News Non-Life28 Mar 2018

India:Govt to review state-run insurance companies

28 Mar 2018

The Finance Ministry will soon hold a performance review meeting of all state-run insurance companies, including the Life Insurance Corporation.

The review of general insurance companies will set the pace for consolidation, said a Finance Ministry official. The underwriting losses of state-run general insurance firms increased by 43.89% to INR155.91 billion (US$2.41 billion) for the financial year ended 31 March 2017, from INR108.35 billion for the previous year, reported The Economic Times.

Referring to the three unlisted government owned non-life insurers—National Insurance, United India Insurance, and Oriental Insurance—that are to be merged, he said: “We are hopeful that the firms will improve their performance, and we will be able to merge these companies in the next six months and after that we will look at listing.” All the three insurers have already been directed to align their operations in preparation for their merger.

"The Finance Ministry review will also be an opportunity for the three insurers to undertake together a preparatory exercise for the reorganisation of offices and manpower,” said the official.

The government wants the general insurers to contain their underwriting losses. As per the latest report available from the IRDAI, Oriental Insurance and United India Insurance reported a solvency ratio of 1.11 and 1.15, respectively, below the stipulated minimum solvency ratio of 1.50 at 31 March 2017.

“We are evaluating all options as to how the combined entity can be strengthened given that the losses of public sector firms have not come down significantly,” said the Finance Ministry official.

The merger would result in the largest general insurer in India, with a market share of 30%.


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Recent Comments

Cedric Pereira

The reason these companies are unable to contain their underwriting losses is because they have been insuring loss making portfolios at a price below the break-even point. In order to meet with their premium target requirements a large account with a 150% or even higher loss ratio is snatched from the existing carrier and renewed at half the expiring premium, disregarding any sort of prudent underwriting criteria or regardless of the claims that would pour in. The reason for all this, as I suspect, is due to the fact that there is no accountability or explanation asked as to “why should one write a loss making portfolio at a throw away price”. I have been in this industry for a long time and the trend now, amongst insurers, is that because Insurer 'A' is writing this risk at X premium, we must get the business at 50% or less of X premium. A situation like this only benefits the clients, he is fully aware of the price war amongst the insurers and this allows them to take undue advantage and shop around for even cheaper pricing. It is these insurers who have changed the mindset of the clients negatively, that an Insurance Company is now a charitable institution rather than an establishment to protect their losses from a fortuitous situation. It is a shame to still hear many clients making this remark …”I have paid premium for so many years and not got anything in return” and it is even more shameful to hear an insurer saying “the client wants this premium and it is the clients expectation “. By the way who does the underwriting? The client or the insurer” Unfortunate that in such a large developing economy many clients do not know the difference between Life Insurance and General Insurance. And who is to blame? I leave it to you to answer, though it is obvious. (These comments are purely personal and does not represent that of the company which I am associated with)

28 March 2018

Parameshwaran S. Iyer

The woes of the PSU GI Industry began about 2 decades after it's nationalization. The rot really started when 'underwriting' principles' were brushed aside for easy commercial gains. Human discretion literally bowed it's head before machines. Felt secure with a cushy govt job to cling to, the employees were turned in to indifferent spectators. Vigilance Dpt/CR were abused to discipline honest employees. Sycophancy ran high in the officers-hierarchy where what mattered was ability to "manage" the avocations of the higher officers rather than competence and accountability. The Employees right from an Assistant to Dev Officer to AOD to ADMD to DM became dummies and cannibalized the Agents tribe, so with no nourishment nor encouragement, the Agent became extinct. Detariffing, No depreciation regime also took it's toll. The entry of Insurance Brokers, who were nothing spectacular than an ordinary Agent yet powerful with their ways & the unbridled freedom given to TPAs etc...without even the slightest doubt, queered the pitch. An industry where Prudence matters forgot it and now it stands out like a sore thumb - a bedraggled giant.

29 March 2018

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