While returns on investment have helped non-life insurance companies register profits, they are yet to show profit from their core business of underwriting profit.
Huge competition and high discounts in the fire & engineering segment after the insurance regulator removed price control have taken a toll on underwriting profits.
During 2008-09, overall underwriting losses fell to Rs 5,300 crore. Of this, public sector players reported a total underwriting loss of Rs 4,400 crore.
| SOME PROGRESS PROFITS OF NON-LIFE INSURERS | ||
| Insurers | ‘08-’09 | ’9-’10 |
| RUnited India | 476 | 707 |
| ICICI Lombard | 24 | 144 |
| Bajaj Allianz | 95 | 121 |
| Iffco Tokio | 2.58 | 25 |
| Relaince General | -52 | -50 |
| HDFC Ergo | -25 | -94 |
| Figures in Rs cr Source: BSE, Company | ||
Not all companies have finalised results for 2009-10, but underwriting losses will continue. Overall profit will be there for general insurers on the back of an upturn in equity markets.
Among public sector insurers, United India Insurance posted a profit after tax of Rs 707 crore in 2009-10, as compared to Rs 476 crore in the previous year. This was mainly due to the investment income, which stood at Rs 1,688 crore. The underwriting loss was around Rs 900 crore. Although the other three state-owned insurers are yet to declare annual results, they are confident of posting overall profits.
“Our investment profit is around Rs 1,900 crore. This will offset our underwriting losses,” said M Ramadoss, chairman and managing director of New India Insurance.
Similarly, National India expects investment income of around Rs 1,400 crore last year. In 2008-09, it had reported a net loss of around Rs 1,200 crore. This was mainly due to an underwriting loss of Rs 1,400 crore.
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Clamp on underwriting
Other private big players, like Bajaj Allianz and Iffco Tokio, saw an increase in profit, but are still struggling with underwriting losses. Bajaj Allianz saw a decline in the underwriting loss to Rs 50 crore from Rs 73 crore in the previous year. Iffco Tokio’s underwriting losses dropped from Rs 99 crore in 2008-09 to Rs 85 crore in the last financial year.
The public sector companies posted 13.8 per cent growth in gross premium in 2009-10, while private ones recorded 12.8 per cent increase in gross premium. “Our growth was muted last year because we decided not to sacrifice profitability for growth. Our strategy to exercise strict underwriting controls and better claims management has led to a reduction of the loss ratio,” said Iffco Tokio Managing Director and CEO, S Narayan. Insurers are adopting various ways to cut losses and ensure positive underwriting margins. They have significantly reduced exposure to group mediclaim products and other unprofitable businesses.
When the claims paid to cover exceeds its premium income, an insurance company reports underwriting loss in operations. During the last financial year, the combined ratio remained over 120 per cent for the general insurance industry.
Discounts on large segments such as fire and engineering are around 80 per cent. Over the past few years, the share of fire has fallen to 10 per cent.