e-auction is fast becoming a buzzword for Indian corporates and multinational companies to buy insurance cover.

At least two MNCs -- Colgate and Nestle -- and one domestic metal company have bought the cover on the net over the last fortnight.

Other corporate entities hope to follow suit as the idea is to get the best possible price in terms of lowest premium cost and promote transparency through the e-bidding process.

e-auction of risk cover provides a mechanism that allows a single buyer and multiple sellers to determine a price for insurance on a 'real time' basis using the Internet platform.

Indian companies have been auctioning their products and wares on the Web, as well as procuring raw materials through the Internet by way of e-auction. Corporates have now extended e-bidding to the procurement of insurance covers.

"Plus they are entitled to the 5 per cent direct discount as they have come directly to the insurance company," said a New India Assurance official.

In January, over 10 per cent of corporate insurance accounts come up for renewal and many MNCs have started the ball rolling by procuring covers through e-auction.

The 12 general insurance companies have been invited to bid for the respective insurance accounts on the Web.

Individual corporates make available details of their portfolio to be insured, which is then analysed by the insurance companies based on cost and return.

Insurers are then hooked onto the corporate's Web site and each is given a code prior the bidding process. The bidders are also able to change their bids as they try to out-bid each other for the lowest price.

"Insurance companies are thus in a state of readiness and can decide the final premium depending upon how desperate they are to win the business," said ICICI Lombard managing director and CEO Sandeep Bakhshi.

Desperate to increase the topline, some companies are willing to offer the risk coverage even at negative returns on the equity, he added.

The objective is to get better pricing and take advantage of the cut-throat competition that has come about following the entry of eight new players.

"There are many new insurance players in the market place today. Instead of our discussing on a one-to-one basis, through e-auction, it is possible to get the optimum price for our insurance programme through the bidding process," said a chief financial officer of a leading MNC in the FMCG (fast moving consumer group) industry.

It is a win-win situation for both companies as well as insurance outfits which see e-auction and bidding on the Website as being transparent, with no pressure from corporates to drop prices.

Added Bakhshi: "Apart from bringing down costs in terms of premiums and getting the optimum price for the risk cover, e-procurement also helps reduce in the lead time for corporates purchasing the cover. What used to take days and weeks can now be completed in hours."

Some corporates even make packets, dividing the entire risk portfolio into smaller units based on the location of individual plants.

This helps insurance companies with limited capacity to bid for the smaller blocks, added officials at a leading private sector insurance company.

Malaysia-based National Power Corporation (Napocor) is purchasing all its $ 6.5 billion worth of reinsurance cover electronically via its electronic bidding system. Its power plants carrying the biggest weight are put up for bidding one by one.