CHENNAI: The general insurance industry has since its inception, by and large, struggled with issues such as unsustainable pricing. Competitiveness, too, has risen dramatically post de-tariffication. However, things seem to be improving over the last six quarters, says Mahesh Balasubramanian, MD and CEO of Kotak General Insurance (KGI). “Because of competitive pressure and most firms’ chase of the topline, the combined ratio has not really held good and underwriting losses remain a matter of concern,” said Balasubramanian.
However, with initial public offerings (IPO) heading for a record year, with many insurance companies looking to tap the rising investor demand for financial assets, some challenges facing the industry are set to be redefined. The IPOs will bring in higher levels of fiscal responsibility, he added.When the industry was opened up in 2000-2001, it was decided that companies should list publicly in ten years since the government wanted a wider shareholding.
“Listing makes a company answerable to its investors and shareholders, particularly in the public domain which brings its own level of responsibility. These firms will also undergo a higher level of scrutiny, which will in turn bring in healthy market practices and conduct. Pricing will be realistic and a balance between the topline and bottomline will be attained,” Balasubramanian elaborated, pointing out that the overall industry will reach a level of maturity .
The `1.27 lakh crore general insurance industry in India has been growing at an average rate of 15 per cent, generating over `1 lakh crore in premium every year and is set to double in the next five years.
On KGI’s product mix, Balasubramanian said it is largely motor, with some health and commercial business. “Today, motor insurance comprises 75 per cent of the product portfolio at the company, which we plan to bring down to 65 per cent by the fiscal end.
However, we plan to increase our health insurance portfolio to 25 per cent, up from 15 per cent now,” he said. Six months down the line, the company is planning to launch travel insurance and specialised schemes to complete its portfolio, he added. KGI is also on a wait-and-watch mode in crop insurance, though the industry clocked 32 per cent growth last year largely on the back of this segment. “Ït remains incomprehensible whether the claims settlement bears out the viability of the portfolio for the industry. KGI would, therefore, wait for some more time,” he said.
In FY17, KGI generated `82 crore of business and in the first half of this year, the company has already done business worth about `72 crore. Balasubramanian expects KGI to close the year with a turnover of `180-200 crore. While 60 per cent of the business has come from Kotak Bank customers, Balasubramanian reiterated, “We plan to build a sustainable and holistic general insurance company and we will certainly add more banks to expand our customer base.”