What are your board agenda for NIA now?
The year to date permormance has not been great as we were hit by multiple catastrophe claims in India and abroad coupled with non-operational issues like write down of the investments and impact of change in accounting policy for our foreign operations.setting aside these one-off factors the Indian business. Continues to fare reasonably well even except for the challenges in the motor business.
Lines like health has shown an improvement in ICR. The immediate challenge is to the combined ratioa and get back to the profitability levels we saw in recent past. On the business front we are taking steps to restore the growth in line with the market and thereby manintain/increase our market share.
Is it necessary to undertake large scale restructuring of the NIA’s business and operations to achieve growth and leadership in the industry?
The company has been doing well barring for the one-off events mentioned earlier. The issues in motor business that has been impacting the PSU General insurance companies is something to be taken up at appropriate forums. Otherwise, in all other lines of business,the company is doing reasonably well.
Inherent strengths of the company. be it the brand image, relationships with large corporates.robust IT platform or the faith reposed by the retail customers and intermediaries on the company remain intact.Company has adequately provided for its liabilities and solvency ratio is most comfortable.
New initiative like tapping new distribution channels and leveraging technology for improved customer experience are being scaled up according to plans. I don’t think there is any need for a large scale restructuring of operations though we intend to open new offices at few places, unviable small operating offices will be closed and certain offices will be relocated
Will you go for aggressive growth or consolidation of existing business and secure a good profitability?
Growth and profitability are equally important, and one cannot be compromised for the other. With a substaintially large proportion of operating expenses being fixed in nature. Leveraging economies of scale is important as low growth can adversely impact the expense ratio as well as combined ratio. The company can neither afford to cede its market position nor can it ignore the profitability.
A reasonable growth. at least in line with the industry and simultaneously reducing the incurred claim ratio will be the strategy going forward. Claims ratio will be brought down using better risk sekection.
Walking away from loss making businesses and pricing action where needed are being acted upon. Growing in line with the industry itself will be difficult for a company of NIA’s size but we have demonstrated that we can do this in the past and I am sure it can be achieved in the future also.
Which are the segments NIA will continue as a leader?
Except crop insurance where the company has been selective NIA is the leader in most other lines. We also have a stake in AIC which is the market leader in crop insurance
How do you plan to improve your important parameters like underwriting losses, combined ratio, claim ratio and expense ratio and solvency ratio?
The performance in the first nine months were marred by one-off events and the normalised combined ratio will be significantly less than what you saw in 9 months of FY19. Risk selection, pricing action and increased focus on retail business will be the key drivers for reducing the incurred claims ratio.
A major part of the expenses is the salaries and the company is witnessing significant retirements of senior employees. The net additions to work force will be negative over the next few years and the new employees join at a much lower pay scale. This coupled with reasonable premium growth would ensure that expense ratio will get lower over time as we reap the benefits of economics of scale.
Company’s solvency ratio even without considering the fair value change account is 2.25X which is significantly higher than the IRDAI mandated control level solvency ratio of 1.5X. The company is debt free and doesn’t have any capital related constraints.
How do you plan to improve your customer services and make your company a tech-savvy company?
NIA is taking many steps to improve the customer experience. Root cause analysis to reduce customer grievances arising of similar issues is being done. Intermediaries are being trained to provide the right information to the customers and empower him to make right choices. Automation of claim processing is going to be rolled out in FY20 and surveyor appointment is also going to be automated. The TAT of claim hubs are continuously monitored. All this is expected to reduce time taken for claim settlement and improve the customer experience.
Would you like to comment over the fact that your share price has fallen a lot after listing?
The company could not deliver to the planned extent for FY19 due to many one-off events and other extraneous factors. The level of awareness of the investors about Indian general insurance industry is also limited. The overall performance of the broader market has also not been great over the last several months and NIA cannot be isolated. Having said that, general insurance industry will continue to grow well and being the market leader. I am confident that NIA will create value for shareholders in the long run.
Are you going for large scale recruitments of both officers and clerks?
Close to 1000-1200 senior employees are expected to retire every year over the next few years. We will indeed be recruiting but thanks to increased use of technology the net additions will be negative. We may go for a recruitment of 300-400 young officers/assistants per year over the next few years.
How do you see the fact that private sectors insurance industry is eating away the market share of public sector companies?
There are 4 PSU insurers and the number of private sector companies are increasing every year. So obviously the competition levels are high as new entrants keep coming in disrupt the market and try taking away market share. To NIA’s credit the company has maintained its market share over last five years.
Of late there have been allegations that certain private insurers have started circumventing certain regulations to garner market share in the motor business and the other players are taking up the issues at appropriate forums.
What is the future of public sector companies in insurance sector?
Public sector plays an important role in any industry and the same is applicable to insurance sector also. The proposed merger of the three PSU insurance companies is apparently a step in the right direction to create one strong entity.
The public sector companies have survived intense competition, improved their internal processed and have become nimble and very competitive. I am confident that they will remain as mojor players in the days to come also.
How do you see the competition in the industry? Has it remained unhealthy after detariffication?
General insurance industry is expected to grow at a healthy rate in the future. This has led to several private sector entities committing capital to the industry bringing along with it intense competition. While there have been price wars in the past it remains an integral part of what we call an underwriting cycle. Except for the recent practices adopted by some insurers in motor I will not say that there has been an unhealthy competition and that the policyholders in general have benefitted a lot.
How do you see the development despite the fact that IRDA created a new system of a MISP to bring an order in the motor (OD) insurance market, many players in the industry are openly violating this and companies like yours is are taking a big hit?
It is strange that a regulation that has been brought in for protecting the policyholder interest is allegedly not being treated sacrosanct by certain players. We do feel a little disadvantaged to certain extent we are hoping that necessary corrections take place at the soonest.
What are the expansion plans you have for your international operations?
Most of our international operations are very mature longstanding operations. They have been profitable in the past and FY19 was an aberration. While they may not be growing much they provide a lot of other benefits like creation of a specialized group of officers with significant exposure to take over larger responsibilities in india when they return. Over and above, our foreign operations contribute a lot in building up our brand as an important multinational player, also helping in securing better reinsurance terms too.