Neerja Kapur, CMD, NIA
“Our future strategy is to increase the return on equity, expand our market share, leverage benefits of economies of scale driven by growth, rationalisation of operating offices, maintaining healthy solvency margin and increasing digital penetration. We also aim to leverage technology to drive customer satisfaction, profitability and growth,’’ oulined Kapur
Mumbai:
Catching up with the overall market growth, New India Assurance(NIA), the largest non-life insurer in the country, aims to grow its top-line by 12 per cent with a targeted reduction of 4 per cent to 5 per cent in the combined ratio in FY 2023-24, said Neerja Kapur,CMD, NIA.
“Our gross global premium in Fy 2022-23 was Rs 38,791 crore against Rs36,835 crore in 2021-22 with a year-on-year accretion of 5.31 per cent. Though, we were lower than the market, but it was a conscious call to grow with profitability, which meant that the company had to let go some businesses where the price was inadequate or the terms were unfavourable,’’ explained Kapur.
This conscious call and efforts taken by the company to weed off loss making accounts- approximately Rs 800 crore in Group Mediclaim and approximately Rs 900 crore of crop insurance- has resulted in a lower market share in comparison to last year, but set off by a large improvement in the performance of that segment, argued Kapur.
NIA’s incurred claim ratio, because of the conscious efforts to get the correct price, has fallen to 95.59 per cent in FY’23 against 99.46 per cent in Fy 22, added Kapur.
During Fy 2022-23,NIA’s commission ratio has more or less been the same at 7.7 per cent, expense ratio was at 13.82 per cent against 13.49 per cent in Fy’22 and combined ratio saw a 3 per cent drop from 120.66 per cent to 117.15 per cent.
NIA’s solvency has improved from 1.66 to 1.87 and return on equity (ROE) rose to 5.53 per cent from 1.22 per cent during 2022-23.
“Our future strategy is to increase the return on equity, expand our market share, leverage benefits of economies of scale driven by growth, rationalisation of operating offices, maintaining healthy solvency margin and increasing digital penetration. We also aim to leverage technology to drive customer satisfaction, profitability and growth,’’ outlined Kapur adding that the company is targeting a reduction of at least 5 percentage points every year in its combined ratio but whether it would be possible or not will depend on the market realities and situation.
“As of now, we understand that ROE is slightly on the lower side. So going forward, we aim it to be in the double digits. So initially, we will try to slowly get to 10 and then 12,’’ she said.
Underwriting results of the company were negatively impacted in the Q4 2022-23 to an extent of Rs 224 crore due to adverse development of claims pertaining to the previous years in the crop line of business. Some catastrophic losses in foreign operations including New Zealand during the quarter also negatively impacted the company’s results with the full year results getting adversely impacted by Rs. 107 crore due to these losses.
However, increase in repo rate augurs well for NIA as incremental deployment of funds in fixed income is happening at around 7 per cent plus.
In FY’23, the company absorbed the entire impact of the wage arrears and additional provisioning on account of employee benefits to the extent of Rs. 3,445 crore.
Despite this, the insurer’s fair value change continued to remain in excess of Rs19,8000 crore as of FY ’23, said Kapur.
“We have continued to enhance our product offerings and expand our distribution channels to better serve our customers. We are seeing good growth coming from the health and the motor segments. These are the two dominant sectors currently in the insurance sector and we will also be focusing on these. Along with the other lines, we are also focusing on our property, casualty sector, liability sector. But these two are the ones which have the predominant growth potential,’’ she said.
NIA earns around 40 per cent of its premium from corporate sector and the rest from the retail segment.
Some of the new products which the company has launched in market in the last few months are- cyber insurance, surety bonds, drone insurance, pay as you drive under the motor line of business, the credit card guard policy covering critical illness.
On the newly announced regulations on expenses of management (EOM) for general insurance companies, Kapur appreciated the IRDAI’s act of bringing a level playing field to the entire Indian insurance industry by just one stroke.
“Last year, being a PSU, a public sector undertaking, we were not in a position to pay anything other than the allowed commission. And so, we did face a disadvantage in the sense that even though we were offering one of the best prices in the market, the attraction was for pushing the offers made by other insurers who were able to offer differential incentives to the intermediaries,’’ said Kapur.
But going forward from this April, since introduction of the regulations, NIA is finding a level playing field in the market.
“And our total expense of management, are in the range of 21.20 per cent. So that gives us substantial ground for incentivising our intermediaries to bring us the healthy proportion of the motor business as also the health business and which we expect improve overall incurred claim ratio(ICR).’’ Kapur noted.
“Of course, when the ICR and the combined ratio of the organisation are high, it will put the brakes in making payments for additional expenses of management, but we do expect that giving the attractive expenses of management in the right segments will attract the right kind of business also, which will improve the ICR and overall improve the combined ratio,’’ she added.
On the ongoing restructuring exercises of the company, Kapur confirmed that after discussions with all stakeholders, the company has implemented EY’s recommendation across all its offices in India in April 2023.
“It will surely ensure efficient operational efficiency which can lead to cost savings, improved productivity and enhanced customer service. Organisational realignment will enable optimisation of the workforce structure to better align with the company’s strategic goals,’’ she observed.
“The company already has annual appraisals based on employee performance, but yes implementation of performance matrix is in the discussion stage, as we have to be sensitive to the fact that this will affect the most important core of the company which are our employees,” clarified Kapur.
According to Kapur, despite a restructuring of the corporate structure, employees’ commitment and professionalism have been instrumental in accomplishments and have played a very crucial role in delivering value to the company’s stakeholders.