms did not ensure compliance of guidelines issued by regulator IRDA, General Insurance Public Sector Association and their respective head offices, CAG said.
"Insurance policies were devised primarily to suit the requirement of the insured (Tata and Reliance), without safeguarding the insurer's interest owing to non-adoption of prudent guidelines."
Failure on part of NIC and OIC to extend Special Contingency Policies on mobile handsets without risk analysis and reinsurance protection resulted in a loss of Rs 65.79 crore (Rs 657.9 million) and liability of Rs 118.21 crore (Rs 1.182 billion) on account of pending claims, it added.
The two insurance companies received claims for risk cover on handsets and default payments far in excess of the premium paid during the period up to October 2004.
Giving details, CAG said against a premium of Rs 27.39 crore (Rs 273.9 million) during December 2002 to October 2004, NIC received claims for Rs 91.23 crore (Rs 912.3 million) up to October 2004.
Of this, claims for only Rs 24.69 crore (Rs 246.9 million) were settled and the balance for Rs 66.54 crore (Rs 665.4 million) were pending. On the basis of paid and outstanding claims, NIC suffered a loss of Rs 49.70 crore (Rs 497 million) and GIC Rs 14.14 crore (Rs 141.4 million).
In the default policy issued to Reliance in June 2003, NIC recieved claims for Rs 152.34 crore (Rs 1.523 billion) against the premium of Rs 55.71 crore (Rs 557.1 million) up to October 2004.
Of this, it settled claims for Rs 120.6 crore (Rs 1.206 billion) and claims for Rs 31.74 crore (Rs 317.4 billion) were pending.
In the default policy issued to TTSL in Aptil 2004, NIC received claims of Rs 9.54 crore (Rs 95.4 million) against premium of Rs 6.20 crore (Rs 62 million) up to October 2004. Out of this, it settled claims for Rs 3.42 crore (Rs 34.2 million) and the balance for Rs 6.12 crore (Rs 61.2 million) were pending.
Oriental Insurance also received claims much more than the premium paid. In the default policy issued to Reliance for handsets, OIC recieved claims totaling Rs 63.53 crore (Rs 635.3 million) against the premium of Rs 17.02 crore (Rs 170.2 million). The insurer settled claims for Rs 19.64 crore (Rs 196.4 million), repudiated claims for Rs 30.08 crore (Rs 300.8 million) and balance claims for Rs 13.81 crore (Rs 138.1 million) were pending.
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