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a">State-sponsored health insurance schemes can co-exist with central government-led Rashtriya Swasthya Bima Yojna (RSBY) health insurance scheme as they cater to different health insurance needs, says United India Insurance chairman,G Srinivasan in an interview with R Srividhya. The company, recently, signed a Rs. 750 crore agreement with the Tamil Nadu government, to execute the state-sponsored health insurance scheme for people in the below-poverty- line segment, outbidding the other PSU insurers. Excerpts:

Though such state-sponsored schemes bring in bulk amount towards the company’s total premium income, they sometimes run into controversies. How does United India Insurance plan to handle this?

Public sector companies have a lot of advantages. We are financially sound. Our ability to run the scheme and social outlook is very transparent. Some private companies in various parts of the country have also done it well. As a company, we have certain strengths that have played out well to our advantage.

Is there a need for a state-government sponsored health insurance scheme, when the RSBY scheme, initiated by the central government, is also available?

In RSBY, the maximum coverage is limited to Rs 30,000, and may not be sufficient to cover a big procedure like a heart surgery. It is meant to cover regular hospitalisation. In state-sponsored schemes, like the one in Tamil Nadu, the coverage is up to Rs 1,00,000 per year, for a family of four.

Both schemes cater to different needs of people and can co-exist. You can have RSBY at the bottom and such state-sponsored schemes for coverage of critical illnesses.

How are the claims ratios in such schemes?

It varies from state to state. It also depends on what premium we charge. There are RSBY schemes where the loss ratios are 130-140 per cent and there are few states where the loss ratios are at 60-65 per cent. In Tamil Nadu, the loss ratios in the past two years have been 75-80 per cent. It all depends on the price we quote at the time of the tender, and if we have the right checks and balances in place.

How do these loss ratios compare with the loss ratios in the overall health insurance segment?

In health insurance, generally, the loss ratios are 100 per cent, group and individual put together. Group health policy loss ratios have not been good for the past three to four years. Last year, the industry ensured that group policy premium was hiked by 16-17 per cent. That has brought down the loss ratios to 100 per cent from 120-130 per cent, earlier.

In the individual health insurance business too, we hiked premium rates last year, and have managed to bring down the loss ratios to 80-85 per cent.

In the motor insurance business, what will be the impact of the declining pool model coming into force from April?

The idea behind the new declining pool system is to ensure that there are no supply side constraints for commercial third- party insurance. If a company is not comfortable with a certain portion of the third-party motor pool, then they transfer it to the pool. The companies will also have a quota of the standalone third-party motor pool based on their market share. The idea is that policies will be freely available. No company can refuse to give commercial third-party motor insurance.

Also, the companies will be required to do some third-party insurance based on their business share in the market. If there is a shortage, they will have to take a portion from the pool. That way there is also a compulsion for every company to do motor third- party standalone insurance.

Is there a possibility of third-party motor premiums going up this year, like last year?

Last year, there was a 68 per cent hike in third-party motor premium. We hope that in the present year also there is an appropriate premium revision, so that, the portfolio becomes viable. Low premium prices are the root cause of high claims ratios in the segment. We need at least a 40 per cent hike to make this portfolio breakeven and viable. Decision on that is expected in the next few months. Last year revision was in April, so, we are expecting a decision on hike in a few months.

How challenging will it be for United India Insurance to achieve profitability when higher third-party motor provisioning is sure to affect profitability of most firms this year too?

It is a challenge to post profits this year because the impact is quite high. The outgo on account of the allocation will be Rs 650 crore. We were hopeful of making a profit of around Rs 700-750 crore. So, we are still hopeful of making some profits this year. It will be a very small figure. We will have to wait and watch.

What will be the impact on public sector insurance companies if the FDI (foreign direct investment) limit in insurance sector is raised from 26 per cent, at present, to 49 per cent?

No impact. Whether it is 26 per cent or 49 per cent, private insurance companies are practically run by the foreign partners who have the management control. It does not make any difference to us.

Many general insurers will require capital infusion following the additional provisions to be made. What would be the capital needs of United India Insurance?

In our case, we are financially very strong. Our solvency ratio is 0.89 per cent, which is the highest in the market. Even after additional provisions, our solvency margin will be quite comfortable, and we will not require any additional capital.

Sometime back, there were talks of the government looking at divesting stake in general insurance companies. What has been the update on that?

It was just an idea. The idea was not for raising more capital. The government could have looked at the option as a way of listing the companies in the market and ensuring better corporate governance.

What is the company’s growth target this year?

We have been consistently increasing our market share over the past four years. This year too, it is at 27 per cent. We will continue to increase our market share in the present year also. This year we will cross Rs 8,000 crore in terms of total business. It will be a growth of 27 per cent over last year.