According to a preliminary estimate, the net profit of the four subsidiaries of General Insurance Corporation-New India Assurance, United India, Oriental Insurance and National Insurance-will go up from Rs 1,255 to Rs 1,400 during the year. This contrasts with the 60 per cent jump achieved the previous year, when, despite having a Rs 442 underwriting loss, the net profit of the general insurance industry zoomed from Rs 720 crore to Rs 1,255 crore.The exact underwriting loss for financial year 1998-99 will be known only after the four GIC outfits finalise their balance-sheets by the end of this month. Sources close to GIC said it could be around Rs 300 crore.

Once again large investment incomes contributed significantly to the profits of the industry.

The investment incomehas shot up by 14 per cent from Rs 2,056 crore to Rs 2,350 crore during the year. The industry's total investment portfolio has expanded from Rs 16,691 crore to Rs 19,000 crore during the year.

"Going by the trend of the last five years, one can say the industry is making profits from its investment income despite a substantial underwriting loss. In other words, the general industry's profit is no more based on premiums. It has become investment driven," a senior analyst said. "There is nothing wrong in the development as it is a global phenomenon,'' countered a top GIC official.

However, due to the prolonged capital market depression the industry's growth percentage in investment income terms has also been shrinking for last three years despite a growing investment portfolio. The growth in investment income was 26.2 per cent in 1995-96, 15.26 per cent in 1997-98 and 14 per cent in 1998-99. In contrast, the size of the investment portfolio has grown by Rs 2,309 crore to Rs 19,000 crore in 1998-99alone.Under current rules, the general insurance industry can invest up to 55 per cent of its income in the private sector and 45 per cent in public sector instruments.

The mammoth underwriting loss of the companies is mainly on account of negative third-party motor claims which has off late seen a declining trend. The claim ratio in this particular segment is pegged around 135 to 140 per cent of premium income.

On a daily basis, the general insurance industry lost Rs 2 crore on account of low premium and high claims between 1990 and 1997.

In April 1998, the centre had allowed GIC to effect a price hike in the third party premia category ranging from 200 per cent to 700 per cent over a period of three years. However, this facility was withdrawn in April this year by the Tariff Advisory Committee (TAC). According to TAC, the hike was unwarranted as the insurance companies are reaping large incomes out of the piling unsettled claims over a period of time.