The Hindu Business Line : IRDA review meeting with non-life insurers on June 11

Bangalore June 7 The Insurance Regulatory and Development Authority (IRDA) has called for a review meeting with all the non-life insurers, both in the public and private sectors.

The meeting to be held on June 11, high-level sources said, was to ascertain the progress of IMIP that commenced operations from this financial year.

IMIP is a pool created by the 12 public and private sector non-life insurers that has taken over all third party motor liability risks. The national reinsurer General Insurance Corporation currently administers IMIP. IMIP's operation is IT-driven. The software solution is implemented by TCS.

The sources said that among the issues likely to come up at the meeting was conversion of IMIP into a separate organisation for managing the motor third party underwriting business of all the 12 non-life insurance companies. Accordingly a new chief executive for IMIP is expected to be appointed for managing the pool.

Though two months have elapsed, IMIP was still plagued by data glitches, the sources said.

Data glitches

This was largely on account of inconsistencies in the submission of third party claims data. This largely resulted from delays in completion of computerisation/networking of PSU insurance company branches. This in turn delayed the reconciliation of data at the head office.

The glitches notwithstanding, few insurers are opposed to IMIP. In fact, the sources said, more private sector insurers were chasing third party motor insurance business.

The reason: Insurers underwriting on behalf of the pool would be entitled to an administrative commission of 10 per cent of the premium. This would support their commission income during the year and considerably offset the drop in ceding commissions (Commissions earned when primary insurer cedes the risk to a reinsurer). Besides, the risks would be spread among all the 12 insurance companies, implying the balance sheet losses would be minimal.

For the public sector, the sources said IMIP would translate into a complete balance sheet turnaround, converting the gross claims to less than 100 per cent. This would convert underwriting into profitable business in the current year itself.

Underwriting losses till fiscal 2006-end were close to about Rs 4,000 crore of all the four PSU insurers, almost entirely on account of motor third party risk. Investment income during the same period of all the four companies was close to Rs 5,500 crore for the period.

A turnaround in the underwriting business would consequently imply that insurers no longer need to rely on investments to buffer their respective bottom lines, the sources added.