CCI finds no case of abuse of dominance against Oriental Insurance Company for lack of market power

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CCI finds no case of abuse of dominance against Oriental Insurance Company for lack of market power

The Competition Commission of India (“CCI/Commission”) by  way of order dated 10.05.2019, has  exonerated Oriental Insurance Company Limited (“Oriental”) against allegations of abuse of dominant position in the market for provision of fire insurance services.

Background

The information was filed by One Anil Rathi , Prop. Of M/s Laxmi Polymers , a firm engaged in trading and processing of rubber, based in Bahadurgarh (Haryana) ,  which had availed, at first, a Standard Burglary Insurance policy which covered risk from 10.06.15 to 09.06.16. Subsequently, a Standard Fire and Special Perils Insurance policy was also availed by the firm due to storage of volatile material and use of high-tension wires at the premises. As per the informant, the list of activities and stock lying in the premises of the firm were disclosed to Oriental while purchasing the policy, however, the insurance policy issued to the firm was “On stock in trade the property of the insured pertaining to his business or trade” and the insurance cover described the firm as engaged in “Leather goods manufacturing “and SMI description as a ‘stock of plastic, rubber, PVB, EVA, rubber compound lying in the insured premises.’  According to the informant, since the insurance policy was issued only after inspecting the premises, there could be no occasion that Oriental was unaware of the activities carried on by the firm or the stock lying the premises. In addition, the informant also claimed that it had obtained a No objection Certificate (“NOC”) from the Haryana Fire and Emergency Services Bahadurgarh for a period of one year from 12.04.16 to 11.04.17, after due inspection by the said authority.

On the intervening night of 20/21. 12.16, a fire broke down at the premises of the firm and pursuant to the loss occurred due to the fire, a claim was lodged with Oriental in terms of the purchased cover. In response to the claim, Oriental appointed S.K Agarwal and Co. as the surveyor to investigate and make an assessment of the loss suffered by the firm. On 02.11.17, the informant firm received a letter from Oriental repudiating the claim on the ground that the informant was in breach of condition No. 1 & 3 of the Standard Fire and Special Perils Policy. It was alleged that since the surveyor report was not shared with the informant firm, it was not in a position to clarify the observations and findings of the surveyor. In addition, the NOC also was completely ignored while repudiating the claim. Another attempt was made by the informant when its legal representative sent a legal notice dated 28.09.18 calling upon Oriental to re-examine and reconsider the claim, however it was nullified vide Oriental’s reply dated 12.11.18.

It was also averred in the information that the informant being a layman was not totally aware of the technicalities and specifications of the insurance cover and could only explain his requirements to Oriental to cover its risks and therefore the best cover could only be suggested by Oriental itself.

CCI Prima Facie View

The CCI observed that the primary grievance of the informant firm was the manner and ground on which the insurance claim was repudiated by Oriental and the allegation was of abuse of dominant position.

The CCI while delineating the relevant market for assessment of dominance, noted that Oriental is a general insurance company which is engaged in selling various types of non-insurance products including motor, home, fire, marine travel etc. and each type of non-insurance product is capable of being in a distinct relevant product market. It was further observed that the fire insurance products offered by various non-life insurers are interchangeable and substitutable with each other i.e. the buyers of fire insurance policy can buy the same from any non-life insurance company in India. Therefore, the CCI adopted the relevant market as “Market for provision of fire insurance services in India’.

After delineation of the relevant market, the CCI based on information available in the public domain, observed that the market for general insurance is competitive with presence of about 25 general insurers and all general insurance companies offer fire insurance policies. It was also noted that in terms of gross premium income for non-life insurers, Oriental had a market share of about 9.5% in the year 2016-17 which declined to about 8.6% in 2017-18 and in terms of gross premium earned from fire segment of non-life insurance, Oriental had a market share of 10.1% during 2016-17, which declined to about 8.6% in 2017-18. On the basis of market share, the CCI concluded that Oriental is not in dominant in the relevant market for provision of fire insurance services in India and thus there cannot be abuse of dominant position.