NEW DELHI, July 15: The National Stock Exchange Members' Association is seeking a downward revision of the insurance premium for delivery-based deals. The association is planning to present a proposal to the Oriental Insurance Company (OICL).

According to Sunil Khemka, chairman of the insurance committee, ``the rates offered by OICL for covering the risk are excessive and need to be rationalised''. The proposal aims to bring down the premium on delivery-based insurance policy cover from Rs 7.87 lakh to around Rs 2.6 lakh per Rs 100 crore turnover.

Sources say the NSE brokers are subject to high insurance premium. For an insurance cover for Rs 100-crore turnover the NSE brokers have to shell out Rs 7.87 lakh. At the same time, BSE brokers, who are covered by New India Assurance Company, are subject to a premium of Rs 0.92 lakh only, for a similar cover. DSE brokers are covered by OICL and are paying Rs 2.90 lakh for Rs 100 crore turnover, the sources add.

Arun Malhotra of DBS Securities feels, ``high insurance premium at NSE is justified given the larger risk containment measures like margins, trade guarantee fund and depository.''

``The premium at NSE is high as compared to BSE as the latter does not receive any upcountry deliveries and with NSE receiving deliveries from more than 156 centres, the risk, especially the transit risk is more'', says Khemka.

The non-delivery based insurance cover offered by OICL to the NSE members is economical with an average premium of around Rs 4000 for Rs 100 crore of business, but the NSE members are not too keen to take up the non-delivery based cover. They are not sure what benefit they can derive from this policy which covers risks like loss of cash, loss of security in the trading members premises, computer errors and errors of omission.

NSE Members' Association president V D Aggarwal is, however, confident that ``in case the premium on the delivery-based policy is brought down, most of the members will take up the policy''.

Further, the brokers are keen to take up the delivery-based cover as it covers the loss in transit also, which accounts for almost 80 per cent of the insurance claims.

But due to high insurance premium and going by the past experience and present conditions attached by OICL for settlement of such claims, members are sceptical of settlement of claims. Khemka feels, although the insurance policy for 1997-98 has already started, it is unlikely to bring about major changes in the insurance policy. Aggarwal feels that the OICL's policy ``has not been a success and the members are dissatisfied''.

He further added that the insurance policy has been uneconomical to the NSE members.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.