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Govt again asks GIs to follow prudent underwriting norms

| | Mumbai

Despite the Government asking the state-run general insurers to strictly follow underwriting norms, the insurers preparing for IPOs feel they will take at least two more years to start making underwriting profits.

Recently the department of financial services wrote to the CMDs of all the state-run non-life insurers to protect the interests of their policy-holders, continue to be effective players in the market on a long-term basis and to ensure that their unhealthy underwriting practices do not cause unnecessary financial strain on their financial stability.

“It’s desirable that prudent underwriting practices suggested in government advisories are followed strictly,” the Government told the companies in the letter.

The four state-owned general insurers are The New India Assurance Co Ltd, United India Insurance Co Ltd, The Oriental Insurance Co Ltd and National Insurance Co Ltd.

 GIC Re is the sole state-run reinsurer while ECGC and Agriculture Insurance Company are the public sector specialised insurers.

One such advisory had already been sent by government to these companies in 2012-13 which was followed by internal circulars.

However, the department has found that these companies are violating the advisories leading to huge underwriting losses. As a result, these companies are solely dependent on the investment income or profit from sale of investments, notes the letter.

“These are limited investments and are fast depleting as a result of indiscriminate disposal by companies to make up for the losses on underwriting premia. Such an arrangement is not sustainable in the long-run and can permanently harm their competitiveness,” the letter said.

Underwriting loss of National Insurance Company, which is preparing for IPO by the fiscal-end, remained almost at the same level at Rs 3,680 crore in FY17, marginally up from Rs 3,633 crore in FY16.

“The recent advisory from the Government is a part of general advisories on prudent underwriting, caution in operating in loss-making areas, and on corporate governance. After all the government owns 100 per cent in us unlike most of other PSUs and banks,” National Insurance Company chairman and managing director Sanath Kumar told PTI.                

 
 
 

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