United India Insurance Company has taken a lot of steps in the current fiscal to consolidate its market position. In an exclusive interview, chairman-cum-managing director Satyajit Tripathy tells Sajan C Kumar that the company expects to maintain that tempo and should be closing the year at a growth rate of around 14% to 15%. Excerpts:
Almost three years after the breakout of the pandemic, what are the impacts on the insurance sector?
Covid has certainly impacted the non-life industry. But to its credit, I must say that the industry rose to meet the challenges. Covid was effectively handled by the industry in the sense that many products to cater to the demand of customers affected by pandemic were introduced. It also brought a lot of awareness on the need to have health insurance protection. What decades of advertisements could not do, Covid did that effectively and we continue to see a lot of interest in health products which is getting converted into actual buying by younger people.
How has been the performance of United India Insurance over the last few years?
In 2021-2022, we de-grew by 5.5% which was a conscious decision on our part to actually grow in profitable areas while not to allow haphazard growth in all the areas. But, I am happy to say that during 2022-23, we have taken a lot of steps to consolidate our position, and as of September 2022, our growth rate was almost close to the industry growth rate of around 15% to 16%. We expect to maintain that tempo for the whole year and should be closing FY23 at a growth rate of around 14-15% . The growth is coming from all lines of businesses, mostly in profitable lines such as property, engineering and miscellaneous. We have controlled growth in group mediclaims and are having some traction in retail health. Going forward, we will be having reasonable results quarter after quarter, but at the same time, we have to factor in the huge wage bill of Rs 2,500 crore which might make a dent.
Your solvency ratio was at 0.35 at the end of September. How do you see this going forward? What are the plans to improve the solvency ratio?
We have taken some steps to reduce our incurred claim ratio (ICR) which is a major component for better solvency ratio. We are looking into liquidating some illiquid investments over a period of time to shore up the solvency margin. In addition to this, we are also rationalising many of our offices to reduce overheads. Now, most of the things are getting into a digital mode and the company may not be requiring as much of physical infrastructure at various places. So, office rationalisation, reducing ICR and liquidating the illiquid investments are the measures we are taking to improve the solvency ratio.
In FY22, we have reduced the number of offices by 270 by either merging or closing down. This year also, we will reduce the number of offices by 250 by March. At the end of March 2022, the company had 1,777 offices. In the process, we have not axed any jobs, people have been retained in other office and some of them have been relocated to newly opened hubs for non- health and non-motor claims. Another aspect is that we must price the risk correctly.
The IRDAI has approved your plans to utilize the call option on your privately placed bond sale in 2018. What is the update on this?
Our company had raised 8.25% unsecured, subordinated listed fully paid-up redeemable non-convertible bonds in the nature of debentures of Rs 900 crore in 2017-18. The company, by exercising the call option, redeemed the entire amount of Rs 900 crore along with interest up to February 2, 2023 with the approval of the insurance regulator.
The insurance sector is expected to see changes in terms of regulations with the government’s proposal for amendment to the Insurance Act 1938 and the Insurance Regulatory and Development Authority Act 1999. Your views?
The regulator is focused on ensuring that insurance products are available to all the strata of the society. The second issue is that you have ease of doing business, and the third aspect is to attract foreign direct investments. I think all these augur well for the industry, which is poised to grow at least 18-20% and we are having a turnover of more than Rs 2.2 trillion. This is a minuscule amount and needs to be improved. The point is that there are still vast areas that are under-insured. Insurance companies will rise to the challenge and there is scope for everyone to increase their business and come out with innovative products.
What kind of changes have you been effecting in product portfolio?
Our book is dominated by health and motor, and both these businesses account for around 75% of our total premium. It needed to be controlled in a way that you weed out unprofitable lines of business and focus only on profitable areas. Also, there are emerging areas like cyber insurance where we want to bring out new products. It requires deep study and we need to have underwriters who understand the domain and also have the wordings clearly defined. This is the area which will have a big future in India, and we will soon be coming out with retail products on cyber insurance. Another area is use and pay in motor insurance where you pay premium as per your usage of the vehicle.
