Money & Banking

United India Insurance has become the largest profitable insurer: CMD

| | Updated on: Apr 21, 2011
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In the last three years, United India Insurance has moved on to become the largest insurer by profits, from a distant second. The company has reported larger profits and lowest underwriting losses among public sector players.

Mr G. Srinivasan took over as the Chairman and Managing Director of United India Insurance three-and-a-half-years ago. Under the soft-spoken persona is a go-getter attitude. In his earlier stint he headed the Trinidad and Tobago operations of New India Assurance.

He has brought about lot of changes in the company, in terms of technology adoption, training and mentoring of employees. He credits the employees for the good performance of the company.

In 2009-10, United India Insurance posted a net profit of Rs 707 crore on a gross premium income of Rs 5,239 crore.

Mr Srinivasan talked to Business Line about the year gone by, and expects the current financial year to be a better one for the general insurance industry. United India Insurance reported a net profit of Rs 333 crore for nine months ending December 31, 2010, while the other three public insurers posted a loss in this period.

Excerpts from the interview:

How has the company performed in 2010-11?

We plan to close financial year 2010-11 with a premium income of Rs 6,375 crore, a 22 per cent growth over last year. However, profits would be lower compared with the previous year. The provisioning for wage revision and motor pool losses are expected to dent our profits.

What would be the quantum of provisioning the company will have to make?

The company has to set aside Rs 450 crore on account of wage revision to the employees, and about Rs 350 crore provisioning due to motor pool losses.

What will be the impact of provisioning for motor pool losses on solvency margin?

Our solvency margin would go down to 3 per cent from 3.5 per cent. But our solvency margin is much above the mandated 1.3 per cent by the insurance regulator.

The motor pool that was created to absorb the losses arising from third party claims is running at a deficit. What are your views on the motor pool?

This is precisely the reason the regulator has asked all general insurers to make a provisioning. Until the premiums on motor third party are fixed, the motor pool should continue.

Two years ago you had mentioned about bringing down underwriting losses. How successful have you been?

Motor and health insurance contribute close to 65 per cent of the premium income.

These two segments have the highest loss ratios. The loss ratio from third party motor pool is over 120 per cent. The regulator has asked us to increase the provisioning to 153 per cent. Only if the premiums on third party motor insurance are hiked, will insurers be able to manage the loss arising out of insuring this segment.

What about health insurance?

We have made progress in bringing down our claims on the health portfolio. The claims have been reduced to 100 per cent from 140 per cent in the group insurance segment. We have raised the premium rate on individual policies as the claims ratio was 120 per cent. Therefore, we have been able to bring down the claims ratio below 100 per cent.

We have been focusing on claims management and, therefore, set up audit of third party administrators. These administrators are intermediaries who settle the claims of the policyholder on behalf of the insurance company.

Can you elaborate on your efforts in reducing claims?

By creating 20 service hubs, we have been able to reduce the turnaround time to settle claims to 30 days from 55 days. Currently our claims settlement ratio is about 93 per cent.

How has business re-jigging helped?

We had created verticals — large corporate cells which handle big companies' accounts — that bring in close to Rs 600 crore of premium income. We realised ‘reach' is the biggest issue and focus on strengthening the agency force by giving them training. This channel contributes nearly 40 per cent of premium income. Banassurance is another channel where we want to tie up with more banks. We have a tie-up with Vijaya Bank and Tamilnad Mercantile Bank.

How has been the experience of government sponsored insurance schemes?

The claims ratio of Rashtriya Swathya Bima Yojna varies from State to State, the average loss ratio is 80-90 per cent.

Published on April 21, 2011

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