Tata AIG General Insurance, which had initially stayed away from the health insurance space, has slowly increased its presence in this segment. Newly appointed chief executive Kaushal K Mishra, in an interview with M Saraswathy, says the company would continue to write business in commercial lines, but at its own terms. Edited excerpts:
Apart from health, which segment have you increased exposure in? Why haven’t you been very aggressive on commercial lines of business?
Earlier, we did not have an appetite for health. But our research showed there was a market for this, and it would grow the fastest in the next 10 years. We did not want to go one-line aggressive. We wanted growth in the top line, but not miss the bottom line mark. We wanted to do this without asking for additional capital. We have entered the health segment and have taken baby steps on this front. This segment accounts for about 20 per cent of our portfolio.
We have the lead in commercial lines such as the marine segment. We would also want to gain market in the fire and engineering segments, but at our own terms. We wouldn’t write business in which rates aren’t proper. That is a conscious decision we have taken. We could have grown faster, about 40 per cent, but we decided to grow only 20 per cent. We feel pricing should be risk-based.
Would this strategy apply to segments like automobiles as well?
For the automobile segment, we would only do business in markets that are appropriate. Though this may not be hugely profitable, at least it would give me back my money. In some pockets in the North, for instance, we are not very aggressive. In others, we are. The South is more stable, though in some parts in the extreme South, we still don’t do business.
But why does this strategy apply to automobiles? Haven’t the losses evened out?
Our losses in the motor pool stand at Rs 157 crore. I admit the earlier issue of unknown risk is not there on the commercial side. But if you consider the newly introduced declined pool, the rates are not remunerative. If you look at the results for the first year, the losses stand at 140-150 per cent. However, the rate increase is merely 60 per cent. So, we are nowhere near the remunerative price, we are still losing money on the commercial third-party side.
So, at current rates, the commercial vehicle third-party side would continue bleeding and losses would not even out. We have taken up the issue of rates with the regulator and the general insurance council. We feel the price rise should be commensurate with the loss ratio.
Would more agreements be signed for government contracts for health insurance?
We carry out Rashtriya Swasthya Bima Yojana schemes. But we don’t believe in tendering business and have taken a decision on that. But if it is a competitive bidding process, we would do it. We are not averse to risks, but pricing should be appropriate and in tandem with the risk.
How has the bancassurance tie-up with Axis Bank been utilised?
I think bancassurance hasn’t been tapped properly, both by insurers and banks. However, through the bancassurance tie-up with Axis Bank, we have been able to touch 1,600 branches. By the end of the year, we would touch all the 1,800 branches. The reach bancassurance gives to insurance companies like us is enormous. Going forward, insurers can’t afford to have brick-and-mortar offices. They have to bank on distribution partners to further their reach.
Would you consider putting in additional capital this year?
We have carried out only a minor infusion. Due to the pool, we have put in some money. But it is much lower than companies that entered the market after us. In 2011-12, we had infused about Rs 85 crore.
Do you expect rates to firm up next year?
After fire and engineering were de-tariffed, the rates hardened slightly; these would firm up further. In the auto segment, we hope rates harden further next year. If we don’t have major a catastrophic loss, the rates would be more or less stable, with a rise of about 5-10 per cent.
The Indian market renewal treaty and annual renewals for reinsurance would be carried out in February and March. Based on the company’s performance, reinsurers would take a call. Last year was a tough one. If that toughness continues, the rates would be impacted accordingly.