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TAAI, TAFI push for lower premium on bank guarantee insurance

As the general insurance scheme covering bank guarantees completes a year, TAAI is negotiating a lesser premium for its members with three bidders on the basis of its zero default record while TAFI has already clinched an attractive deal with Oriental Insurance, reports Bhisham Mansukhani.

TAAI and TAFI have sought to bring down insurance premium on agent bank guarantee from the existing one per cent by forty basis points to .6 per cent, for their respective member base. While TAAI is presently negotiating with three insurers on the back of a no-claim record for the first year, TAFI has already brokered a deal with Oriental insurance at .58 per cent premium, down from one per cent, which was part of the erstwhile tie-up with Bajaj Allianz. TAAI which, till recently, also had a tie-up with Bajaj Allianz, was in the negotiation stage with three insurers at the time of going to print. Oriental, incidentally is also one of the three insurers TAAI is talking to.

Under the general insurance scheme launched in 2004 which replaced the joint bank guarantee scheme required agents to pay a mere one per cent of the net payment made to the Billing Settlement Plan (BSP) every month. According to TAAI president, Ashwini Kakkar, "The insurance programme which was launched last year was a huge step forward as airlines were guarded against any agent default while the agent's financial burden in dealing with the principals was considerably reduced because the bank guarantee was costing agents up to ten per cent per annum. A year on, citing the absence of a single default, TAAI is talking to three insurers for rates that are lower still.

While TAFI did report some cases of default, it has successfully negotiated a lower premium, which its president, Zakir Ahmed, hopes will take the number of agents signed up to the scheme from 350 to 400. Kakkar believes that a further reduction in premiums will allow the travel agents to channelise his resources towards the transition he needs to make from his current position of a lopsided dependence on airline ticketing.

Ashwini Kakkar, TAAI president

"The insurance scheme was a huge step forward as airlines were guarded against any agent default while the agent's financial burden was reduced from ten to one per cent. Now, a year on, citing the absence of a single default, TAAI is taking it lower still "

As of now, airline ticketing accounts for 95 per cent of a typical agent's business. Kakkar says that his mandate is to reduce that to 30 per cent while growing the individual agent's business by 10 per cent annually. "Travel agents should be allowed to sell railway tickets online without having to visit the railway station. We are lobbying with the government for the same and want this to account for 30 per cent of the agent's business - the Indian Railways carries more than 17 million passengers daily. TAAI is also working on a mechanism to enhance the hotel reservation business. Agents must also concentrate on selling package tours since leisure travel in India is still to boom. On the prospect of the IATA agent base increasing as a result of falling premiums on insurance, Kakkar said that while that may happen, it wasn't the objective.