Insurers thank competition panel for taking on car makers

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SME Times News Bureau | 01 Sep, 2014
Officials of non-life insurance companies have welcomed the orders of Competition Commission of India (CCI) slapping a heavy fine on 14 car makers indulging in restrictive practices which cost the insurers and vehicle owners heavily.

"If more independent repairers come into the market and the component makers are able to sell to them at more competitive prices then it is good for the vehicle owners as well as the general insurers," Cholamandalam MS General Insurance Company managing director S.S.Gopalarathnam told reporters.

"It is a good order. If everything goes as per the intention of the order then it is good for the insurers as well as the vehicle owners," another senior industry official, who did not want to be identified, told agency.

On Aug 25, the CCI levied a penalty of Rs.2,544.65 crore on 14 car manufacturers for violating the competition law. The hefty penalty came after it found that these car makers have restrictive practices that prevent independent repairers coming into the market.

India's Tata Motors Ltd suffered the highest penalty of Rs.1,346.46 crore, followed by Maruti Suzuki (Rs.471.14 crore), Mahindra & Mahindra (Rs.292.25 crore) and General Motors (Rs.84.58 crore).

The other car companies that have been penalised are: Honda Siel, Volkswagen India, Fiat India, BMW India, Ford India, Hindustan Motors, Mercedes Benz, Nissan Motor, Skoda Auto India and Toyota Kirloskar India.

The CCI also directed the companies to immediately cease and desist from indulging in conduct which has been found to be in contravention of the provisions of the Competition Act.

It also directed the car companies to put in place an effective system to make the spare parts and diagnostic tools easily available through an efficient network.

The car makers have also been directed to make available in public domain information regarding the spare parts, the retail price, arrangements for availability over the counter, and details of matching quality alternatives, maintenance costs, provisions regarding warranty including those mentioned above, and any such other information which may be relevant for full exercise of consumer choice and facilitate fair competition in the market.

The car companies are also directed not to impose blanket condition that warranties would be cancelled if the consumer avails of services of any independent repairer.

"The vehicle dealers are overpricing the spare parts. It is a known fact that the dealers make a kill in service and spares and not while selling a car," Gopalarathnam said.

According to him, the days of tinkering a dent and changing a part have gone.

"Today the vehicles are designed in such a way that the car owner is forced to change the entire assembly than a small component," he said.

Overseas the same companies follow the concept of "child parts", that is, replacing the damaged or defective part and not the entire assembly whereas in India, many companies do not follow the same, complain insurance industry officials.

Non-life insurers are of the view that the car companies have to take this into account while designing their vehicles, a measure which will also be environment friendly.

Queried as to why insurers are not able to charge premium depending on the car company or the vehicle model, Gopalarathnam said: "The competition is very tough as there are more than 20 non-life insurers (excluding health insurers and others) in the market."