The Hindu : Royal Sundaram sees huge potential in health insurance

Online edition of India's National Newspaper
Monday, Feb 03, 2003

Business

Business

Royal Sundaram sees huge potential in health insurance

EVEN AS it is well on course to recording a premium income of around Rs.180 crores during 2002-03, private general insurer Royal Sundaram Alliance Insurance Company Ltd. is confident of reporting a cash profit during 2003-04. If things go the way it had planned, the Chennai-based joint venture firm will reach the break-even level inside 30 months as originally indicated. As at the end of the third quarter of the current financial year, it had reported a premium income of Rs.130 crores, covering over two million lives with a policy base of 2.75 lakhs.

In an interview with The Hindu, Deputy Managing Director Antony Jacob said Royal Sundaram Alliance Insurance Company was aiming to garner a premium income of around Rs.300-350crores during 2003-04. He insisted that the organisation was simultaneously geared to pursue this target. The company was readying to add another half-a-dozen offices to its existing 18-branch network. It was also preparing to beef up its staff strength by another 50 to 75 from the current 300-odd people. The Deputy Managing Director, nevertheless, made it amply clear that Royal Sundaram would not grow the top line at the cost of bottom line.

Fielding a range of questions, Mr. Jacob claimed that the foreign partner Royal & Sun Alliance (R&SA) was committed to the Indian joint venture. He insisted that for any future fund needs, necessitated by business growth, the Indian joint venture would ``go to Royal.'' Royal, he said, was proposing to take its Australia and New Zealand operations to initial public offer (IPO). Nonetheless, he asserted that Royal should have no problem in funding the Indian venture, if required. Currently, three expats were working for the joint venture, which was getting technical expertise and the like from the foreign partner, he pointed out.

At the moment, the business was split equally between the commercial and personal insurance. This ratio, Mr. Jacob claimed, would more or less remain the same over a period. At half time this financial year, motor insurance, at 41 per cent, was the principal contributor. This was followed by fire (25 per cent), engineering (10 per cent), marine (8 per cent) and the health insurance (6 per cent). Mr. Jacob insisted that commercial insurance remained a profitable avenue for private insurers. Yet, he presaged a huge potential for health insurance products, both in the commercial and individual segments. The sheer volume the health insurance promised would entice many a private player jump onto this bandwagon, he pointed out. Quizzed on the volume of business the firm had landed from the TVS group, Mr. Jacob said 10 per cent of commercial insurance business of the joint venture had come from the 30-odd TVS group companies. Close to a quarter of its personal line business had been facilitated by TVS Group firms such as Lakshmi General Finance, Sundaram Finance and the like.

On claims settlement, Mr. Jacob said Royal Sundaram Alliance Insurance Company was pining to bring the claims ratio to 70 per cent from the current 75 per cent. He insisted that the company was now taking a very hard look at this crucial aspect of the very insurance business. A serious effort was under way to put in place an institutional mechanism that would facilitate a better supervision of the claims control process. Similar mechanism was quite in vogue abroad, he said. Once such a mechanism was in position, he insisted that the company could end up saving substantially in claims settlement. To a query, he asserted that claims were settled within five days of submission of all documents. Asked about the re-insurance strategy, Mr. Jacob said the maximum liability for an event for the company was restricted to Rs.50 lakhs. On the investment strategy adopted by the company, he claimed that the funds - Rs.160 crores - were invested in only in debt instruments - be it government or rated corporate instruments. On the much talked about move for de-tariffication of motor insurance, Mr. Jacob admitted that the general insurance companies wished a breather for some more time. This was sought more due to the non-availability of data and hence inability to fix the competitive tariff individually, he pointed out. To a question, he said the margin on non-tariff insurance products were very low.

Quizzed on providing insurance cover for terrorists' attack, Mr. Jacob said Royal Sundaram Alliance Insurance Company was part of the Rs.200-crore terrorist pool in India. The company, he said, offered extra cover under fire policies for payment of an additional premium. In this context, he pointed out that globally - after September 11 incident- individual insurers had stopped writing business on terrorism and rather opted to join the pool. The Indian pool provided for a maximum liability of Rs.200 crores per policy. To a query, he said all religious institutions should think of covering their assets against a range of perils post-Akshardham Temple attack in Gujarat by terrorists. Mr. Jacob felt that the Corporate India should take a cue or two from its counterparts elsewhere in the globe and go for terrorist cover.

K. T. Jagannathan

in Chennai

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Royal Sundaram sees huge potential in health insurance