Maruti Suzuki may face revenue loss of over Rs. 400 crore

Wednesday 25 July 2012, 11:26 AM by

Following the violent strife at the Manesar plat of Maruti Suzuki India Limited (MSIL), the car maker is expected to end up with a revenue loss of over Rs. 400 crore. As per resources, the settling insurance claims are restricted to Rs. 5 crore against the damages incurred by the unit. A company executive said that the auto maker does not possess cover to claim its revenue losses.

The largest car maker of the country has an insurance cover of Rs. 16,213 crore, together with four different companies, namely Iffco Tokio General Insurance, Bajaj Allianz, National India and United India. All the aforementioned insurance companies have refused to pay the compensation on the loss incurred by the company due to the pause in the manufacturing process and have expressed their consent to pay for the damages caused to the plant and machinery.

Among the three companies, Iffco Tokio General Insurance has a majority stake with 60 per cent cover, which is then followed by Bajaj Allianz with 17.5 per cent claim cover. The remaining 22.5 per cent share is divided among National India and United India with exposure of 15 per cent and 7.5 per cent, respectively.

Parag Gupta, Head of Claims, Iffco Tokio General Insurance, quoted, “We have received intimation from Maruti about the recent incident. We have sent our surveyors. The policy will cover loss to the property but will not cover loss due to business interruption.”

With this decision of insurance companies, the absence of all-inclusive insurance cover represents the unethical approach of the corporate India. Most of the companies plan to insure their losses being incurred against the damage to their property and a very small number even think to frame strategies for the loss of revenue. Covering such losses is also fairly important as in the case of Maruti Suzuki’s Manesar plant, wherein the auto maker is hit by the adverse effect of their revenue loss. The main reason behind such casual approach lies in the 40 per cent extra cost levied by the insurance companies for buying the revenue loss policy, which includes the damages incurred by fire and other disasters.

As per the rule by the governing authorities, it is obligatory that the insurers report a First Information Report (FIR) before claiming for the damages. The first party is required to intimate the insurance companies within 14 days with detailed list of losses to be covered by them.

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