Will more than double rural micro-branches to 750: United India Insurance CMD
Milind Kharat, the man at the helm of United India Insurance Co., has over three decades of experience in the insurance industry. A post-graduate in economics from the University of Bombay and a fellow of the Insurance Institute of India, he has held different positions at various levels with diverse profiles in public sector insurance companies, including New India Assurance Co Ltd and Agriculture Insurance Co. of India Ltd. He also had a couple of international stints in Japan and Fiji. In an exclusive interview to Business Line, the first after he took over as the Chairman and Managing Director of the Chennai-headquartered insurance company last month, he said his primary agenda is to cut down underwriting losses, and improve focus on rural penetration.
What will be your agenda for United India?
My primary agenda will be to cut down underwriting losses. We will be taking steps to check underwriting losses periodically. If some of our products have a high claims ratio, we will negotiate and readjust the price, or else will shed them. It will be a continuous process. Otherwise, United India has been doing quite well, both in terms of business and profits.
And, I would like to take it further in the same direction. For the current financial year, we have set a target of Rs 10,000-crore premium and Rs 700-crore profit. We are pretty much on track to achieving it.
When do you expect to make underwriting profits?
The motor third-party business is a major reason for our losses in underwriting. Health (insurance) too is a big drain. Otherwise, in areas such as retail, we are making underwriting profits. In third party motor, the claims ratio is 150 per cent. How can any insurance company make a profit in this?
But, we have seen companies that have made profits in the business?
Some might have reported profits in the first year of operations. But motor third party is a long-term business, as there is a three-year window available for the victim to file a case and claim damages. Hence, the result may not necessarily reflect losses in the first year.
The Insurance Regulatory and Development Authority recently dismantled the third-party pool and has put ‘declined risk pool’ in its place. Will this help you reduce losses in the business?
Yes, I guess so. The third-party pool earlier had many losses. I feel that will come down in the present set-up. However, the newly formed declined risk pool has come into effect from April this year, and it is too premature to say anything on it right now. This will enable us to bring in better management efficiency.
Are rates firming up in marine and fire insurance sectors?
Though we see some improvement in the rates, I can’t say they are at comfortable levels.
In its recent circular, the Finance Ministry asked public sector general insurance companies not to compete with each other…..
It’s good and is required. I see that as a risk management measure. When a particular business is loss making, there is no point in giving big discounts on it. Undercutting is happening particularly in group health insurance policies. When the outgoing is more than the premium collected, the insurance company will surely bleed. It’s only a risk management tool.
But the very purpose of having created four companies is to create a competitive environment…
We can still compete. We will have our own products designed by each of us…
Apart from cutting down underwriting losses in motor and health, which will be your focus areas to grow the business?
Our key focus will be to expand our rural penetration. We are already the market leader in the rural and social sectors. We want to build on this strength. We are planning a big push for the rural business. For example, we are planning to more than double our micro-branches to 750 in rural markets from the current 350. We also propose to recruit business correspondents for these unrepresented pockets.
In an interesting development, we recently bagged the Andhra Pradesh Government order to insure cattle population of the state. It is an exclusive arrangement. We are also hoping to bag a similar contract from the Tamil Nadu Government.
What will be the premium income from the AP contract?
I guess it could be somewhere around Rs 5 crore. It may not be a big business, but a good beginning.
How is the Tamil Nadu Government’s health insurance scheme doing for you?
It is profitable. It covers 1.34 crore families and we received a premium of over Rs 600 crore. If the claim ratio increases, we can negotiate and readjust the price. We have also been doing a similar scheme, called Rashtriya Swastya Bhima Yojana, in Kerala.
The Union Cabinet has increased foreign direct investment limit in the insurance sector to 49 per cent from the earlier 26 per cent. Will this make the market difficult for you to grow?
No. I don’t think so. In our country, general insurance penetration is at 0.7 per cent of GDP. In the last one decade it grew only by 0.1 per cent. Many developed economies have it at over 4 per cent. So, we have big room to play. FDI in insurance will only help grow the market better.