HDFC Ergo General Insurance reported net profit for the first time in the first nine months of last fiscal. The company saw a steady growth of over 30 per cent and is confident of sustaining it, say Ritesh Kumar, Managing Director and Chief Executive Officer, and Mukesh Kumar, member of executive management, in an interview with Business Line .
Excerpts from the interview:
For HDFC Ergo, in the first nine months of FY 2012-13 we had a combined ratio of 91.4 per cent and reported net profit of Rs 101 crore. We have been growing at 33 per cent, so I think what one can surmise is that we should be able to sustain it.
The Insurance Regulatory and Development Authority (IRDA) came out with health insurance regulations recently. What do you feel is the impact of that?
RK : I think it’s a welcome move because the more you go out and standardise, you are removing ambiguity. There are a few elements within that about which we are not very happy about and we are in discussion with the regulator.
IRDA has said that policies for non-life insurance companies should be restricted to three years not just for health insurance but also for personal and accident insurance which are low-ticket products. So if we are talking about penetration being a key issue, then somewhere this might actually become restrictive.
The other concern is with regard to third party administrators (TPAs). The TPAs could, based on the directives of the insurer, settle the claims. Now each and every payment needs to be made from the insurance company. Some companies will face problems on that. We have got our in-house TPA, so to that extent our process is already catering to that scenario; because we are making individual payments to the hospitals and the bulk of our business is now with our in-house claim set-up.
Mukesh Kumar : The health regulations are a collation of a large number of things that were happening already in the industry. The reason for that is if you look at the grievance data, health insurance is the fastest growing portfolio and the complaints are increasing even faster.
So today, even though motor accounts for 44 per cent of the total market, complaints on health insurance are actually increasing much more than motor because there was a lack of awareness of the definitions being used and there was complete confusion in the minds of the customers. So I think, with a lot of discussion that the industry had with IRDA, the attempt is that every company uses standard definitions and each company will have a basic health insurance product which everyone understands.
As we move up the curve, we can have more innovative products, but for 97 per cent of the population what you really need is basic insurance products.
What have been the benefits of moving claims settlement process in-house? Have you been able to recover the costs?
RT : There is a cost, but when you hire the services of a TPA, you also pay a fee. I don’t think it’s really the cost aspect but a servicing issue. If you’re able to save cost that’s a by-product, but that is not the objective. The key objective is how you control the servicing; if you have your own processes you have more control on improving that.
We have a call centre that is open 24 hours and we have got paramedics who take the call, and we are able to facilitate processing much faster.
We have also gone out and tried to make the cashless service as seamless as possible. If insurers are able to go and increase the cashless services, we will see savings coming as we are able to negotiate rates, compared to a reimbursement claim.
Will you move your claims settlement for health insurance completely in-house?
RT : For retail health insurance, the claims settlement has moved completely in-house. For corporate health insurance, they have a view, left to us, we will fully move it in-house but they are more comfortable with TPAs.
In which segments do you see an increase in premium rates?
MK : It’s difficult to say, but in terms of need, motor insurance rates need to correct and property insurance rates which have fallen after de-tariffication, is not at sustainable levels because of which losses are increasing and reinsurance capacity is also a challenge now.
Earlier, re-insurers would line up and we could actually place business with them with very good terms. Today, it is becoming a challenge. Luckily, this year has not been as bad as the other years, if things continue then capacity will be an issue for most insurance companies; if re-insurers end up making losses year after year, they will not provide capacity to general insurers.