Insurance is nothing but a contract or promise. How well an insurance company honours the promise determines its customer-friendliness; how the company rewards shareholders determines its business expertise.

Balancing the two is a delicate art, which the Pune-based Bajaj Allianz General Insurance Company Limited handles with consummate ease. The company has a settlements ratio of around 94 per cent - possibly, the highest in the world - and its 20 per cent return on equity ranks the highest amongst private non-life insurers in the country.

Four years after opening up the non life sector, the private non life insurers have captured 14 per cent market share in the Rs16,000 crore market.

"Private companies have proved that they are here for the long haul, which is evident in their network and strong business volumes," says Kamesh Goyal, CEO, Bajaj Allianz General Insurance Company Limited.

According to Goyal, the pace of growth will continue to grow in the coming years as private insurance companies gain acceptance and their market penetration expands. For instance, Bajaj Allianz booked gross premium of Rs480 crore during the year ended March 31, 2004, earning a net premium of Rs286 crore - up from Rs299 crore and Rs180 crore respectively in the previous year.
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However private companies have not been able to make noticeable inroads into the corporate insurance market, in which the public sector insurance companies have a near monopolistic hold. Many private companies had pinned their hopes on broking houses to procure business for them from the corporate segment. But they have been unable to attract corporates away from the public sector insurance companies.

Has the change in the broking structure and the continuing practice of offering discounts in premium for business placed directly with the insurance companies affected the private sector insurance companies or brokers from procuring corporate business?

Goyal says, "The revised regulations haven't affected new corporate business procurement. The contribution from the brokers was nevertheless less than expected."

According to him, Bajaj Allianz ranks the top in the private sector in terms of return on equity by offering a return of 20 per cent. Excerpts:

Which insurance segment posts the highest growth in the industry and for your company?
Motor is the segment, which posted the highest growth rate in the industry, because of the increase in sale of automobiles. For Bajaj Allianz, we registered a 100 per cent growth in non-motor segment.

What trend do you see in the market now?
The market will witness a shake-out when the de-tariffing of motor and fire insurance takes place. We have to be ready with a pricing model as early as possible. This will also put an end to cross-subsidisation and companies have to come with realistic pricing models to ensure their competitiveness in the market place.

What were the portfolio and channel-wise distribution premiums last fiscal?
Motor Rs222 crore, property Rs170 crore, marine Rs21 crore and others Rs67 crore. The direct business would contribute 35 per cent to the premium income while 65 per cent is garnered through various intermediaries in the market. The renewal ratio is generally 95 per cent in corporate business and 55 per cent in the retail segment. The business generated from group companies was approximately 3 per cent.

What were the results of your underwriting business in each segment
For Bajaj Allianz, the underwriting results for fire was profitable while marine and miscellaneous incurred an underwriting loss. The total claims paid exceeded Rs150 crore, which is the highest pay out among the private general insurance companies.
Our claims settlement ratio was 94 per cent, which is the best among the industry standards worldwide. We are equipped with qualified people to control the claims in the areas of motor and health.

What were your management expenses?
Management expenses were 25 per cent on net earned premium basis, which is the lowest in the industry.

What is your investment income and strategy.
The investments are as per the IRDA guidelines. Our investment income in 2003-04 was Rs28.5 crore and Rs20.7 crore in 02-03.

What is your company's capital base? Has the company received any additional capital infusion during the year?
Our capital base is Rs110 crore. We have not yet gone in for additional capital infusion till now. We would consider increasing the capital base as and when required. Our net worth is Rs138 crore.

Could you tell us about your reinsurance programme?
For 2004-05, Bajaj Allianz has been successful in placing a reinsurance programme, which is a combination of both proportional and excess of loss protection. On the proportional front we have increased underwriting capacity to Rs150 crore for property risks from an expiring Rs120 crore. We have also put in place an excess of loss protection programme, which can cover catastrophic losses up to an aggregate of Rs100 crore.

Our treaty reinsurance has been designed to maximise underwriting capacity and, at the same time, provide balance sheet protection for us. The panel of reinsurers comprise Allianz, Reinsurance Singapore and General Insurance Corporation of India (GIC), which are rated A or better by AM Best.

About your plans for expanding your network.
Bajaj Allianz has a network of 40 offices spread across the country, which is as of now, the largest network among private general insurance companies. We are considering opening 3-4 offices in areas where we are not present and also considering the option of having franchisees.