Non-life insurance cos' profitability takes a massive hit

Most non-life insurance companies have taken a hit on their profitability in the first half of the current fiscal owing to the rising underwriting losses and huge amount of paid claims, despite booking higher premium during the period.
In particular, it has taken a toll on the financial health of the public sector general insurers which are gearing up for the listing.
Nevertheless, insurers say that things are improving. Due to huge underwriting losses, two of the state-owned non-life insurers, United India and Oriental, have suffered net losses of Rs 429 crore and Rs 382 crore, respectively in the first half of the fiscal.

Both were profitable companies in the year-ago period. While United India had posted a net profit of Rs 356 crore, Oriental Insurance had registered a profit of Rs 335 crore a year ago.
United's solvency ratio, against a regulatory requirement of 150 per cent, currently stands at 156 per cent while the Oriental's solvency ratio has fallen to 114 per cent during the reporting period.
Another public sector general insurer National Insurance, though has booked a net profit of Rs 128 crore, has continued to have a lower solvency ratio of 126 per cent as on September 30.

Country's largest non-life insurer New India Assurance also took a hit on its profitability due to underwriting losses in the first half of fiscal 2017. The insurer's profitability (PBT) has fallen to Rs 514 crore in the reporting period from Rs 921 crore a year ago due to a large underwriting loss of Rs 1,803 crore in the reporting period.

The company has logged a premium of Rs 11,204 crore in H1 of the current fiscal.
"We had a few major fire claims which had contributed to drop in PBT," New India chairman and managing director G Srinivasan told PTI.
"However things are improving now as we plan to bring down our combined ratio from 120 per cent at present to 115 per cent by the fiscal-end. We are also looking at making underwriting profit within 2-3 years' time," he said.
In spite of having booked underwriting loss at Rs 250 crore in H1, country's largest private sector general insurer ICICI Lombard has recorded a net of profit (PAT) of Rs 302 crore in the first half of the fiscal from Rs 258 crore a year ago.

"Keeping in view the huge size of our book, it's difficult for us to predict by when we will be in a position to start making underwriting profit as the present trend may continue for some more time. Moreover, currently we are busy analysing the impact of Vardah cyclone before we arrive at projected figures," ICICI Lombard chief-underwriting, claims and reinsurance, Sanjay Datta said.
"Still we have done better on the front of PAT and other financial numbers," he said.
"The growth in profits can be attributed to our prudent
underwriting decisions and better expense management," Bajaj Allianz General Insurance managing director and chief executive Tapan Singhel said.

According to Singhel, the industry continues to reel under losses and the concerns around this seem to be getting even more louder in every conversation amongst the insurance companies and other stakeholders within the industry. If the industry continues to report losses in the future as well, it may stunt innovation and impact the claim settlement record of the insurer since the priority then will be to regain foothold.
"Risk-based pricing will definitely usher in profitability along with growth. It will further enhance customer service and help insurers focus on providing more efficient and faster claim settlements. Correction in pricing and bringing back profitability is the change that we highly anticipate in the industry in the coming year," he said.

Liberty Videocon chief executive and whole-time director Roopam Ashtana has cautioned the industry on relying only on investment income for booking profit.
"In an era of falling interest rate regime, these insurers are likely to see a fall in their investment income in the new year. So, they have to reduce expenses, increasing efficiency or raise premium to have profit," he said.