July 21, 2015
The Competition Commission of India (CCI) has imposed a total penalty of INR6,710.5 million on the four state-owned general insurance companies for manipulating the bidding process initiated by the Kerala government for selecting a service provider for a government-sponsored health insurance scheme. .
The CCI acted following an anonymous complaint it had received against National Insurance, New India Assurance, Oriental Insurance and United India Insurance, alleging violation of the law, which deals with anti-competitive agreements, including bid rigging. A probe was carried out, that concluded that the four companies colluded with each other and manipulated the tendering process .
The insurers were alleged to have formed a cartel and quoted higher premium rates in response to the tender. The bid rigging was said to involve the Rashtriya Swasthya Bima Yojna (RSBY), a government-sponsored health insurance scheme for those living below the poverty line, for the 2010-11, 2011-12 and 2012-13 financial years. When deciding on the penalties, CCI noted that the case related to public procurement for social welfare schemes, the beneficiaries of which were poor families, and this was taken as an aggravating factor. .
CCI said that it would be appropriate to impose a penalty at the rate of 2% of the average turnover of the insurers for the last three financial years based on the financial statements filed by them. A penalty of INR1,628 million was imposed on National Insurance; INR2,510.7 million on New India Assurance, INR1,005.6 million on Oriental Insurance and INR1,566.2 million on United India Insurance. Sources said these insurers will offer their clarifications and appeal against the order.