FM pulls up state GICs on performance

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Mumbai, Jul 14: Finance minister Palaniappan Chidambaram has pulled up the four state-owned general insurance companies (GICs), which have rapidly lost marketshare to their private sector counterparts.

Over the past seven years since the sector’s liberalisation, the 12 private sector general insurers have cornered over 40% marketshare in the Rs 28,130-crore industry. They consistently gained 5% marketshare every year since they were allowed to undertake general insurance business.

Chidambaram had met the chiefs of the four general insurers--New India Assurance, Oriental Insurance, United Insurance and National Insurance—to review their performance recently. However, he was reportedly unhappy that despite a strong manpower base and national branch network, they continued to lose substantial marketshare.

“The finance minister sat patiently through the presentations made by us, and at the end gave his critical comments about our functioning,’’ said the chief of a state-owned general insurance company, requesting anonymity. The FM stressed that state-owned general insurers have to improve their performance, he added.

In last year’s review meeting, the FM held up as an example the performance of Life Insurance Corporation (LIC), which, he said, had given the private sector life insurers a tough fight to retain marketshare. This year, however, the FM was silent on LIC, as the behemoth had also seen severe erosion of its marketshare in 2007-08, said the insurance company chairman.

Oriental Insurance has lost 2% marketshare and is down to 13.7%; New India Assurance, the country’s largest general insurer, has seen its market share erode 1.35% to 18.75%.

Significantly, the launch of detariffing—where general insurers are allowed competitive pricing—was expected to benefit the public sector firms as they are in a much better position to offer competitive pricing due to their large balance sheet size.