India’s largest credit information company, Credit Information Bureau (India), abbreviated as CIBIL, is planning to extend its services to the insurance sector. With members ranging from all leading banks and financial institutions to NBFCs and housing finance companies, Cibil is likely to provide credit information to both life and general insurance companies.
The data will help insurers to arrive at a fair pricing?those obtaining high credit scores could bargain for attractive premiums.
Speaking on the sidelines of Cibil’s third annual credit information conference here on Wednesday, chairman MV Nair said, ?We are looking at the insurance industry and have started initial discussions with the insurance regulator, Irda.?
He said as Irda was in the process of floating a separate credit information bureau on the lines of Cibil for the insurance industry, the company decided to approach them. ?We are talking to the insurance regulator to offer our expertise as well as platform,? said Nair.
The whole process of providing credit information to insurers will also be same as in the case of banks: those with a good track record will get benefits and chances are that premiums can be attractive, too. The modalities are yet to be worked out, Nair said.
Currently, Cibil caters to financial institutions, including banks, credit card companies, NBFCs, co-operative banks and lenders. Cibil has 840 members and the number of consumer records processed increased to 200 million from 13 million in 2004, he said.
Pointing out that the credit information system has brought in huge dymamics into the system, providing a win-win situation for both lenders and borrowers, Nair said the delinquency ratio in credit cards, one of the important retail products, was at 7% for 90 days plus outstanding but after Cibil’s offerings since 2008, it has reduced to 1.5%.
?This is a clear indication that banks have started using the information on the track record of borrowers. They started choosing the borrowers carefully and this has led the drop in the delinquency rates,? Nair said, adding ?huge awareness among the borrowers was another big advantage?.
Emphasising the need to have a good credit track record, he said: ?Unless the customer has a good score, he may not get a credit card or any other loan; so borrowers will try to keep their payment track record good.?
In the housing loan sector, those with a score of 700 numbered around 23% in 2010. Today, the figure has risen to 63% meaning that the banking sector had started choosing borrowers with better scores. The natural sequence will be those who have better scores will bargain for a better price.
Cibil had recently tied up with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) to offer greater value and comprehensive access to credit and mortgage information to credit institutions and consumers. This partnership will enable both organisations adopt a more co-ordinated approach to their respective functions and collaborate with each other to offer seamless solutions to credit institutions.
