 "Oriental insurance")
The Oriental Insurance Company hopes to turn profitable by the end of the financial year, thanks to measures taken to contain losses. While anticipating premiums to reach Rs 18,000 crore by 2023-24 (FY24), the management emphasises that this growth will not come at the expense of profitability.
The public sector non-life insurer narrowed its losses to Rs 47.12 crore in the first half (H1) of FY24 from Rs 3,586.93 crore recorded in the same period a year ago. However, it notes that the figures are not directly comparable due to a wage revision arrear payment in H1 of 2022-23 (FY23).
R R Singh, chairman and managing director of The Oriental Insurance Company, said, “Our wage revision occurs every five years. Last year, it covered five years, and the company paid Rs 2,300 crore. Excluding this amount, the company incurred a loss of almost Rs 1,300 crore.”
The company’s combined ratio, which is 163 per cent in H1 thus far this calendar year, has reduced to 119 per cent in the period under review. Excluding the provision for salaries, the combined ratio was 132 per cent in H1FY23.
Singh expressed optimism, stating, “If the trend continues and there are no catastrophic losses, we may generate some profit by the end of the financial year.”
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Regarding premium expectations, the management targets growth to Rs 17,500–18,000 crore by the end of FY24.
Singh said, “In H1FY24, we grew at a rate of 15 per cent. I would like to retain this growth rate, so I’ll be happy even if it is 10 per cent by the end of this year. Therefore, I have set an internal target of around Rs 18,000 crore this year against Rs 16,000 crore last year. But I don’t want to grow at the cost of my bottom line. So, a positive mix is required. Hopefully, we should be somewhere near Rs 17,500 to Rs 18,000 crore.”
Among several measures to boost the health insurance segment, which accounts for 50 per cent of the company’s business, the firm decided not to renew loss-making medical insurance policies.
According to Singh, the company did not renew around 300 medical policies that had been causing losses for three years.
Additionally, the company ceased the renewal of Ayushman Bharat, a significant loss-making business for the state-owned insurer.
Another key measure to improve its retail health segment was to focus on selling products to the younger generation by offering better incentives to agents.
“We reduced the commission from 15 per cent to 5 per cent for the higher age group and increased it from 15 per cent to 30 per cent for the lower age group. This has also started giving results because now agents are more inclined to bring us the premium of the young generation, which has helped the retail health segment,” Singh added.
The company successfully reduced the incurred claims ratio (ICR) in the health segment to 106–107 per cent from over 120 per cent in the year-ago period.
In motor insurance, the ICR decreased to 125 per cent from around 160 per cent last year, bringing the overall ICR of the company down to 100 per cent in H1FY24 from 113 per cent in H1FY23.
The company remains optimistic about crop insurance after the 80:110 model set by the government, having underwritten around Rs 1,500 crore insurance this year.
In the 80:110 framework of the Pradhan Mantri Fasal Bima Yojana, premiums will be refunded to the government for losses below 80 per cent. In instances where losses surpass 110 per cent, the government will assume the excess costs.
Apart from controlling losses, the company is reducing expenses by closing offices and cutting rental and other costs. While the liquidity cash flow remains healthy, the solvency margin is still negative due to losses from the past five years. Any capital infusion from the government will help improve the solvency margin.
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