Icra lowers rating for paying ability of National Insurance

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Mumbai, April 7: Credit rating agency Icra has downgraded the Kolkata-based state owned National Insurance Company’s high claim paying ability. The company has been downgraded from ‘IAAA’ to ‘IAA+’, indicating high claim ability.

The rating downgrades reflect the sharp decline in the company’s profitability and Icra’s concern on the qualifications made by the auditors of the company with regard to the valuation of the its liabilities towards its policyholders, Icra said in a statement.

With the operating environment becoming increasingly competitive, Icra is of the opinion that the profitability of the company could come under further pressure unless measures are taken to improve the underwriting practices, prune costs and improve claim management and service standards, said the rating agency.

Yet, factors providing Icra comfort on the company’s claim serving ability include the latter’s strong national franchise and presence, its access to a strong and liquid investment portfolio and its healthy capitalisation levels.

Icra said National Insurance, akin to its peers in the public sector, has operated in an oligopolistic environment until the deregulation of the sector. Icra, however, observes that over the past few years, growing competitive pressures have started affecting the company’s market position, particularly in more profitable businesses like fire and engineering, which are being aggressively targetted by the private sector incumbents.

National Insurance has projected good growth in 2003-04 driven by its focus on the motor business, wherein it tied up with Maruti Udyog Ltd for insuring 75% of all new vehicles sold by Maruti in 2003-04.