Tamil Nadu government keeps away private non-life insurers

Venkatachari Jagannathan
04 November 2003

Chennai: Even as it talks about inviting the private sector to set up various projects, the Tamil Nadu state government has kept away the private non-life insurers from insuring the assets of state government undertakings.

According to its direction, the state government units should insure their assets only with the government insurers if the premium rates are fixed by the Tariff Advisory Committee (TAC). The question of differential pricing between various players due to competition does not arise.

This precludes the private insurers from getting any fire insurance business from the state government undertakings. The fire insurance portfolio is the most profitable one for the domestic non-life insurers.

In the case of non-tariff business, in which insurers are free to fix their premium rates and risk covers, the government undertakings have to first get the insurers'' bids and their board should look at the viablility of the insurance scheme and the claims settling track record of the private insurers.

The government undertakings should evolve prudential tender norms that will ensure the reliability and capability of the private insurers. To assess the private insurers'' financial capability and stability, services of a consultant could also be obtained.

As to the tender procedure, if the premium outgo is Rs 5 lakh or more, then the undertaking should issue an open tender as prescribed by the Tamil Nadu Transparency in Tender Act. On the other hand if the premium spend is less than Rs 5 lakh then the limited tender procedure should be followed.