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.
Mr S Karthikeyan , Chairman , Insurance Council, AIMO KSB said while giving logic to industry demand that 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.”
S Karthikeyan said that 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 cardboard , dwellings , Mattresses, office spaces among others which has affected 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.”
Given the reclassification of MSME’s based on turnover, it would be easy to exempt or reduce the burden on the MSME’s. AIMO aims to garner a Win-Win relationship for all the industries and that is the only way MSMEs can survive , become profitable and sustainable.
Suggesting a few solutions , Karthikeyan added “ AIMO suggests the development of a portal based on the organisation PAN, which has relevant details of the organization and all the claim details for previous 8 years. This should be a public domain information, which all insurers can access. Secondly instead of a blanket pricing for all, make a system where organisations who have not claimed for x number of years is rewarded for maintaining high safety standards. A blanket pricing is like punishing the organisations who have maintained safety standards for the non-maintenance by others. This is already being done in motor insurance and is termed as a No Claim Bonus (NCB).”