Combination factors enable Oriental to cut H1 loss
If the same trend continued and nothing catastrophic happened, the insurer may close the fiscal with a small net profit, says R R Singh, CMD
image for illustrative purpose
Chennai From a net loss of Rs 3,586.93 crore during the first half of FY23 to a net loss of just Rs 42.17 crore for the comparable period in FY24 as seen in the advertisements is not any printing mistake, but the result of right steps, said a top official of the public sector non-life insurer, The Oriental Insurance Company Ltd.
“A combination of factors has resulted in our company cutting down the net loss to Rs 42.17 crore for the half year ended 30.9.2023 from Rs 3,586.93 crore logged during the corresponding period of FY23. It is not a printing mistake with regard to the decimal point,” laughed R.R. Singh, Chairman-cum-Managing Director, said.
He also said, if the same trend continued and nothing catastrophic happened, the insurer may close the fiscal with a small net profit.
According to him, on an apple-to-apple comparison of the two-half years, then the net loss for last year was about Rs1,300 crore if one takes out the Rs 2,286 crore wage arrears paid last fiscal.
The combination of factors, that Singh cites, are prudent underwriting of health, motor and other insurance business, converting fixed cost salaried employees into income generating ones, rationalisation of intermediary commissions based on profitability, office closer or moving to a smaller premises to cut down the rental outgo, leveraging video conference technology to cut down employee travel costs and focusing on social media promotion for business.
Elaborating further Singh said, nearly 50 per cent of our premium was from the health insurance portfolio which bleed the company.
To cut down the bleeding, The Oriental Insurance replaced the old policies with newer ones-including the ones sold by the banks, reviewed the corporate clients and turned away loss making ones or increased their renewal premium.
“Group health insurance policies that were making a loss for three years were not renewed. In some cases, the renewal premium was increased by 10 per cent,” Singh said. The Oriental Insurance also declined to renew the group health insurance policy of the Gujarat government which was a huge loss making, he added.
On the retail health insurance side, the company saw only older people getting insured with it which resulted in claims outgo.
“We changed the intermediary commission structure. We reduced the commission from 15 per cent to five per cent in the case of policies covering elderly people. On the other hand, we also increased the commission from 15 per cent to 30 per cent for policies covering younger people,” Singh said.
This resulted in the insurer getting healthy younger people as insured and the risk of claims reduced to a large extent.
That aside, the company is also keeping an eagle eye on its claims processing agencies and the hospitals where its clients are admitted.
“We audit all the health insurance claims beyond a threshold limit. We also do a surprise check at the hospitals. These measures brought down the incurred claims ratio (ICR) of our health insurance business,” Singh said.
Similarly in the case of motor insurance vehicle/own damage business line where the ICR was about 160 per cent, The Oriental Insurance stopped underwriting some heavy commercial vehicles, reduced premium discount and signed up with vehicle dealers.
