G Srinivasan, chairman and managing director of United India Insurance, spoke to Moneylife’s Raj Pradhan on the various issues facing the insurance industry and his company’s growth plans

Raj Pradhan (ML): Please tell us the current situation in the cashless imbroglio between PSU insurers and hospitals.

G Srinivasan (GS): We had started with 250 hospitals on the Preferred Provider Network (PPN) and now it is over 500 hospitals in four cities. We aim to add many more hospitals. There was initial resistance, but we have made good progress for even corporate hospitals in cities other than Mumbai. The cost of insurance should come down over a long period of time with PPN.

ML: Why do group insurance policyholders still enjoy cashless facility at corporate hospitals which is denied to individual policyholders? The CAG audit report shows PSU insurers suffering huge losses in group insurance during 2006 to 2009.

GS: We have a lot of pricing flexibility with group insurance. If our experience is bad, we can increase premiums or curtail benefits. If group insurance policyholders want cashless (facilities) at all hospitals, we charge more premium on renewal. If they accept our PPN, we give premium discount. The CAG audit finding was always known to us, but not to (the) market. During the tariff era we used to get high premiums for fire, engineering, marine (insurance), etc. We would cross-subsidise health insurance. With de-tariffication, the rates for lucrative segments came down, but health insurance cross-subsidy remained for some more time. We are now in a tight market and group health insurance premiums have increased.

ML: Have commissions come down for group and individual mediclaim policies?

GS: The commission rates are same for individual mediclaim policies, but have been reduced for group mediclaim policies due to losses.

ML: Do you offer lifelong renewals for mediclaim? Many private insurers do not offer lifelong renewals.

GS: We cannot deny renewal if the policyholder has decided to continue. The regulator is clear that the insurance company is not supposed to say ‘no’. Moreover, premium increases have to be in-line with IRDA (Insurance Regulatory and Development Authority) product filing.

ML: There have been recent changes for claims-filing period reduction from 30 to 7 days. Will it cause inconvenience to policyholders?

GS: It was already implemented by a few companies in the market. We are starting to enforce the same to have control over claims. When the policyholder is admitted to a hospital, we need to know so that we can talk with doctors, do our investigation. The time limit for submission of claims should not be too long. If there are genuine reasons for delay the policy conditions can be waived at various levels. It will help in fraud control. If there are post-hospitalisation bills, they can be submitted as separate claims later.

ML: There are reports of PSU insurers coming up with a new policy for cashless facility at corporate hospitals. Are you planning any other new product?

GS: We will file for a ‘premium’ product for cashless (facility) at corporate hospitals in a month. We have filed for two new products — each for health and motor. The health products are totally new for different segments, while motor products are variation of existing products. We want to bring innovative products like ‘top-up’ policies which are doing very well. We currently have about 150 products that include 10 health products.

ML: How strong is the TPA case against four PSU insurers that is pending with the Competition Commission of India (CCI)?

GS: It is not a serious issue. We are talking about back-office work; not products or the pricing competitive spirit. The reason to go for one TPA is for more efficiency of claims processing. It is not an area where CCI would like to step in. Moreover, we are not moving all businesses to common TPAs immediately. It will take a number of years for it to evolve. The existing TPAs will continue to get partial business.

ML: Are the plans of LICHFL Financial Services to collect Rs1,000 crore of United India Insurance premiums in one year too ambitious?

GS: LICHFL Financial Services carries a strong brand name and has the potential to scale up fast. We have a vibrant economy with huge potential. Even though they are starting at the retail level for different general insurance sector businesses, they will move to the corporate level soon and will be able to sell group insurance policies. United India Insurance will provide the training, capacity-building and technical expertise.

ML: What are your views on IPOs from PSU insurers?

GS: PSU insurers’ IPOs need legislative amendment. The Insurance Act amendment in Parliament needs to be passed to give government leverage to go for IPOs. The other step is IRDA regulations that may come by the next financial year. The decision for IPOs can be taken only after these prerequisites.

ML: What is United India’s current financial situation?

GS: We are targeting a premium income of Rs6,000 crore in 2010-11, as against Rs5,000 crore achieved in 2009-10. In the first six months of this year, we have already crossed Rs3,000 crore. The company’s underwriting losses are likely to come down to Rs800 crore by the fiscal-end, as against Rs880 crore incurred in the last fiscal. The underwriting losses were pared by the increase in the fixed investment to Rs800 crore during last year. This year, we are looking at achieving fixed income of Rs850 crore. We made profit of Rs900 crore on equities trading.

The company is projecting to bring down its combined ratio to 118% as against the current 122% by the fiscal-end. We want to bring our combined ratio down at 110% within three years from now. We had the highest profit among PSU insurers in the last two years along with minimum underwriting losses.

ML: What are your growth plans?

GS: We have 100 corporate agents as of now, responsible for getting 10%-12% of the company’s entire business. We have 30,000 active agents across the country. Every office will have unit managers responsible for recruiting, training, and motivating agents. We target to have one lakh agents by 31 March 2012. The product knowledge training will be imparted to avoid any mis-selling. We also have a strong grievance redressal system in place. Anyone is welcome to personally write to me.