‘Third Party Motor Insurance Is Extremely Unprofitable For General Insurers

MD and CEO of IFFCO TOKIO General Insurance, S Narayanan feels that unless the premium rates in general insurance space are consistent with claims cost plus expenses the profitability will be elusive. In conversation with Ritu Kant Ojha of The Indian Express, Narayanan says that because of the extreme unprofitable nature due to inadequate premium levels, most companies are critical of Third Party insurance especially in case of commercial vehicles. “This is one area where premium rates are controlled by the regulations. This should be made free and companies should be able to charge their own premium rates after filing with IRDA” he says. Excerpts:

With the competition increasing in the General Insurance space are we going to see lower premiums and better services?

Premium in most classes of insurance has reached a plateau and there is every likelihood of rates firming up. In terms of products, we are likely to...see a number of add-on products and services. Service levels will surely improve. This could well be the differentiator rather than the price.

People have had issues with the TPAs that they take too much time in responding and even when they do, the claim is not given for 100 per cent amount?

Third Party Administrator (TPA) is a relatively new concept and would take some more time to adopt towards a more efficient approach. They need to invest more in technology and employ quality manpower so as to improve turnaround times.

Regarding settlement of claims for 100 per cent, this is done based on the policy conditions. Some policies may have a restrictive coverage for which the claim cannot be paid in full.

High claims ratio remains a concern for the general insurers. What is the reason and what steps is the industry taking to bring it down?

With a desire to...acquire market share, insurers have cut down on the premium rates. On the other hand the claim costs have been going up due to inflation. Unless the premium rates are consistent with claims cost plus expenses profitability will be elusive. Better claims management and plugging of leakages can also help improve claim ratios.

IFFCO TOKIO has completed a decade in India. Do you plan to expand now? Are you looking at an IPO in near future?

We have grown into a Rs 1,875 crore company (in terms of GWP) with a presence in over 440 locations in the country. Our geographical expansion is an ongoing process.

We need to have clarity on the legal and regulatory areas. IRDA is expected to spell out guidelines in this regard. We are prepared for changes in the shareholdings pattern, so as to meet the requirements of law and regulations.