RR Singh, CMD, Oriental Insurance Company, admitted that the company aims to be profitable in FY 24 despite having many of the complex financial problems like lack of capital and required solvency
After years of heavy losses and despite having severe existing financial constraints, Delhi based state owned Oriental Insurance Company(OIC), is now rapidly making progress towards profitability.
With multi-pronged strategies to cut down the losses and augmenting its income, the financially battered insurer has improved its bottom line and has managed to sharply cut down its losses to Rs 41crore in the first half of the fiscal ended September 30 as compared to losses of Rs3,587 crore in the year year-ago period.
Outlining his strategies to turn profitable, RR Singh, CMD,OIC, said,“ If no major claims happen in the next few months, I am confident, we will end the fiscal with profitability, which will be in years. There will be still underwriting losses but after adjusting investment income, we hope to be profitable.’’
Singh admitted that the company aims to be profitable during FY24, despite having many of the complex financial problems like lack of capital and required solvency.
“These financial problems haven’t deterred us from embarking on the path of business restructuring and profitability. Both the government and the IRDAI have helped us with special supports to pursue our turn around business plans. With a healthy accretion of premium, Rs 9,500 crore during H1 FY24 , we have an adequate liquidity base and assured of a robust investment income. We are targeting a premium of Rs 16,000 crore during the year. Also, out of Rs 3,587 crore of losses that happened during the last year, Rs 2,500 crore was due to the new higher salaries that had to be paid to the employees. So the actual business losses were only Rs 1000 crore, ’’ Singh explained.
“Without loading the cost of the higher salary revision, our combined ratio was around 130 per cent last year and with new business restructuring measures, we have already brought it down to 119 per cent during this year. Our Incurred Claim Ratio(ICR) has fallen below 100 per cent from 112-113 per cent which means our outgo on account claims have already fallen drastically and will help us wiping out our losses during the year,’’ Singh said.
The company, in terms of team work, has extensively reviewed its business plans and has taken firm measures implemented minutely to shed loss making business in Motor and Health segments which contribute 50 per cent of the company’s premium income.
`With the help of technology, the company has improved the eco-system for the Motor business and is now controlling the high losses inthat segment..
In Health segment, the company has stopped renewing loss making group medical policies or is charging substantial higher premiums for renewals.
Earlier, it decided not to renew Ayushman Bharat account of Gujarat government as it was hugely loss making one.
“By not renewing this one account, we will be saving Rs 600 crores of losses during the year,” he said
It is now targeting young customers, who tend to have less of claims, by paying higher commission to agents who are bringing us such customers and discouraging aged customers, who tend to generate more losses for the company, by reducing the commission for the intermediaries dealing with such customers.
“We are undertaking audits of TPAs, who are handling our health portfolio, and scrutinizing all aspects of health insurance claims in details,’’ added Singh.
However, the insurer has remained bullish on Crop Insurance business and has already written Rs1500 crore of Crop premium this year.
“In the new format of 80-110, set by the central government for PMFBY(Prime minister Fasal Bima Yojana), where any losses below 80 per cent will make the insurers to refund the premium to the government and in case of losses exceeding 110 per cent, the government will bear the excess, is an interesting . We hope, the segment will be profitable for us,’’ Singh said.
Besides controlling losses, the company has taken measures to check its costs on various accounts.
It has shut down almost 200 of its branches and has shifted a lot of offices thereby saving on rentals. With the government permission, It is now planning to sell a lot of real estate assets across the country that will augment its income during the year.
“Our staff strength also has fallen to 7,500 from 8000. Going forward. while more will be retiring, we will be only recruiting some specialists ,’’ said Singh.
On capital infusion, Singh said the government will definitely consider it soon as the performance of the company has improved and any capital infusion will further accelerate its financial recovery.
“We have appraised the government about our performance in a recent review meeting with the Department of Financial services(DFS). Not having the required solvency is not an issue for us now either to grow or to achieve profitability,’’ Singh outlined.
“We are keeping a close watch over the performance of all the three financially battered PSU general insurance companies- OIC, United India Insurance(UIC) and National Insurance Company(NIC). We have seen encouraging signs and have also our plans including capital infusion to aid the recovery of these companies as soon as possible. We will do the needful,” said sources at the DFS.