'Allow mkt-driven price for third party motor pool insurance'

Written by R Ravichandran | Updated: Feb 22 2014, 19:39pm hrs
Due to a sharp decline in the auto sector growth, particularly in car and commercial vehicle, the motor pool of general insurers is likely to take a hit of 10%. Chola MS General Insurance, however, is growing in this pool, says SS Gopalarathnam, the managing director of Chola MS General Insurance. In an interview with R Ravichandran, Gopalarathnam said the third party pool must be let off with detariff and allow market driven price mechanism for the same. Excerpts:

What would be the impact of slowdown in auto segment on general insurers

The motor-pool premium is falling. Due to a slowdown, particularly in the passenger car and CV sides, it is expected that the pool will take a hit of 10%. However, we are still growing due to a better underwriting and claim settlement exercises. Motor pool alone accounts for 62% of our premium, followed by 19% from health.

It seems you are going slow on commercial side, including fire, engineering and group health. What are the reasons

Of course, we have decided to go slow on this segment as the market is witnessing heavy discounting due to competition. We found it is not viable to match such high discounts almost to 95% in areas such as fire, engineering, bulk premium, shipping and marine. It is worsening further after the detariff situation. However, we will focus on this area with value addition without going for much discounting with the help of our partner Mitsui of Japan. The commercial segment contributes 12% to our business.

The truckers are blaming the insurers for three-fold hike in TP (third party) insurance. Your response

We had sought a 70% increase, but Irda notified only for 30%. Still there is a huge gap. Companies are not making money as the claim settlement cost has gone up substantially over a period of time and this in addition to the inflationary pressure. Why should someone do it at loss. Let the market driven price mechanism takes place. We hope Irda will look into it. We have allocated R50 crore towards motor pool in the current year too.

You said Chola MS will focus more on health segment. Can you explain.

Currently, health is contributing 19% to our business and we hope this to go up to 25% next year. We have eight unique and customer-friendly products. We will launch four more products in the next financial year and we will bring down the motor pool segment from 61% to 55%. We are targeting individuals healthcare and we will ramp up our agents force to 20,000 from 6,000 now.

What has been business target and profit for FY13

We are looking at a growth of 20-22% and expect to end the current financial year with R1,650 crore business. After the motor pool provisioning of R50 crore, we hope to end the year with a profit of R55 crore. We are targeting R2,400-crore business next financial year with an expected profitability of R105 crore after allocating R50 crore towards motor pool. We hope this could be possible by exploiting our sister concern Chola Finances network of 1,000 offices across the country apart from bancassurance route. We are looking at joining with more banks as the banks are allowed to take up insurance broking now. We have done R180-crore business in motor pool through captive network and the same will touch R400 crore next year.