The Hindu Business Line : Oriental Insurance net dented by ‘tax blow’

Mumbai, June 19 Oriental Insurance Company has seen its net profit for 2007-08 shrink to Rs 50 crore, against over Rs 400 crore in the previous year, as it has been dealt a Rs 385-crore tax blow.

The company, which has had to pay the Rs 385 crore as long term capital gains tax from stock sales for two years, has now taken up the issue with the Central Board of Direct Taxes.

Taxed for first time

Mr M. Ramadoss, Oriental Insurance’s Chairman and Managing Director told Business Line, this was the first time that an insurance company was being taxed on profits made from long-term capital gains of stock sales. The Rs 385 crore tax levy has been made on a profit of Rs 560 crore from stock sales.

“The company’s net profit 2007-08 has come down to Rs 50 crore, against around Rs 400 crore in the previous year. We have taken up the issue with CBDT as well as the Revenue department,” Mr Ramadoss said.

In 2007-08 (the first year of the free-price regime), Oriental Insurance reported a gross written premium of Rs 3,855 crore, 1.86 per cent lower than the previous year’s Rs 3,928 crore.

“We have not been chasing topline growth because we were trying to protect our bottomline last year. For instance, we lost a corporate group mediclaim account worth Rs 70 crore because competing insurers quoted lower premium which was unviable from our perspective,” said Mr Ramadoss.

Service centres

The PSU insurance major, however, expects 8-10 per cent growth in gross written premium this year, driven by the big changes the company plans to make in terms of business process re-engineering.

These changes are based on the recommendations of its consultant, the Boston Consulting Group.

The corporation plans to launch service centres for claim-settlement in cities which have more than 5 offices. So, to begin with, cities such as Delhi, Mumbai, Hyderabad, Patna and Jaipur will have service centres, which will process motor claims . The objective is to move the back office work from the operating office as well as reducing the turnaround time for claim-processing.

Claims processing

“We found that our company took around 78 days to process 6,000 claims. We hope to reduce this turn around time to 15 days,” Mr Ramadoss said.

The service centre, in course of time will also take care of other functions like policy issuance, third party claims and accounting.

The non-life insurer also hopes to improve its management of Third Party Administrators and increase its tie-ups with auto dealers. It will also have managers to monitor and help its 35,000 agency force.

New products

Mr Ramadoss said that Oriental Insurance would also launch new products in motor insurance and health insurance this year.

Mr Ramadoss said the company planned to increase its presence in West Asia by setting up more representative offices.

The company is currently present in Kuwait, Dubai and Nepal.

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