The Hindu Business Line : United India expects to make underwriting profit in 2 years

Chennai, May 15 With the ‘motor pool’ in operation to take care of the ‘headache portfolio’ of motor third parties, insurance companies expect to do better. United India Insurance, for one, expects to turn in an underwriting profit in two years, according to the public sector company’s Chairman and Managing Director, Mr G. Srinivasan.

For 2007-08, the company reported a net profit of Rs 631 crore, up from Rs 528 crore for the previous year, but that was only because of the investment income of Rs 1,517 crore (Rs 1,260 crore). United India had to contend with an underwriting loss of Rs 853 crore last year.

However, Mr Srinivasan sees claims coming under control. In engineering, marine and health segments, claims have come down substantially (see table). True, claims rose in the fire and motor segments. But the problem with fire insurance was the drastic cut in rates consequent to competition after de-tariffing. In the case of motor insurance, the rise in claims is not seen as an indicator of a trend because claims take time to kick-in.

United India officials also point to the fact that where claims have come down, they have come down substantially. On the other hand, in ‘fire’ and ‘motor’ segments, claims have not risen as much.

Health claims

Addressing a press conference here on Tuesday, Mr Srinivasan said that the most heartening development was the drastic reduction in claims under ‘health’. The portfolio is technically still bleeding, claims paid being more than premium earned, but Mr Srinivasan sees a profit around the corner.

Third party administrators, who were to intermediate between hospitals, patients and insurance companies, have helped make work smooth, but contrary to initial expectations, have not caused any reduction in claims. That the ‘health portfolio’ is coming under control despite this is seen as something positive. For the long term health of the portfolio, however, the hospitals in the country have to be regulated, says Mr Srinivasan.

Direct pay

United India, for one, has put in place a system where claims are paid directly to the customers by its bankers. The cheques are only administered by the TPAs.

This differs with the usual practice where the TPAs are given some ‘float funds’ by the insurance companies out of which they pay the claims. There is a problem with this approach — sometimes the TPAs make pecuniary use of the float funds and delay claims settlement.

For the coming year, Mr Srinivasan expects United India to ramp up the more profitable retail product lines. He expects rates to harden, which would improve the performance of ‘fire’ and ‘marine’ segments. He, therefore, sees a clear trend towards making an underwriting profit.

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