Ten years ago in 2002 when Maruti Suzuki made its entry in the business of selling automobile insurance under the brand name of Maruti Insurance, which was ostracized by the IRDA (Insurance Regulatory and Development Authority) in March 2010 for violating the norms of foreign investment in India. The prohibition for selling insurance policies for vehicle has come upon the Maruti Suzuki group mainly because it was holding more than 26 per cent stakes in the insurance venture which was prohibited for the firm since it was a foreign company. After this episode, the Indian subsidiary of Maruti Suzuki Motor Corp, Maruti Suzuki India Limited has again made the decision to make a comeback after two years of being ostracized in the broking business of insurance. Mr. Mayank Pareek, the Managing Executive, sales and marketing, Maruti Suzuki India will lead the Maruti Insurance Broking Private Limited.
The absolutely new company will be having separate postulate which is formed to stay absolutely close to the rules and regulations made by the industry regulator. However, the fact remains hazy if this broking unit will only sell the insurance policies for vehicles in particular. It has been reported that before being ostracized the firm sold around 2.5 million vehicle insurance policy in the fiscal year of 2010. The insurance regulatory commission banned the firm after the supposed accusation made to it by the local insurance firms that the service stations of Maruti were aerating the bills which consequently made a loss to these local insurance firms. As per a spokesperson, when in 2002 the firm made an entry in the insurance sector the rules and regulations for the insurance brokers were still being systematized. As per the norms, which were made by the IRDA, Maruti was asked to reform its eminence as the later had collaborations with other insurance firms.
It is important here to know that it was a not at all possible for Maruti Suzuki India to have 74 per cent stakes in this particular insurance firm when the parent firm Maruti Suzuki Motor Corp already held 55 per cent share in this joint venture. Right before the insurance firm of Maruti lost its license to the wrong practices it was indulged in, it was acting as an agent for insurance firms which were in the business of general insurance like New India Assurance Co. Ltd., National Insurance Co. Ltd., Iffco-Tokio General Insurance Co. Ltd. and Allianz General Insurance Co. Ltd. It is also to be mentioned here that Iffco-Tokio had jumped into the sector of cattle insurance as well as soon as it commenced its operations in Indian insurance sector. With a total Rs 18,000 crore market of insurance per annum in India, Maruti Suzuki India made a contribution of around Rs 1,800 crore to this figure, which is indeed a huge figure to consider. When someone claims insurance and it is generated on the request, the dealers who are authorized to service the vehicle and then contact the insurance firm for finally claiming the money. Here the vehicle owner plays only one role, which is to pay off the ratchet amount once the insurer contributes to the overall expenditure on the repairs or replacements.
In the past the agents of the different insurance firms practiced to make a call to the customers whose premiums for the insurance policy was due, but with the entry of Maruti in this business the whole process changed at once. Now Maruti contacted all insurance firms and started marketing their products, this reduced the active involvement of the agents and dealers started earning the commission directly which was being earned by the agents earlier. For this favor the dealers who were associated with Maruti for selling the policies and product, gave a commission which was close to 4 percent to 6 percent of the full cost of the insurance covered, usually the insurance premium in total is 0.5 percent of the vehicle. This shows how much profit Maruti was making and how agitated this made these envious insurance agents who lost a good volume of commission because of Maruti entering into the vehicle insurance sector.