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Reliance General market share plunges by 40%

Reliance General market share has dropped to 3.87% in Apr-Sep 2010, from 6.22% in the previous corresponding period. Data reveals that the decrease in business is across most segments

Reliance General's gross premium underwritten is down by over 21%. This is at a time when the general insurance sector is expanding and no other company is exhibiting negative growth.

Overall, gross premium underwritten for private insurers increased by 25.19% and that of PSU insurers increased by 21.09%. The segment-wise breakup reveals a decline in every aspect of business. So, is this the signal that might take Reliance towards a ultimate merger with Royal Sundaram General insurance?

The health segment gross premium underwritten was almost unchanged, even though other insurers had an average 50% increase. This is a result of increase in premium by almost 500% in Reliance HealthWise, which has put off customers. (Read 'Unhealthy rise in Reliance HealthWise premiums') The full impact of unhealthy increase in premium by almost 500% will be seen over a period, but Reliance must be hoping that some customers will be forced to continue with it as a change in insurer impacts the four-year waiting period for pre-existing conditions to be covered.

According to a broking house, more than 70% of Reliance customers have switched to another insurer due to Reliance's premium hike. "Due to the losses made in the past three years, Reliance had to cover up the same and revise the premium that resulted in the hike. The market reaction to the hike has led Reliance to revamp its portfolio of health policies. As a result, Reliance health insurance is not perceived as competitive in the market," said an official at another broking house.

Reliance General could survive the sudden downtrend through a merger with another insurance firm. An amalgamation with Royal Sundaram General insurance has been discussed on and off. When contacted, both Reliance General and Royal Sundaram General did not want to comment, but it seems that a merger is very likely.

In April-September 2010, Royal Sundaram General had a smaller market share of 2.58% compared to Reliance General. But its gross premium underwritten increased from Rs438 crore in April-September 2009 to Rs532 crore in April-September this year.

Earlier this month, media reports quoted J Hari Narayan, chairman of the Insurance Regulatory and Development Authority (IRDA), as saying, "The merger of Royal Sundaram Insurance with Reliance General Insurance is expected shortly. The merger will take place soon after the creation of the framework of mergers of general insurance companies. The merger will create a size that will make sense for both parties. Just as in retail, in financial services too, size matters-the bigger you are, the bigger you grow. In a merger, we see that one plus one is more than two."

When asked for the reasons for the falling market share, an official of Reliance Capital corporate communications promised to get a response from the business group. We have not heard from them so far.


FM attributes high onion prices for steep rise in food inflation

New Delhi: Returning to double digits, food inflation rose to 12.13% for 11th December, the third successive week of increase, with finance minister Pranab Mukherjee attributing high onion prices as one of the reasons, reports PTI.

"I am afraid there has been some upward movement of food items... of course the weekly fluctuations take place and one of the reason may be the high prices of onion, which (we already) have taken steps," Mr Mukherjee told reporters.

The official data released today showed that for week ended 11th December, food inflation rose by 2.67 percentage points from 9.46%, touching a six-week high.

Food inflation pinched the common man's household budget, as prices of onion, fruits, eggs, meat and fish, milk and vegetables became expensive.

Economists feel this development may prompt the Reserve Bank of India to raise key policy rates.

The annualised price increase of onion worked out to 33.48%, fruits-20.15%, eggs, meat and fish-19.35 per cent, vegetables-15.54% and milk by 17.83%.

Onion prices rose 4.56% on a week-on-week basis.

"The prices of onion must have impacted (inflation) to some extent. There is some increase in prices of milk in the last few weeks. So that must have impacted to some extent but we are on top of it," cabinet secretary KM Chandrasekhar said.

Continuing to battle against onion prices, which touched Rs70-Rs80 a kg in the last few days, a committee of secretaries, headed by the cabinet secretary, met this morning to take stock of the situation.

According to Mr Chandrasekhar, the government is trying to put in place all the logistics and policy support measures to ease the onion prices.

These include moving of the staple vegetable by the railways and going in for duty free imports.

"I think it will ease very quickly...We have decided to move onion from different areas. There is a shortfall in Maharashtra, but Karnataka is reasonably good and Gujarat is producing quite a lot of onion," he said.

However, the extra burden on households on account of fruits vegetables and milk was at least partly made up by a modest decline in cereals-0.35%.

Within the cereals group, pulses dropped by 10.77%, but the decline has to be seen against a sharp increase in prices last year.

Wheat also showed a decline of 5.14%.

Mr Chandrasekhar said, "As far as international prices are concerned, on rice, wheat and sugar we are fairly comfortably placed. We are not exporting rice. We have enough stock."


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