The Hindu Business Line : Price war hurts Iffco Tokio General

Mumbai, Sept 3 Iffco Tokio General Insurance Company has been hit by the price war in the non-life insurance industry. It is the only company registering a negative growth in gross premium income since April.

“Our premium rates are based on sound underwriting principles and as a result, we may not be price-competitive in the market place. We expect that only by October we would be able to show growth in premium income compared to the previous financial year,” said Mr Ajit Narain, MD and CEO, Iffco Tokio.

Although the free price regime began in January this year, major corporate renewals of insurance policies started in April.

Discounts offered by insurers on fire and engineering policies have been over 50 per cent and taken their toll on the top-line growth of companies.

In April-July, the company’s gross premium stood at Rs 397 crore, 18 per cent lower than the previous year’s Rs 488 crore.

The company showed a negative growth of 12 per cent, 26 per cent, 15 per cent and 19 per cent in April, May, June and July . Other private and public sector companies have grown in the range of 2 per cent to 200 per cent during the same period.

The non-life insurance industry showed a growth of 12.6 per cent during April-July 2007, lower than 23 per cent in the previous year.

Retail focus

Iffco Tokio , however, hopes to end the year with a modest growth of 4 per cent in premium. “Our business plan for 2007-08 shows a modest growth relative to 2006-07 and we are confident of reaching our annual target of Rs 1,200 crore, comfortably. The focus this year will be on retail lines of business – and will be largely motor insurance driven,” Mr Narain said.

To combat the swings in the market, the company plans to increase the share of its motor business from 39 per cent to 45 per cent of the total portfolio.

On the non-life market’s performance this fiscal, he said the industry expected a growth of about 12-16 per cent this fiscal— where portfolios like health, motor insurance would grow while fire and engineering insurance would fall by about 4-6 per cent in the total portfolio mix.

“Post-December, the market would witness a lot of value-added services in portfolios like motor insurance. In commercial lines of business, we may see coverage available with mega risks extended to smaller ones or fire coverage on a first loss basisl,” Mr Narain said.