Staying with declined pool could work for public insurers

Underwriting third party cover constitutes a big chunk of operations for public insurers. In that context, staying with the declined pool could offer some respite. But there will be a sensible correction in prices to contain loss ratios of certain portfolios, points out Milind Kharat, chairman and managing director, United India Insurance, in an interview with Aswathy Varughese. He also gives a bird’s-eye view on how the industry is poised. Edited excerpts:

How has been your business so far and how will it be, going ahead?
For us, business has been good so far and the company is growing at 20%. Last year, we collected `8,179 crore and this year Rs10,000 crore is our target. The main drivers for growth will be health and motor, which are currently growing at 25% and 20%, respectively. We expect stable growth in these segments.

How are you planning to realign the business after directions from the finance ministry?
We have received some directions from the finance ministry on some loss-making portfolios. We have analysed our health portfolio wherein group mediclaim policy losses were higher and price adjustments have been done according to the requirements. This has been done in such a manner that our profitability will not get affected.

How has the premium revision panned out?
It depends on the loss ratio of the group business and varies on a case to case basis. There cannot be a general treatment for the premium revision. Wherever the loss ratio is higher, we will do the price correction accordingly. Also, we have reduced our discounts in motor and fire portfolios.

Do you think it’s a relief for public sector insurers as Insurance Regulatory and Development Authority (Irda) is planning to continue with the declined pool?
The structure of the declined pool is very different compared to the earlier one. Those companies which do not want to accept particular vehicles such as buses or taxis will have to decide their underwriting policies by their own. Insurers can take a call on which vehicle to be accepted and which are to be ceded to the declined pool and subsequently from the declined pool, it would be shared by other companies. The size of the declined pool is very small against the earlier one. Of course, these will not offer much advantage to public sector companies as they underwrite third party business on a large scale whereas private insurers are not largely present in this business. So, we feel that liability would come largely to PSU companies. It would be some way beneficial for public sector insurers if the declined pool continues for some more time.

What is the status of in-house third party administrator (TPA) you are planning?
We all have been working on that front. Currently, we are working to formulate an appropriate structure for the company. Soon, we will be taking this to Irda for approval. By mid-2013, this would be operational.

Any expansion plans?
We have plans to open more micro offices in the next fiscal. Presently, we have some 410 micro offices and will be opening some 300 more. Also, we have plans to recruit more agents this year. Currently, the company does not have any foreign offices. So, we will be focusing more on our international operations by opening more branches in South East Asian nations and the Middle East.