The Hindu Business Line : UI health portfolio likely to break even this year

Mumbai, March 21 United India Insurance is in the throes of change. The company, which is currently implementing the suggestions of its consultant, the Boston Consulting Group, aspires to be one of the best non-life insurers in India in the next few years. The company hopes to enter the overseas market as well as focus on specialising in each of its business lines in the domestic market.

Mr G. Srinivasan, Chairman of the company, is bullish on the outlook for the non-life sector. Growth, he says, will bounce back by next year. He spoke to Business Line on United India’s plans and the rapid changes taking place in the industry. Excerpts:

What exactly are the changes you are putting in place based on the recommendations made by BCG?

BCG has identified a few areas for us to focus on. We are conducting some pilots and we will soon implement what we have learnt from them. These pilots relate to changes in the approach to the market, to different segments such as retail and corporate as well as channels such as agents, brokers and bancassurance partners.

We now plan to have a focussed approach towards large corporates and brokers. Independent offices will be set up in major cities to focus on the corporate business. We are beginning with Mumbai and if this succeeds, we will take it to other centres. This will help us further expand our large corporate business and work with active brokers.

The aim is to reduce organisational layers and reduce response time to customers.

What is the mix of your portfolio? What kind of changes do you see in the free price regime?

Our business mix has motor insurance contributing 40 per cent, health around 15 per cent, property 25 per cent and the rest from miscellaneous.

That mix has certainly been changing with de-tariffing. The contribution of property insurance may come down with prices falling. Motor is growing at 20-25 per cent while health is growing at 20 per cent. Accordingly, the proportion of health and motor insurance will increase as these lines are seeing strong growth.

Health insurance has typically been a loss-making line of business due to cross-subsidisation with property insurance. How ‘healthy’ is your health insurance portfolio?

Health was a loss-making portfolio. With cross-subsidisation between the health and property portfolios being done away with, the health portfolio is likely to break even this year.

What kind of new products do you plan to introduce? United India Insurance has for long been planning a long term, savings-linked health product. How soon will we see this in the market?

With the proposed change in policy wordings, we are looking at introducing several new products. We will introduce health products for all segments of the population. We plan to soon introduce a floater health policy for families.

We are also working on long term and savings-linked health products. But we have to make an actuarial evaluation of these products and also take into consideration the regulator’s comfort with such products. We are short-term insurers and such long-term products should be able to stand on their own.

What are the changes you are seeing in motor insurance?

Motor is another interesting area that we plan to work on. There are so many products that are being offered internationally, which can be brought here. There are, for instance, premium products, which have several add-on covers. There can also be very basic covers.

The high loss ratios in the motor segment have been on account of commercial vehicles. With the motor pool already in place for the industry, this is changing. Earlier, commercial vehicles were refused insurance. Now, they are getting insured because we have a pool. The loss ratio in motor insurance has also come down.

What is the kind of growth you expect the non-life sector to see this fiscal and the next? What is the outlook for your company? (Between April and January, United India Insurance has registered a growth of 6 per cent in gross premium at Rs 3,076 crore)

2007-08 has been the year of detariff. So, growth may be slower for the industry. But 2008-09 will not show it to the same extent, as the price corrections have already been built in. The same will hold true for the company.

So far, the non-life market has grown at 12 per cent. It may go back to growing at 17-20 per cent next fiscal once the reduction in prices is factored in. United India Insurance Company is likely to end the year with a growth of 7 per cent in premium. We will also register a profit and it will be more than last year.

Do you plan to enter the overseas market?

We do have overseas aspirations which we will pursue in one-and-a-half years. We are interested in Asia, Africa and West Asia. We are still to decide on the structure of the overseas set up — whether it will be a joint venture or a separate entity.

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