Chennai:

For Jagannathan, 57, who stepped into the general insurance industry when he joined Hercules Insurance in 1969 and who went up the hierarchy on a fast lane, at times overtaking his seniors, the task ahead is quite herculean. Why?

Last year, the company's after-tax profit experienced a steep fall to Rs 8.15 crore from the Rs 121.59 crore registered during 1999-2000. Now, he has to see that the profit level goes up. In addition, he has to fight with the new players who are playing it dirty at the market place. It is also a fact that the competition in this sector is attracting capable hands from United India. So Jagannathan has to pep up the morale of his team members from time to time.

The tall, bespectacled Jagannathan, a Tamil literature aficionado, is all set for the game with a baggage full of novel ideas. An excellent human resources manager a fact acknowledged even by some belligerent union officials, Jagannathan's first task, of course, is to boost the employee morale that has deteriorated after last year's worst underwriting experience.

In order to contain the future flow of talent towards private companies, Jagannathan has hit upon a unique idea, a company anthem to cultivate a sense of belonging to United India. He got the song penned by the well-known Tamil cinema lyrist Vairamuthu and the anthem cassette is played on every Monday and Friday morning. "We have translated the song into six languages," says United India general manager C H Sarabhayya.

Good move. But the immediate task for this post-graduate in economics is to contain United India's cost-ratio that has overstepped the statutory limit of 19.5 per cent of the net premium income by 2 per cent. There are two ways of reducing the cost-ratio from the current levels: One, by increasing the premium-base and two, by reducing the staff. In support of the latter, the representative body of four nationalised insurance companies, General Insurers (Public Sector) Association (Gipsa), has put out a proposal to reduce the manpower marketing as well as administrative in all its constituents.

Curiously, Jagannathan seems to prefer the difficult route increasing the premium-base in an aggressive fashion. "We will study the implications of the voluntary retirement scheme (VRS) for United India as and when the scheme is notified," he says when asked about his opinion on Gipsa's proposals.

What he says is logical. Several imponderables are to be addressed before announcing a VRS. A parliamentary committee is studying the advisability of allowing brokers and corporate agents to operate. As the recommendation could go either way, it will be suicidal for United India to send out its marketing personnel who bring in 60 per cent of its premium income.

Further, United India is toying with the idea of floating a separate outfit to sell personal insurance products. If that happens surplus employees could be deputed or transferred to the new outfit, thus reducing the cost ratio. A separate subsidiary for selling personal insurance products is Jagannathan's pet theory. "An independent company gives me the required operational flexibility. We have appointed a consultant to go into the various aspects of it, and its report is awaited."

Given the company's adverse underwriting experience in its miscellaneous insurance portfolio, how viable the separate subsidiary would be, by merely selling personal insurance products, is a question that needs to be addressed.

Even after taking out the claims paid towards motor insurance (vehicle damage and third party) the company's claims experience on pure personal insurance products is negative. United India last year paid claims totalling Rs 210.27 crore on its three personal insurance products: personal accident (Rs 15.66 crore), householders (Rs 70.20 crore) and mediclaim (Rs 124.41 crore). The total premium earned was Rs 140 crore; personal accident (Rs 11.90 crore), householders (Rs 12.44 crore) and mediclaim (Rs 115.21 crore).

Says Sarabhayya: "Any insurance businesss success depends on the client base. A larger client base will absorb the losses of few policyholders and the business will be profitable. Initially we incurred underwriting losses [premium less claims paid] on cattle insurance business because the base was small. Today the same business has turned profitable as the base got enlarged."

While the option for a new subsidiary is being studied and will be decided in the future, Jagannathan is laying more emphasis on selling personal insurance products and has formed a strategic business unit for the purpose. A three-month intensified campaign to sell personal products like mediclaim, householders and personal accident insurance policies has already been launched.

"I have fixed a target of Rs 24 crore for my sales force for this period," says he. The company hopes to mobilise Rs 300 crore from this line an increase of Rs 100 crore over the last year's figure. "The performance till December is in line with our target."

The intense campaign-promoting products like house, accident and health insurance policies have enlarged the underwriting base with the beneficial impact already being felt. During the first half of this fiscal, the mediclaim and householders insurance policies got the company Rs 84.72 crore, while the claims outgo on them is Rs 77.14 crore.

Sarabhayya says the company has introduced new products like Uniheart (covering heart diseases) and student's education. "In addition, United India is soon to package health insurance in its householders insurance policy as a strategy to increase the premium as well as the underwriting base."

In order to increase its distribution reach, United India is in talks with State Bank of India for selling personal insurance products. The company has signed a product distribution memorandum of understanding with Rose Valley Industries, a Kolkata-based retail chain.

"I am also planning to introduce one-man office concept in rural areas. With sufficient financial power delegated, a single person can effectively run a small rural outfit," says Jagannathan. Facilitating that will be an investment in information technology. "The company is investing around Rs 95 crore to computerise and network all its branches."

About the current year's performance, Jagannathan says the premium income till December was Rs 2, 020 crore. "We are sure of achieving the premium target of Rs 2, 650 crore this fiscal, with a fresh accretion of Rs 200 crore." The accretion will mainly be in fire insurance and personal insurances. Though the fire premium rates were revised downward last year, the 10-per cent surcharge on fire premium has helped the company to register growth. In addition, the revision of the motor insurance premium is also expected to boost the premium income.

All these and the 10 per cent plus yield on investment keep Jagannathan a happy man.