AIMO wants a Reduction in Insurance Premiums of Rs.40,000 crores

New Delhi: The All India Manufacturers Organisation ( AIMO ) made a fervent plea to the Government of India , requesting a reduction in Insurance Premiums for the MSME sector totalling with immediate effect as the member MSME’s are already reeling with numerous factors like uncertainty of business , material issues, labour problems, statutory compliances etc during the pandemic and substantial increases in Insurance Premiums at these times is unwarranted. AIMO also advocated the introduction of the No Claim Bonus (NCB) for MSMEs for the first time which could save MSMEs in excess of Rs 40,000 Crores per annum.
Explaining the background Mr S Karthikeyan , Chairman , Insurance Council, AIMO KSB said “ The Standard Fire and Special Perils Insurance Policy (SFSP) is one of the single biggest policies used by the majority of MSME’s  to cover their machinery, stocks, buildings etc. Each industry has a specified rate, which was established by the Tariff Advisory Committee in 2001.Against the above, insurance companies are permitted to provide discounts. As on January 1st, 2020 it was decided by Insurance Information Bureau of India after consulting General Insurance Council(GIC) the largest Re-insurer in India, that these discounts would not be suitable for the insurance industry and decided to restrict the discounts provided.” Addressing the problem area, S Karthikeyan said “ This restriction in the discounting pattern has led to a substantial increase in the premiums paid towards Standard Fire and Special Perils Insurance Policy (SFSP) , this has increased the premiums by 600-700% for many manufacturing industries in cardboards , dwellings , Mattresses, office spaces among others  which has effected the cash flows for many of them.  While we at AIMO agree that the discounting patterns were not good for the insurance industry, we do not agree in the methodology that has been adopted towards this increase as the well-being of all the industries have NOT been considered and of only the Insurance industry has been considered. The insurance industry being directly linked to all industries must not make such decisions based only on the insurance industry.”

Elaborating on the benefits to the Insurers, Mr Radhakrishnan , National Treasurer said , “ Our suggestions will enable insurers to avoid small claims as many do with their Motor Policies, organizations will start avoiding claims which are lower than the discount they may be able to avail if they do not claim. Saves labour hours for insurers, Allows customer loyalty after a claim instead of organizations shifting insurers to save premium even after a claim is settled and serviced properly. The Introduction of No Claim Bonus  ( NCB ) in Industry will encourage organizations to increase their safety standards and thereby reduce claims outflow for insurers.”

“ We believe that these suggestions will specifically help the MSMEs, as it is this segment, which has been hit most by this decision. The Covid-19 threat has added more financial distress to the industry. AIMO requests special permission from IRDA to provide Quarterly payment options for organizations towards all their insurance premiums and any claim during this time, can be adjusted against the balance premiums payable for the year.” Concluded Mr Karthikeyan