State-owned general insurance company New India Assurance has posted strong FY18 results helped by an improvement in its combined ratio (premiums earned versus claims payout). In an interview with Moneycontrol, G Srinivasan, Chairman and Managing Director, New India Assurance talks about the business strategy for this financial year.
Q: The combined ratios came down in FY18 compared to FY17. What was the reason for this drop?
A: There has been a general improvement in the claims ratio. Our loss ratio in health is 103 percent that dropped from 115 percent. Motor insurance loss ratio dropped to 79 percent from 85 percent.
In the group health space, there have been price corrections both in the retail and group health segment. Also, we did well in fire and engineering and led to a drop in the loss ratios. Only the crop insurance segment saw a rise in claims.
Q: Will we see a continued drop in combined ratio? What steps will be taken to reduce it?
A: In FY18, we saw a drop of 8 percent in combined ratio and this has contributed to our profitability. In FY19, we would want our combined ratios to go down to 105 percent.
We are targeting to achieve this by price corrections in some segments. In areas where risk is not good and loss ratios are high, there will be some price corrections. When it comes to segments like group health where loss ratios are not sustainable, we would either have to get the right price or we walk away from those businesses.
Q: There was a drop in your Q4 net profits compared to last year. What was the reason?
A: Only an accounting issue. There was about Rs 530 crore adjustment in the fourth quarter due to change in accounting policy for unexpired risk reserves. Without that, the profit would have been Rs 122 crore. Compared to this, our profits for Q4 (Rs 336 crore) have almost tripled.
Q: Are you satisfied with the third party motor insurance price increase?
A: We have always felt that the rate increase in the third-party motor has not been adequate. This year, the increase has been only 8 percent. We have been talking to the regulator (Insurance Regulatory and Development Authority of India) and sending representations that the rate increases need to be much more so that the business is sustainable.
In areas where risk is not good and loss ratios are high, there will be some price corrections. Especially in segments like group health where risks are not good, we will either make rate corrections or walk away from those businesses.
Q: Apart from the regular lines of businesses like motor and health, have you seen a rise in business from miscellaneous insurance as well?
A: There was an increase in business from lines like cyber insurance and liability but since they are a small portion, it doesn’t have any impact on the overall business. However, I believe that these emerging lines will give us an opportunity to diversify our portfolio in the future.