Break even or little profit will help us run NHPS efficiently: G Srinivasan

G Srinivasan talks about NHPS, reinsurance market and how technology has improved efficiencies at NIA, as the company expands to Myanmar and the Dubai financial centre this year

G Srinivasan, chairman-cum-managing director of The New India Assurance (NIA), spoke to Abhijit Lele and Advait Rao Palepu about the National Health Protection Scheme (NHPS), reinsurance market and how technology has improved efficiencies at NIA, as the company expands to Myanmar and the Dubai financial centre this year. Srinivasan is expected to complete his tenure at the public sector general insurance giant in July 2018. Excerpts:

Several issues have been raised by various stakeholders coming under the NHPS and Ayushman Bharat scheme. Are expectations from the industry being met by the government?

Hospital tie-ups, methodology for rolling out the scheme and package rates have almost been finalised. Hopefully by August or September, the scheme will actually be rolled out. 

Most state governments are keen on the insurance model as they are not sure of their own ability to manage it. Some hospitals have raised objections and even the Indian Doctors’ Association has said the package rates are very low. But the government has told them that states have some flexibility to modify the scheme wherever it is needed.

What preparations are insurance companies making prior to the launch of Ayushman Bharat?

The good thing about insurance companies is that they are used to mass health schemes. NIA has been involved in some state health schemes under the Rashtriya Swasthya Bima Yojana (RSBY). We have built the technology and relationships with third-party administrators. We have people with experience in handling these schemes. So that way, we are reasonably well prepared. 

We will be able to handle the volumes under NHPS with our current infrastructure and we might need to put some people in some specific areas. Internally, we are conducting studies to understand the fundamentals of each state to determine the premium rates. We believe the prices will be higher in states where the infrastructure is good and awareness is highest.

Will the NHPS improve the commercial viability of health insurance products? 

We will do an actuarial study on past trends and experience and try working out a viable premium, without which the quality of service will not be good enough. I don’t think any insurance company is looking for big profits but at least we should break even and maybe receive a little bit of profit to run the scheme efficiently.

It has been almost a year since foreign reinsurance players set up shop in India. Has there been any benefit within the reinsurance space from their presence? 

They are still in their early days, studying the market and looking for good opportunities and I would not say that they have made major in-roads into the Indian market. 

As direct insurers, we would like choice and competitive prices in the reinsurance market. The foreign reinsurance branches have not been too active in the market and it will take one or two years to see any major change (in prices). It will be good if Indian reinsurers do more inward business from foreign markets in order to make India a reinsurance hub.

Bond yields have seen an uptrend since the start of the year, while banks have got leeway to book mark-to-market losses over time, whereas insurers cannot do the same. As major purchasers of government bonds, what are your thoughts? 

Insurance companies do not have to account for mark-to-market for bonds; it only applies for equity investments. Rising yields is positive for us as our investment income goes up. In case of equities, we have a huge fair-value which stands at Rs 230 billion. So, whether it increases or decreases, it doesn’t really affect us. In case of bonds, we hold them at the same price till maturity. So, we are not impacted in the same way as banks.

What are the benefits you are seeing given the consistent investments NIA has made in technology in the past year? 

Normally, people think that private insurers have the lowest expense ratios while public sector insurers have the highest. However, NIA has a very strong core insurance solutions platform and we have issued 30 million policies. It has helped us enjoy one of the lowest operating ratios in the entire market. 

Over the year, the company introduced digital portals for customers, brokers and aggregators, respectively, and today 25 per cent of our 80,000 agents use a digital portal. 

About 15 per cent of our policies are sold online and we are moving into claims automation, which will bring efficiency in claims settlement and reduce the settlement time. The aim is to reduce the average settlement time for motor insurance. For instance, cutting it down to 15 days from 30 days now, and in the case of health insurance to one or two days for settlement. Given our historical experience, we have a lot of data that can be leveraged with technology.