Specialised insurers in the making

Under the tariff era till last year, underwriting was not the focus of insurance companies as tariffs ensured profitability.

Detariffing has brought in sharp focus the core value of underwriting to non-life companies. This may push insurers towards areas of specialisation based on the foreign partner's technical strength and reinsurance tie-ups.

Already moves towards selecting risks have taken off. Tata-AIG General Insurance has issued a list of industries to brokers for which it will offer very competitive rates.

The list consists of risks where AIG has good underwriting strength and hence has been profitable for Tata-AIG General since the last six years. These risks include software development companies, BPOs, hotels, office complexes, shopping malls, engineering workshops, breweries/ distilleries and soft drink manufacturers, cycle and automobile manufacturers, steel units, computer hardware manufacturers, electrical goods manufacturers, clock manufacturers, food product factories, confectioneries.

Says Dalip Verma, CEO, Tata-AIG General Insurance, "Based on our underwriting experience since we started business, there are some industry segments which we feel very comfortable participating in. So we have targeted these segments."

Points Rahul Aggrawal, director, Optima Risk Management Services, "Detariffing will allow insurers to price risks aggressively or cautiously as per their experience and expertise. An insurer with positive experience in agricultural commodities may give an aggressive price whereas other insurers may price cautiously."

Says Antony Jacob, MD, Royal Sundaram General Insurance, "Royal & SunAlliance with its vast experience of working in a mature market provides us with critical insights to do prudent underwriting. Our focus will be on construction and engineering, marine, property on the commercial side, while on the retail side our focus is on motor insurance, personal accident, individual health and home insurance as these are risks which we have been underwriting since last six years. Since we haven't done risks such as aviation, oil and gas, errors and omission liability insurance, its unlikely that we will promote them."

Experts say that insurers have also become selective as incorrect underwriting can adversely affect their solvency margin, a parameter closely watched by the Insurance Regulatory and Development Authority (IRDA).

Says Kamesh Goyal, CEO, Bajaj Allianz General Insurance, "If the foreign promoter does not have expertise in underwriting certain risks then local skills can be taken. If you want to be a big player, you can't focus on few lines. We will continue to focus on aviation, large projects and health. There will always be insurance companies wanting to do all kinds of insurances."