GIC Re's revision of reinsurance rates and exclusion of contagious disease losses does not violate Competition Act

Facts
Decision

Facts

In 2019 several pharmaceutical companies proceeded against General Insurance Corporation of India (GIC) Re before the Delhi High Court to challenge the revision of reinsurance premium rates. They claimed that the revisions were arbitrary and unreasonable. The court held that GIC Re's rate revisions were within its commercial wisdom and accordingly dismissed the writ petitions.

In 2020 the Automotive Tyre Manufacturers' Association (ATMA) brought a complaint against GIC Re before the Competition Commission of India (CCI). The ATMA stated that GIC Re had:

• enhanced reinsurance rates through the implementation of certain circulars and endorsements; and
• incorporated a contagious disease exclusion.

Further, the ATMA alleged that:

• GIC Re had abused its dominant position to impose unfair and excessive pricing in terms of Section 4(2)(a)(ii) of the Competition Act 2002 because policyholders were being subjected to exorbitant premiums by insurers;
• GIC Re has distinct advantages such as the right of first refusal over reinsurance placements in India coupled with a statutory cession of 5%, by which competitors are unable to operate on a level playing field and along with end consumers are denied market access, which violates Section 4(2)(c) of the Competition Act;
• GIC Re's exclusion of contagious disease losses was anti-competitive and violated Section 3(4)(d) of the Competition Act because it amounts to a 'refusal to deal';
• GIC Re's refusal of reinsurance support if insurers offer discounts on the minimum premium rates amounts to resale price maintenance and violates Section 3(4)(e) of the Competition Act; and
• insurers are compelled to follow GIC Re's diktats, thereby producing a hub-and-spoke cartel which violates Section 3(3) of the Competition Act.

Decision

GIC Re filed a detailed response denying these allegations and on 27 January 2021 the CCI dismissed ATMA's complaint, holding that:

• the allegations of GIC Re's abuse of a dominant position and imposition of excessive and unfair pricing are without basis;
• GIC Re had passed no restrictions on other reinsurers and therefore had not violated Section 4(2)(c) of the Competition Act;
• there is no resale price maintenance since insurers retain the commercial freedom to price their policies as they see fit;
• the contagious disease exclusion endorsement builds on the pre-existing standard terms and conditions of domestic reinsurance treaties. As insurers remain able to offer any additional cover to policyholders, there is no refusal to deal; and
• since insurers have the commercial freedom to price their policies and GIC Re has imposed no restrictions on insurers' pricing or coverage, there is no cartel arrangement between GIC Re and insurers.

The CCI also relied on the Delhi High Court's order dismissing the writ petitions filed by several pharmaceutical companies against the implementation of GIC Re's circulars and endorsements.

For further information on this topic please contact Rajat Taimni or Saket Satapathy at Tuli & Co by telephone (+91 22 6725 5421) or email (rajat.taimni@tuli.co.in or saket.satapathy@tuli.co.in). The Tuli & Co website can be accessed at www.tuli.co.in.