We were able to reduce underwriting losses by nearly a third in 2010-11: Chola MS chief

Cholamandalam MS General Insurance reported a 23 per cent growth in premium income to Rs 968 crore in 2010-11. Due to provisioning of motor pool losses, Chola MS General reported a loss of Rs 22 crore in 2010-11 against a profit of about Rs 2 crore the previous year. But for the mandatory sharing of the industry's ‘commercial vehicles third party insurance losses', the non-life insurer would have made a profit of Rs 39 crore, said Mr S. S Gopalarathnam, Managing Director, Cholamandalam MS General, in an interview with Business Line .

A cost accountant by qualification with an Advanced Management Programme from Harvard, he has been with the Murugappa Group for the last three decades. He started as a management trainee with Tube Investments, the flagship company of the group.

The Indian non-life insurance industry is passing through a hard time, as fierce competition has resulted in uneconomical undercutting of prices. Mr Gopalarathnam talks of how Chola MS was able to turn in profits in this tough market.

How has the company performed in 2010-11?

Due to provisioning of motor pool losses, Chola MS General reported a loss of Rs 22.6 crore in 2010-11. We had to absorb about Rs 61 crore as provisioning on account of motor pool losses for the last four years, including 2010-11.

The company's operating profits jumped by more than seven times to about Rs 39 crore from Rs 5 crore last year.

What was the scene on the underwriting side?

We were able to cut down underwriting losses drastically. These were at Rs 13 crore in 2010-11, down by nearly a third from the previous year (Rs 36 crore).

How did you manage this?

Mainly by cutting our exposure in group health insurance by 80 per cent. Consequently, the actual claims ratio came down drastically to 68 per cent from 130 per cent in this segment. Therefore, our overall claims were pared to 61 per cent from 68 per cent.

Could you please explain how the paring of claims happened?

We have introduced co-pay and premium reset clause which has helped the company manage claims better from group insurance. Co-pay is where the insured also has to foot a part of the bill. It has been seen that if the insurer bears full cost of the bill, the insured generally do not look into the details of various charges made by the hospitals.

Hospitals also overcharge if the bill is paid by an insurer. We introduced 10 per cent co-pay, where the insured will have to bear 10 per cent of the bills. This helps because the insured will look into the bill and ask the details on charges made by the hospital.

Premium reset clause helps because, whenever a company's insurance claims exceed 70 per cent they will have to pay an increased premium.

What are your views on Rashtriya Swasthya Bima Yogna?

The RSYB is good scheme as it helps in two ways — providing insurance for people living below the poverty line and access to healthcare for rural pool. Chola MS provides RSBY in five States, namely, Maharashtra, Bihar, Gujarat, Jharkhand and West Bengal. Our average claims ratio across the States is 70 per cent.

However, pricing of the RSBY in certain States has reached an all-time low. Premium has come down to Rs 300 for a sum insured of Rs 30,000 for insuring a family.

COMMENT NOW