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C.R. Sukumar

Hyderabad , Aug. 12

IN a bid to bring non-life insurers, both public and private, on to the profit track, the Insurance Regulatory and Development Authority (IRDA) is contemplating significant changes in the investment regulations for them.

The non-life insurance industry, which posted a profit before taxation of around Rs 1,000 crore three years back, reported a cumulative loss of Rs 68 crore last fiscal.

Industry experts attribute this to the non-life segment running at a very high cost ratio, in excess of 30 per cent, on earned premium despite a tariff structure of rating for more than 80 per cent of its business. The major causes for the sickness include excessive motor third party (TP) losses and falling investment returns.

The IRDA officials admit that the underwriting experience in the non-life sector had been poor for several years now across the globe and did not show any signs of reviving in the near future. "In fact, given the global nature of the business due to reinsurance and due to the changing and ever widening nature of risk, it could well become more adverse. Indian non-life insurers further face a particularly unprofitable motor portfolio which cannot be spurned not only because it is mandatory, but also because it brings in the lion's share of the premiums," an IRDA official opined.

Further, the officials acknowledge that the other incomes of the insurers, traditionally known for providing cushion to the bottom line, were also letting them down.

The IRDA officials were of the view that the solutions to these problems "could come by way of easing investment regulations for insurance companies." There was also the "need to loosen some constraints on the investment formula" in view of the evolving nature of the investment markets such as new rules for investing in derivatives that entered in the Indian market.

While admitting that the general insurance industry worldwide was facing underwriting losses and the Indian companies cannot be exceptions to it, the IRDA Chairman, Mr C.S. Rao, has assured that the Authority would attempt to address the problems being faced by the Indian non-life insurance players and in turn protect the interests of the consumers.

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