The Hindu Business Line : Public insurers find it tough to retain corporate accounts

DESPITE being the market leader in the non-life insurance arena, New India Assurance Company is now finding it tough to record reasonably good growth rates, on account of its base in the western part of the country.

The West zone accounts for a premium potential of 40 per cent of the overall premiums in the domestic market as most of the leading corporate houses are located there.

A close look at the locations of other public sector non-life insurance companies show that United India Insurance is located in the South, Oriental Insurance in the North with a premium potential of 25 per cent each, and National Insurance in the East with a premium potential of about 10 per cent.

However, for the ten months period ended January 31 of fiscal 2003-04, New India could achieve only 0.06 per cent growth in its gross premium underwritten. National Insurance recorded the highest growth among the public sector players with 19.3 per cent increase in premium, while United India achieved 3.87 per cent and Oriental 2.66 per cent.

According to the leading insurance industry analyst and former Chairman and Managing Director of the Oriental Insurance Company, Mr G.V. Rao, "the uneven growth rates could perhaps be explained as due to the competitive pressures generated by the private players who are mostly located in the West. There are more corporate accounts to be targeted in the West than elsewhere."

Despite its location in the East with a relatively low potential for business, National Insurance has shown that it is possible to provide tougher competitive pressures to win premium volumes on an all-India basis, Mr Rao said in IRDA reports.

While all the public sector players together could register a growth of only 6.34 per cent in their business for the ten months period under review, the private sector players recorded a phenomenal growth of 72.47 per cent in their business. The overall industry growth stood at 12.47 per cent.

According to Mr Rao, the growth rate of six per cent recorded by the public sector players is an indication of how tough market conditions have become for them despite the rate increases in motor business in the first quarter of the fiscal 2003-04.

"Retention of major corporate accounts has been a major headache for them. Corporate strategies to deal with unhealthy competitive market pressures have yet to be devised and implemented," Mr Rao observed.

With the voluntary retirement scheme announced by the four PSU insurers public players involving the exit of almost 30 per cent of the Managers and Deputy Managers of each of the public players, the decision-making and servicing capabilities of each would be more sorely tested, he said.