Financial Daily from THE HINDU group of publications
Saturday, Jan 22, 2005
Money & Banking
Variety - Tourism
Thanks to Bajaj Allianz, bank guarantee burden off travel agents
Tunia Cherian George
Mumbai , Jan. 21
TRAVEL agents in the country seem to have plenty of reason to smile these days.
Even as their sales have grown with each year, more recently, they have also been able to do away with a major impediment to their business putting up huge bank guarantees.
This is thanks to a novel credit insurance scheme developed by Bajaj Allianz, the only insurer offering this customised product in India.
According to Mr Balbir Mayal, President of the Travel Agents' Association of India, airlines began to insist on bank guarantees after 9/11. They wanted the agents to put up bank guarantees equivalent to their turnover, to cushion against defaults in payments. The airlines were even limiting the stock available with the agents for lack of the guarantee, said Mr Mayal.
With the annual insurance product developed by Bajaj Allianz, the travel agents buy a policy that covers their dues to the airline for a whole year. The premium for a year amounts to one per cent of their net payment made to the BSP (bank settlement plan) every month after deducting commissions and incentives. The BSP is an organisation of the IATA that reimburses the carriers for the tickets sold by the agents.
Mr Mayal said the product had come as a huge relief for both the travel agents' community as well as the airlines.
The agents can now conduct their business without worrying about the huge guarantees especially difficult for middle-rung agents to put up.
Further, to furnish a bank guarantee, banks require the agents to extend a collateral as well margin money and bank charges of 3 per cent. The insurance product does away with all these expenses at one shot.
At the other end, the airlines feel more secure, as their risk to the agents is covered by the policies, he said.
According to Mr K. Krishnamurthy Rao, head of underwriting at Bajaj Allianz, the company has a total sum insured of Rs 400 crore under the scheme. About 500 members of the Travel Agents Association of India and the Travel Agents Federation of India have bought this credit insurance cover.
The product signified the level of customisation possible in general insurance and also Bajaj Allianz' ability to customise products based on customer requirements, he said.
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