Q&A: SS Gopalarathnam, Cholamandalam MS General Insurance

'Our underwriting practices have improved'

Cholamandalam MS General Insurance Company Ltd, a joint venture between the Chnnai-based Murugappa Group and Mitsui Sumitomo Insurance Group of Japan, collected Rs 785 crore by selling new policies in 2009-10 and has targeted a new business premium of Rs 1,300-1,350 crore by 2011-12. SS Gopalarathnam, managing director, tells Niladri Bhattacharya about growth plans. Edited excerpts:

Last year, you wrote policies worth Rs 785 crore. How do you see your business growing this year, specially when you have said you want to exit the group health business?
This year, growth has been very good. The new premium income would be in the region of Rs 950-960 crore during 2010-11. This came after we decided (in 2010-11) to exit the group health business, where the claim ratio is nearly 130 per cent. Premiums from group health policies this year will be in the region of Rs 10 crore, compared to Rs 70 crore collected last year.

Going ahead, by the end of 2011-12, we are targeting a gross written premium of Rs 1,300-1,350 crore.

Since you are exiting the group health business, what will be your main focus area? What will be the share of motor and health insurance?
The retail business will contribute 85 per cent of the total business over the next two years. We are already present in 110 locations in 75 cities and, in addition to these, we will be leveraging 200 branches of Cholamandalam Finance. Motor and health insurance together constitute 77 per cent of the total portfolio. We will be launching eight new products in the coming year, expected to generate around 10 per cent of new premium income.

The company has been reporting losses in marine insurance. What is the status?
We have managed to bring down the marine claim ratio to 60 per cent from 80 per cent over the past one year. We have also been able to bring down underwriting losses significantly, by tightening the underwriting practices. By the end of this year, the marine portfolio should contribute to overall profitability.

Commercial third-party motor insurance is a concern for most private general insurance companies, as premiums in this segment haven’t gone up in the past four years.
The total third-party loss for us will be in the region of Rs 30 crore but hopefully, this year, the premiums will be revised upward. We have also taken some important strategic decisions to manage our motor portfolio in a better manner. First, we are reducing our exposure in the northern region, as it the a highest claim zone in the country, since 75-80 per cent of car thefts happens in that region. We are reducing our exposure to nine per cent by the end of this year from 12 per cent a year before. Subsequently, we will be increasing our exposure in the East.

With some better underwriting skills, we have managed to bring down the motor claim ration in this region from 100 per cent to 72 per cent in one year.

How is rural insurance doing, particularly in the backdrop of the microfinance sector turmoil?
We are mostly working with the Muruguppa Group for the rural insurance business, mostly through Rashtriya Swastya Bima Yojana, which contributes nine per cent to our total rural business. Currently, rural business accounts for 12-13 per cent in our total portfolio. Recently, we launched some weather insurance products, where we are targeting a premium of Rs 3 crore.

However, due to the recent problems in the MFI industry, selling micro-insurance will get difficult. Because of its low-ticket size, micro insurance policies are viable only when distributed through MFI networks.