‘Third-party premium hike on CVs will be great relief across industry’

New India Assurance Co Ltd expects to collect around `8,250 crore in insurance premiums this fiscal. The company, which currently has 45 offices, plans to add another 150 offices across India next fiscal. Chairman and managing director M Ramadoss spoke to DNA, on why controlling the underwriting loss is more important for his company than increasing the market share. Excerpts from the interview:

What is your outlook on the general insurance industry?
The general insurance industry is doing very well this year compared to last year when industry growth was hardly 10%. Since the start of this fiscal, it is growing at 22% and New India Assurance has also shown a growth of 18% up to December.

How has your premium collection been this fiscal?
During last fiscal, we collected Rs6,080 crore and this year we will do around Rs8,250 crore, out of which premium coming from India will Rs7,000 crore and that from abroad will be Rs1,250 crore, which is almost a 15%-16% rise compared to last year’s collection.

Contribution from motor insurance is 45% as compared to health insurance which is 20%. There is rapid growth in the health insurance industry as people have recognised the need to buy it.

Motor insurance volumes are on the rise because motor car sales are growing.

Year 2009-2010 was flat as there was no growth in commercial vehicle sales and second half of 2008-2009 was also very bad. So, 2010-2011 has been comparatively a growth year for us.

Do you think the premiums will decline on motor insurance?
Premiums in ‘third-party’ are tariffed where as in ‘own damage’ we have the freedom to price our premiums. Hence, the premium prices on ‘own damage’ have been coming down because of good volumes, better loss ratios and decline in the number of accidents as a percentage. But this may not be the case across the industry as it depends on the fleet of dealers. If their loss ratio has come down, then they may offer better discounts in premiums.

Do you think IRDA (Insurance Regulatory and Development Authority) will be successful in hiking the TP (third party) premium, especially on commercial vehicles?
If the premiums are hiked it will be a great relief across the industry as too much loss is suffered by companies. TP premiums are fixed since four years now. But IRDA has put a discussion paper mainly for commercial vehicles in the third party portion.

They have asked for a public opinion whether the premiums on them should go up or not. But commercial vehicle owners will always oppose this as they have a very strong lobby and good association.

Are you planning to launch any long-term policy?
IRDA prohibits us from coming up with any long-term policy beyond five years. But only after we revised our existing mediclaim policy and came up with our new premium health product, will we think about a long term policy. The claims and medical costs are going up every year, so it is very difficult to perceive the future. Since there is no published figure for medical inflation, coming out with a long-term policy is a problem.

Where has the procedure of finalising single TPA (third party agreement) for four PSUs reached?
The earliest it can be is by June or September 2012. We are working on that and are at an advanced stage of finalising it. All the four PSUs want to form a TPA taking one outside partner. We have advertised for expression of interest and many have already submitted their bids and we are shortlisting them. Then we will have a final round of discussion, and may be in two months time, we will be able to finalise the partner. After that we will finalise the structure of the company which will take another year to establish the same. TPA will be beneficial to all the four PSUs. As on today we are dealing with more than 10 to 12 TPAs and each one has different practices, hence, it is difficult to control and keep a constant watch on them. If we are able to manage the claims ourselves, it will definitely better our efficiency.

What is happening on the PPN front?
PPN (preferred provider network) is doing very well as more and more hospitals are getting in. Only Jaslok Hospital has joined. Breach Candy and Bhatia Hospital are still talking to us. There are 42 hospitals in Mumbai’s Association and this initiative by the PSUs will help customers go to any hospital in the network, where there are 41 procedures in which the costs are identified very clearly.

What are your future plans?
We will have personal line products available online from April 1, 2011. We have also started opening Micro Offices, also called ‘single men offices’, that will operate and issue the policy, but processing claims will not be done from there. So such offices can be operative in the remotest place as it’s cost effective. Currently, we have 45 offices, and by the next financial year we will have another 150 offices across India.