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Storm brews over Tata Tea cover

Kohinoor Mandal

KOLKATA, May 1

UNITED India Insurance Co Ltd has moved the Tariff Advisory Committee (TAC) against Tata-AIG General Insurance Co Ltd for underquoting premium rates while capturing the insurance coverage business of Tata Tea Ltd.

Industry sources said that United India had written to TAC on April 18 alleging that Tata-AIG had underquoted by giving a 30 per cent overall discount and had calculated the premium on the basis of the previous year's (2000-01) turnover.

Tata Tea is a traditional client of United India and the relationship extended well into the pre-nationalisation days. United India's policies covered the company's gardens in North as well as in South India.

``There were two policies and those were based on Sec 1 of the Tea Crop Tariff. In the first policy, the crop, along with the movement of the tea up to the auction house was covered. The second policy covered the product and the process,'' industry sourc es told Business Line.

For the year 2001-02 policy, United India quoted a premium of around Rs 3.75 crore. Tata-AIG offered the same coverage but quoted Rs 57 lakh less. Ultimately, Tata-AIG struck the deal with Tata Tea only a few days before the deadline of March 31, 2001.

In its letter to TAC, United India stated that it would not have complained if Tata Tea terminated its relationship saying that it hoped to get better service from a new insurer. ``It was not so. We lost the business because Tata-AIG's quotation was cons iderably lower than us. They cannot offer a lower price because a new insurer will have to offer the same terms and conditions as that of the last policy. Our offer was similar to the previous year's policy,'' sources said.

United India apprehended that Tata-AIG has given a 30 per cent discount across the board for all tea gardens. It felt that they cannot do it because the policies are garden-based and all gardens do not have a similar performance or future projection.

The general trend is that the insurer calculates the premium, some time in March, on the basis of the turnover for the financial year that is ending. Subsequently, the company gives it the projected turnover for the next financial year and thereafter alt erations are made in the premium rates.

This change takes place later in the fiscal, may be in April or May. United India felt that Tata-AIG had not accounted the projected turnover.

Ms Vrinda Walavalkar, Vice-President (corporate communications) of Tata-AIG, confirmed that a complaint had been filed against it in TAC. ``We have followed all the rules and regulations and we can categorically state no violation is involved. At this po int, we would not like to say anything as the matter is with TAC,'' Ms Walavalkar said.

``Tata-AIG appears to have put all the assets of Tata Tea together and brought it under one head. This had reduced the premium cost. United India used to distribute all its business to the local offices, where the gardens are based. This might be a reaso n for the lower price of Tata-AIG,'' an expert said.

Tata Tea, however, continues its medical and fire insurance coverage business with United India.