The Hindu Business Line : HDFC Chubb gross premium tad lower

HDFC Chubb General Insurance Company is slipping in the numbers game. The company has registered negative growth in premium for the period between April and August. While other private companies have clocked double-digit growth, HDFC Chubb figures at the bottom of the league. For the period April-August 2006, the company has reported a negative growth of 1.47 per cent in gross premium. Other private sector companies during this period have grown between 20 per cent and 300 per cent.

HDFC Chubb's gross premium at the end of August stood at Rs 76.52 crore compared with Rs 77.66 crore during the same period last year. Motor insurance, which is considered to be a loss-making proposition in the insurance industry, currently contributes around 75 per cent to the company's total premium income.

Mr Srirang Samant, MD and CEO, HDFC Chubb, said the company registered negative growth mainly due to its competitors adopting irregular methods in securing fresh motor insurance business.

"Car dealers are our main distribution channel as they sell insurance when customers buy vehicles. But other insurance companies are approaching dealers with incentives and using irregular and unviable methods to secure business, which we cannot do," he said.

With auto sales picking up during Dassera and Diwali, Mr Samant hopes the company will be able to sell some more motor policies. "We are now trying to focus on commercial lines of business like property and specialty insurance," he added.

Signs of stress

HDFC Chubb, which was set up in 2002, began showing signs of slow growth last year. But business got hit on reports of the insurance venture being under stress. In the first quarter of the fiscal, the company registered a growth of 4.62 per cent in premium, which dropped to 1.62 per cent in July and ( - ) 1.47 per cent in August.

The company has been witnessing an exodus of its senior employees. It is yet to fill in the vacancies for the chief underwriter and the heads of the human resource and information technology departments. Analysts say HDFC Chubb is headed for more trouble ahead of the free price regime (from January 2007) when insurance companies will be fixing their rates for motor insurance.

"For HDFC Chubb, free pricing will have a double whammy effect. A company that is showing negative growth will further lose 20-30 per cent of its turnover," said an analyst. Since the company is not able to show top line or turnover growth, shareholders may have to infuse fresh capital by the year-end. Sources in the market said that the HDFC Chubb's weak sales force was just not able to rake in the business, although the company enjoys goodwill in the insurance sector due to the Chubb tag.

As the uncertainty over the fate of HDFC Chubb continues, analysts say that if HDFC pulls out of the partnership, Chubb and its new partner would have to re-register with the Insurance Regulatory and Development Authority.