Ramadoss, chairman cum managing director, Oriental
Insurance Company Limited, discusses the road ahead for
the government owned general insurance companies with
Six months after the administered pricing system in the
domestic non life insurance industry was scrapped, free
pricing in its true sense is yet to take shape. The Insurance
Regulatory and Development Authority (IRDA) has imposed
a floor level below which insurers cannot price their
products that were earlier under administered pricing
chairman cum managing director, Oriental Insurance Company
Limited, M Ramadoss, "The IRDA''s ceiling has not
changed the situation. The unhealthy practices that were
prevalent in a tariffed market still continue."
adds, "No other insurance regulator governs the premium
rates. All regulators police the insurer''s solvency margin."
all India chartered accountancy rank holder Ramadoss,
has a strong determination. His father died when he was
in school leaving behind his mother and three sisters
to sustain themselves with a meagre rental income. Against
the suggestion of his close relatives to seek a job after
graduation, Ramadoss opted to pursue chartered accountancy.
cleared his final chartered accountancy exams standing
31st rank in 1975 even before he had completed his articles
at the Chennai-based chartered accountancy firm Fraser
after that he was selected as assistant administrative
officer (AAO) by The New India Assurance Company Limited.
The financial strain on the family eased to a large extent
and he was able to arrange the marriage of his sisters.
career progressed at brisk pace at New India. He acquired
professional insurance qualifications and is a Fellow
of Insurance Institute of India and an Associate of UK-based
Chartered Insurance Institute.
2001 he became general manager and was posted in London
overseeing New India''s operations in the UK. "The
London posting was interesting and challenging,"
he reminisces. Four years later he rose to head Oriental
fiscal Oriental Insurance earned a premium income of Rs3,940.53
crore, of which the net premium after reinsurance outgo
will be around 69 per cent. "Last year we were the
market leader in engineering, marine cargo, aviation,
hull insurance businesses. All these portfolios involve
lot of reinsurance outgo," he explains.
the current fiscal Oriental Insurance hopes to achieve
a topline growth of 15 per cent. "While the target
is challenging, it is attainable," Ramadoss says
confidently. At the end of May 2007 Oriental Insurance
has jumped to the second place in the 12-member non- life
insurance industry with a premium of Rs743.23 crore.
him the underwriting procedures have been tightened. Prior
to his coming, Oriental Insurance was one of the two government
owned insurers that had recklessly underwritten subscriber
default risks of a mobile telephony player.
Ramadoss, who loves chess, thinks twice before making
adventurous moves unless he has his flanks well covered.
He has often turned away insurance proposals with sizeable
premium income, unless he feels claims are manageable.
of General Insurers'' (public sector) Association (GIPSA),
Ramadoss talks about his plans for Oriental Insurance
as well as the future of the four government owned non-life
companies are not only catching up but also overtaking
the government owned non-life insurers.
The strategy of private players seems to be to gain topline
growth at any cost so as to get better valuations. But
we are for profitable growth. There have been instances
where we have turned down big-ticket group mediclaim policies
because of high loss ratio.
instance we turned away a group mediclaim business from
a large IT company based in Bangalore. The premium potential
was around Rs12 crore. The previous year the account experienced
a claim of around Rs20 crore. Even after factoring investment
income on the premium amount the account will not be profitable
of the other three government owned insurers came near
that company. The government companies have bled all these
years. We are slowly changing towards profitable growth,
cutting down losses. However, a private company wanting
to show topline growth has accepted that risk at a lower
are the highlights of Oriental Insurance''s performance
We were able to reduce incurred claims to a good extent.
The incurred claims ratio in the case of motor own damage
(damage to vehicles) came down to 43 per cent from 48
per cent in FY06.
FY05 the figure was 53 per cent. We underwrote motor business
aggressively when others applied their brakes to it. One
can''t grow without doing motor business. Our motor portfolio
premium will be around Rs1,900 crore. The third-party
(TP) claims ratio has come down to 160 per cent. In three
years the combined ratio (premium: claims, administration
and dividend expenses) will be less than 100 per cent.
Today it is 121 per cent.
is the growth rate that you have targeted for the current
We are targeting a topline growth rate of 15 per cent.
While the target is challenging, it is achievable. regional
managers have to sign an MOU with various parameters to
the claims front the target is 5 per cent reduction in
motor OD. The motor OD ratio is to be less than 40 per
cent. We will clear all pending non-suit claims and no
claim will be kept pending for more than six months.
IRDA chairman says that companies are free to have region-wise
premium rates for health insurance. In motor insurance
there is region-wise premium structure. What is your view?
A region or city-wise premium structure has yet to be
tested. The issue to be resolved is when a person who
has taken a policy in a non-metro city opts for treatment
in a metro hospital. Perhaps, we can charge additional
premium as `metro addition''. Insurers are yet to look
at this concept in a serious manner.
interesting trend is that corporates do not want their
health care claims to be processed by third party administrators
(TPA). Many individual health insurance policyholders
are also opting out of TPA services.
owned non-life insurers are phasing out their marketing
force, while the general view is that a company that makes
its marketing force a run-off cadre will never survive
competition. What is your view.
The cost norm laid down for development officers / marketing
officers is around 10 per cent. They are expected to procure
business and meet the cost norm. However, we found much
of the business procured by development officers was routed
through an agent who had to be paid commission.
in turn increased the procurement cost for the companies.
During the last three years the total business procured
by development officers grew just by one per cent. This
channel has become a costly and uneconomic one.
are talking about the merger of four government owned
non-life insurers. Has GIPSA discussed it?
There has been no serious discussion on the merger at
GIPSA, except casually, perhaps.
Today we see advantages in a merger as the capacity to
insure will go up to Rs5,000 crore.
the premium retention will go up to 90 per cent from the
70 per cent at present and there will be drastic reduction
in the reinsurance outgo. The net worth of the merged
entity will be around Rs9,000 crore and the market value
of investments will be around Rs30,000 crore.
is also the value of the real estate owned by the insurers.
But people are sceptical about the merger. The reality
is that today the four companies have around 4,100 offices
competing with each other. In the case of big project
insurances the premium difference between the four government
insurers is around Rs30 crore. That is a lost opportunity
for government companies.
the private sector getting aggressive we should not lose
any more chances.