The Hindu Business Line : Cholamandalam MS to be cautious on motor portfolio

CHOLAMANDALAM MS General Insurance has decided to limit its exposure to motor vehicles at a level that is below the industry average as a measure of prudence.

The company's Chief Executive, Mr Arun Agarwal, said the aim was to eventually cap the motor portfolio at below 30 per cent of the total business.

Currently, motor insurance contributes about 31 per cent of Cholamandalam's premium, while the industry average is about 40 per cent. "We are trying to balance our portfolio, and we have internal caps for different segments," he said.

Mr Agarwal pointed out that re-insurance options are limited in the motor business. Therefore, most of the risk is borne by the company that underwrites the business.

Though motor insurance makes up the largest segment in Indian insurance, returns are limited. A recent report (S.V. Mony Committee ) on motor insurance tariff referred to it as a "bleeding portfolio."

At present, Cholamandalam gets most of its business through fire insurance - 32 per cent. Other significant contributions included the marine portfolio - 7 per cent and the liability portfolio at 8 per cent of premium income.

Cholamandalam MS General Insurance expects to double its premium income to around Rs 200 crore - Rs 220 crore in the current fiscal. The company has earned a premium of Rs 75 crore for the five-month period ended August 2004. "We are on target as of now," Mr Agarwal said.

The insurance industry as a whole registered a 14 per cent growth for the five-month period.

Commenting on the recent trend of large companies going in for mega risk covers, Mr Agarwal said companies were going to the international market to tap the soft cycle in rates.

When asked if this trend would cut into the business of domestic insurance companies, especially the new private companies, he said, "Business will be shared by domestic companies, but reinsurance pattern changes".

On the anvil are a new package policy for hotels and restaurants. Mr Agarwal said that the company would start a direct mailer campaign to market its health insurance product. The company operates from 16 locations and has recently added Vadodara to its network.