The Hindu Business Line : `Underwriting discipline, challenge for insurers'

The marine hull business, for instance, accounts for Rs 200 crore of premium annually. This segment has been de-tariffed (free pricing and product features) since the beginning of this fiscal.

The size of the risk cover is huge. A number of vessels are covered for over Rs 100 crore each.

Emphasising the need for `underwriting discipline', particularly in the marine hull business, the Chief Executive Officer of Bajaj Allianz, Mr Kamesh Goyal, has, in the corporate's newsletter, captured the current trend.

He said, "to grab business, certain insurance companies dropped the premium rates by almost 50 per cent."

While this undercutting of rates, on the one hand, made customers happy, on the other, they began to suspect the motives of the insurance companies, because the rates were much lower than the international levels.

"Insurance companies, which picked up business at lower rates, either had to shell out the premium from their pockets while reinsuring, or had to go back to the insured to renegotiate. This, in a way, is a good development as it shows the stability of the insurance companies and the maturity of the customers," Mr Goyal said.

Stating that the General Insurance Corporation of India (GIC), which is also a national reinsurer, played a positive role in "driving sense" into the insurance companies by refusing to support the illogical rates, Mr Goyal said he hoped GIC would play a greater role during detariffing by instilling discipline in the market.

The performance, particularly underwriting profit (profit from insurance operations excluding investment income) for the 2004-05 fiscal, appears to have slipped for a majority (nine out of the twelve) of the companies operating in this space, compared to the earlier financial year.

Mr Goyal said underwriting discipline would be the biggest challenge the general insurance companies would face in the coming days.

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