Premium income likely to grow 16% this fiscal: NIC chief

Having improved its solvency margin to 1.90 per cent in FY17, against a low of 1.26 per cent in the previous fiscal, State-owned National Insurance Company (NIC) is now working towards bringing down its combined ratio (a measure of profitability after taking into account the incurred losses and expenses) to below 120 per cent.

In an interview to BusinessLine , K Sanath Kumar, Chairman and Managing Director, NIC, spoke about the company’s IPO plans and business growth. Excerpts:

The two recent IPOs of public sector general insurance firms — The New India Assurance Company and General Insurance Corporation of India — received lukewarm response from retail investors. Has that impacted your IPO plans?

No, there has been no impact on our IPO plans. We are hoping to get clearance (for IPO) from the regulator (Insurance Regulatory and Development Authority (IRDAI)) soon. Then we will initiate talks with merchant bankers. But as things stand, it looks difficult to go for an IPO by March 2018; it may spill over to the beginning of the next fiscal.

One of the key takeaways (from the recent IPO experience) for us was to focus more on the retail market. We have to appreciate the fact that insurance is still a less understood financial sector. But as we move forward, with more IPOs coming into the market, there would be appetite for these instruments and more support from portfolio managers like mutual funds.

What measures are you taking to conserve capital?

We are trying to conserve capital by reducing our exposure to segments which need more capital. In our case, group health policies, those issued to large corporates, have high claims ratio (well above 100 per cent). So, we are prudently reducing exposure there.

Even in retail health, wherever we have a higher claims ratio, we want to bring it down. We are also looking to go in for reinsurance cover (wherever required) to conserve capital.

How do you see your combined ratio by the end of this fiscal?

Our combined ratio is quite high at around 127 per cent at present, and this is because of the claims ratio. We want to bring it down to below 120 per cent by the end of this fiscal. We are confident of bringing down the claims ratio across portfolios by focussing on prudent underwriting, faster disposal of claims and by going in for better use of data in claims settlement.

We have already been able to improve our solvency margin on a sequential basis by absorbing more liabilities and strengthening technical reserves. We expect things to improve, going forward.

How big is your health insurance business? How do you see it growing?

Health insurance currently accounts for 24 per cent (close to ₹3,400 crore) of our total business of ₹14,256 crore. Of this, nearly 30 per cent comes from government health business.

We have been able to turn many of the government health business, which were loss-making at one point in time, profitable through reinsurance arrangement and better claims management. There is tremendous scope (in this segment).

In terms of pricing, we have been able to negotiate for higher prices in our corporate group health portfolio, in a number of cases. We have not increased prices on retail health, but other companies have done it; so we will also take a look at it.

How do you see your business growing by the end of this fiscal? Which will be the key areas of focus?

Our premium income was close to ₹14,256 crore in FY17. We hope to grow it by about 16 per cent to ₹16,000 crore by the end of this fiscal.

The strategy will be two-pronged — reducing exposure to loss-making group health and motor businesses and scaling up retail business and increasing footprint in the corporate segment. At present, 30-40 per cent of our business comes from corporates. We want to have better traction by associating ourselves with more number of corporates in the areas of fire, property, engineering and project insurances.

We have a fairly extensive product category for home and retail health; we are in the process of fine-tuning that to make it more attractive and in line with current demand. We will be filing some of these products with the IRDAI for their approval. We hope to launch 2-3 products soon.

We are also looking at credit insurance business. There are some companies like New India Assurance and ECGC which are offering this product at present.

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