The government has instructed state-run insurance firms to focus on improving incomes, even as the competition to boost market share spiked the amount consumer claims, risking a squeeze in profitability, a person familiar with the matter said.
The government thinking on the matter is that aiming for profits would help insurers cut unnecessary costs while dealing with the settlement of claims raised by customers, the person said, asking not to be identified. A chase to bolster market share by adding more consumers has led to a spike in claims, which has narrowed the gain for insurance companies, the person said.
“We are not just fixated on the market share. The focus is to lower claim ratios, show more prudence on the underwriting front, and avoid the usual loss-making businesses of group-level medical and motor insurance, where the proportion of claims is high for amounts of premiums received by the insurer,” an official at a state-run insurer said.
“We don’t have clearances to offer incentives to clients like private sector rivals. But there are limits to avoid losing business to private players,” the official added.
Publicly traded New India Assurance declined to about 14% of the non-life insurance business in India, compared with 20% last May, according to Insurance Regulatory Development Authority data.
Public sector general insurers recently cut the number of organization layers to two from three earlier. Life Insurance Corp of India, India’s biggest state life insurer, is also focusing to improve margins and increasing market share of non-participatory products.
