The Hindu Business Line : General insurers pitching hard for Infosys policy

The big ticket customer
Policy up for renewal early next week
Risk cover includes group medical and accident for over 52,000 employees
Sum insured to be Rs 5,300 cr, upfrom last year's Rs 4,600 cr
Infosys may opt for terrorism cover, besides fire risks

Bangalore , June 27

Public and private general insurers have pitched hard for insuring Infosys Technologies Ltd. The sum insured for the risk cover on corporate assets is estimated at Rs 5,300 crore ($1.2 billion) for the policy coming up for renewal early next week. The risk cover also includes group medical and accident for over 52,000 employees in the company's offices across the country, sources said.

For renewal, the sum insured was hiked from last year's Rs 4,600 crore, considering the assets acquired by the company during the last year.

The coverage included loss of profits due to fire-related accidents and business interruption.

Last year, the policy was placed at a premium of Rs 10 crore with National Insurance Company Ltd (NICL), where ICICI Lombard Insurance Company Ltd had a share. This year, Infosys has not decided on the premium and is still scouting the market, though NICL and ICICI are strong contenders. Infosys sources said, "We are looking at several options and have not yet decided."

Higher premiums

But indications are that premiums were likely to be far higher than last year. Sources said that this escalation was largely due to the increased asset size and higher liabilities. Sources said that insurers were prepared to concede some discounts on assets, as corporates like Infosys have rarely made claims.

The escalation was also due to the fact that along with traditional fire risks, Infosys was also expected to take coverage for terrorism risks. At least 60 per cent of its assets were located in Bangalore, with the rest spread across the country.

Liabilities cover

However, insurers are worried about the liabilities cover, because software companies have high claims ratio on the medical insurance cover — in excess of 100 per cent. Infosys, sources said, was no exception.

Besides, reinsurance coverage was available only on the asset coverage.

On the liabilities, insurers would have to take the losses directly into their books, since liabilities such as medical claims and accidents are rarely provided with reinsurance support either in the domestic or international markets. Moreover, insurers faced with large losses on their books are attempting to make their existing underwriting business profitable on a stand-alone basis. This implies that all insurers, without exception, are unwilling to cross-subsidise as in the past. The focus has shifted from the top-line to the bottom-line, they added.

In fact, private insurers have already initiated discussions with some of the country's top corporates for capping the liabilities under group medical covers.

Few have so far agreed for imposing such caps. Consequently, sources said, companies such as Infosys would have to face higher premium payouts for the current year.

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