IRDA asks travel insurance companies to revert credit risk cover to 100 per cent
In a ruling that will bring relief to travel agents across India, the Insurance Regulatory and Development Authority (IRDA) has asked travel insurance companies to revert the credit risk and disbursement cover provided to travel agents to 100 per cent from the previously decided 80 per cent.
The IRDA had previously issued a circular to travel insurance companies stating that only 80 per cent of the credit risk and disbursement was to be covered by travel insurance companies and the remaining 20 per cent would be borne by travel agents by way of individual bank guarantees even though a 100 per cent premium was paid by the travel agents.
According to a statement by TAAI, Iqbal Mulla, President, Travel Agents Association of India (TAAI) met with United India Insurance Company Limited (UIICL) officials – which sent the notice to TAAI members – following the circular’s issuance and asked them to revert the cover to 100 per cent while explaining the difficulties travel agents would face if the new ruling were to come into effect.
The notice was sent to travel agents whose premium renewal was due in January 2012.
Speaking with TravelBiz Monitor, Mulla said, “It was very surprising for the agents to come to know that the IRDA has implemented such a regulation whereby our member agents will have to pay 100 per cent premium.
This would have led to a lot of problems for travel agents and so we met with the Chief Regional Officer of UIICL and explained the whole problem. And within a week, we received a confirmation letter from UIICL stating that they have decided to revert the cover to 100 per cent. The letter also mentioned that their competent authority has approved rate @Rs.1.30 per cent plus Service Tax up to Rs 30 crores sum insured, with 100 per cent coverage.â€
Commenting on the ruling, Ajay Prakash, President, Travel Agents Federation of India (TAFI) stated, “While all this was happening in the country, I was at Macau for the TAFI Convention.
However, I was constantly in touch with Mr Mulla via phone regarding the status of this issue. The efforts put in by him will definitely benefit the entire travel agent fraternity as getting a bank guarantee is not an easy task since it has serious cost implications for travel agents. This shows that when associations work in tandem, we can achieve great heights.â€
Jay Bhatia, Chairman – Western Region, TAAI added, “This is a fantastic move for travel agents and especially the mid-size agents since this will save a lot of their money which they would have paid as collateral if they were required to pay 20 per cent under the individual bank guarantee.â€
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