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Indian Express
15 hours ago
- Business
- Indian Express
Biggest problem for insurance industry is fraud: GIC Re chief
RAMASWAMY NARAYANAN, Chairman and MD of state-owned General Insurance Corporation of India (GIC Re), says the biggest problem for the insurance industry is fraud — whether it is health or motor or agriculture. In an interview to HITESH VYAS, GEORGE MATHEW and SANDEEP SINGH, Narayanan said the unregulated healthcare sector needs a regulator and GIC Re is discussing with the government on introducing a catastrophe insurance for the country. Excerpts: How do you see economic activities at the ground level? Are you seeing demand coming in from industries? Yes, it has happened. We are looking at good avenues of growth, definitely at the corporate level. At the retail level, it goes up and down, depending on how people look at insurance. We also have a big role to play in trying to educate people to look at insurance in a more positive way. When COVID happened, health insurance went up. Motor insurance is an area where we have found that some of the compulsory insurances are not taken by people. Overall, I look at the market growing very well. There are different areas or different pushes coming in, such as the regulator bringing out the slogan saying 'Insurance for All by 2047', which is pushing people to perform. As an industry, there is a huge amount of work that we need to do. The growth or the competition is here in the metro and tier 2 cities but we have not done enough in tier 3 cities or villages. We need to do that. Any particular sector where you see more activity happening which may be leading this phase of uptick in growth? Infrastructure is an area where we are seeing a lot of growth and demand. So, obviously, that augurs well and this also means that the country is growing in the right direction. That is something which looks positive and we are seeing growth there. Why is the level of insurance penetration not increasing? We are not creating new markets. We are still fighting in the same markets today. Companies are present in metros and tier 1 cities but if you go to very smaller towns or villages, they are not there…maybe the cost of having an establishment, or the premium figures may not be as big as you get in a branch here (metros or tier 1 cities). That is really pushing back people from doing it probably. Unless the insurance industry starts distributing it (products) to the last man in the country, I don't think penetration levels will go up. Penetration levels have to go up. We are abysmally low. Do you see scope for a war insurance cover? We had spoken to insurance companies and brokers that if somebody wants additional cover, we are willing to look at it. Basically, the normal traditional cover, especially in property and other products, do not cover war or war-like situations. It is completely excluded. I was waiting to see if somebody, especially close to the border, would be interested in a war cover. But I realised that the time frame was small, and also people would have realised that looking for a cover then would mean that it is very expensive. The event happening and you ask for a cover, people obviously charge a very high price. Going forward, maybe people will start thinking about this cover. So, we look at it positively. This is another area of insurance that can come up. So, we are ready for that, in case people want that. Why have health insurance premiums shot up in the last two years? The issue is higher claims. And yes, we are also worried about it and are pushing hard. It is an unregulated industry. Hospitals, unfortunately, don't have a regulator. When you go to a hospital, the first question they ask is whether you have a policy. The moment you say yes, the treatment that you get will be the same but the cost will go up by a factor of something. This, according to me, is not legitimate. Whether I am insured or I am paying from my pocket, the cost of the service cannot go up. It has to remain the same. This is something that needs to change. The insurance industry is trying to control the cost. They are trying to control and see whether one is being subjected to tests that they don't need for the problem that they have gone for (in a hospital). There is a lot of resistance from the hospitals. There are complaints that people have to pay money upfront for treatment at the hospital. If everyone is regulated, why not healthcare also? The general insurance and life insurance councils have approached the government. They are seriously in talks with them and something should happen, I am sure. Why is there no catastrophe insurance scheme for the entire country? Hopefully, it will come sooner. We are discussing this with the government. We are obviously in the business of taking catastrophe risks. We understand how it is changing, in terms of frequency and severity going up. When a catastrophe happens in India, about 8-12 per cent is the insured loss, depending on where it hits. The rest is completely uninsured, which is the problem area for us. Most of the time, these are people who cannot afford and take the brunt of the shock. Once the event has happened, they depend on the government for doles. So, we have been in talks with the government saying, rather than doing that (offering doles), take a cover, pay for it yourself because other people just can't afford it. So whatever budget you have, you use it to pay the premium. And then once the event happens, let the insurance and reinsurance take over. This will work well according to me because once the insurance industry gets in, they will also start looking at ways to reduce losses. We are also looking at doing it in a slightly different way other than the traditional method. We are proposing what is known as parametric insurance, which is not traditional. It is based on certain triggers being met. So if I say that in a day 200 mm of rain happens, then you get the claim. I don't even send somebody to see whether you have suffered a loss. You are in that policy, you get it (claim amount). This will help the government also as they know that immediately there is a relief going to the people who have suffered. The Insurance Amendment Bill is awaited. The government has allowed 100 per cent FDI. What will be the impact on general insurance and on the reinsurers? For reinsurance, it makes no difference because any way you can have a 100 per cent branch. All foreign re-insurance branches (FRBs), such as Munich Re and Swiss Re are 100 per cent owned, they don't have any local partnership. On the insurance side, I am a little doubtful. First of all, when it moved from 49 per cent to 74 per cent, we didn't see a major take-up by foreign players, saying we would come to 74 per cent. My personal feeling is that you need to have a local partner in a market like India. You need to have a great distribution network. I think a strong local partner will always help. The local partners are the ones who are driving it. The foreign partner can bring in global best practices, best products, right pricing strategies and insurance knowledge. How are you dealing with scams in the agriculture sector? The insurance company on ground has to be very strong. For us, as a reinsurer, we try to see how strong they are, how they are able to manage the scheme, do they understand what they are doing, and the pricing. Unfortunately, today in agriculture, pricing has been horrible because new schemes have come up. Currently, the most popular scheme is the 80-110 scheme, where your risk coverage or your risk transfer is only 30 per cent. You give a cover and in case your losses are below 80 per cent, the balance you repay back to the government. If the losses go beyond 110, the government steps in and pays the losses. So really the risk transfer is only 30 per cent. As far as we are concerned, I don't think that's the way insurance should work. Secondly, fortunately for us, when it is the 80-110 scheme, most companies don't come for reinsurance support at all because they know their losses are capped, they don't need reinsurance. As a result of all these, the pricing is horrible, and at that pricing we will never write, that's very clear. Why talk only about agriculture? For the insurance industry, the biggest problem is fraud – whether it is health or motor or agriculture. The General Insurance Council is now pushing hard. They are trying to get the companies together. The IRDAI came out with this concept of Bima Sugam – a platform where everybody shares the data on insurance. So you know whether there is any fraud. I think initiatives are coming out but the market is still at a stage where a lot of things need to be done. Why did the growth in the insurance sector decline in FY25? Typically, the industry has gone 12-13 per cent year on year. This year (FY25) it was 6.2 per cent. Two reasons – one, I would say is the fact that there was a change in the accounting. So, earlier long-term products, such as housing and motor, were accounted for the year they were taken. Now the Insurance Regulatory and Development Authority of India (IRDAI) has said it must be accounted for the number of years that it has to go through. For example, matching with your 15-year housing loan, if you take a 15-year home insurance product, then it needs to be accounted for over 15 years. So obviously, this being the first year, there was an immediate impact. Second, I would say that the premium in the property class of business fell last year, which we are hoping to correct this year. How do you see prices this year? This year, prices should hold up. So as reinsurers, we have also put in place different ways by which to control the prices from falling too much. We need to understand the market well. Sometimes people tend to take decisions without going through the entire gamut. Property is about 8 per cent of the total portfolio. So, for a company which is writing probably 35 per cent of its business in health and another 30 per cent in motor, compromising a little on that 8 per cent may not seem too big, but overall, the big losses that we expect here, we need to ensure that it is priced. India is that way a cat-prone country. Every year we have some kind of event happening. Climate change is a reality today. The kind of losses that we used to see previously, the frequency has gone up, severity has gone up tremendously. With all that, we need to ensure that the prices match up to those losses or at least to those risks we are taking… at least you have to provide. When the loss happens, you should have some buffer to pay out. Do you think a concept like sharing credit score should be implemented in the insurance industry? There have been some discussions at the General Insurance Council level that claims and the so-called frauds need to be reflected in a person's CIBIL (credit) score also. So it is not just about you missing out on an EMI payment, it is also about the fact that if you have done something fraudulently, it should hit you on your CIBIL (credit) score. Your investment income grew by 4.5 per cent in FY25. What was the reason for the slower growth? Typically, about 73 per cent of my book is debt, which is normally government securities or AAA-rated bonds. Close to 17 per cent is equity on a book value. Nearly 8 per cent is money market, which is FDs or liquid mutual funds, and about one per cent is alternative funds. This year (FY25), markets were pretty volatile and at some points, they fell drastically. We used those opportunities to buy. In FY25, the profit on sale of investments was comparatively lower. This is the reason you see the growth is only about 4 per cent. Your premium from the international business has come down in FY25. What do you attribute this to? The growth (in international business) has started. You need to have a very good credit rating to underwrite international business. Going forward, we will be growing our international book along with our domestic book. The growth will happen typically 10 per cent year on year. Currently, our domestic book is 75 per cent and 25 is international. We would like it to be 50-50 at some point. But in the short to medium term, it will remain where it is because internationally, economies are not doing well. We don't see growth. How about investment in new projects? Is it taking off? It is definitely taking off. Investments from private promoters and from the government in areas such as highways, bridges and metros, are definitely happening. People are happily focusing on the Environment, Social and Governance (ESG) side, and so a lot of investments are happening on wind and solar farms, which is very encouraging.
Indian Express
a day ago
- Business
- Indian Express
Post Operation Sindoor, we're looking at war insurance cover, says GIC Re Chairman
Operation Sindoor and the increasing use of drones in recent warfares has led insurance companies to explore the possibility of launching war insurance cover for corporates and people in border states to safeguard their investments in projects and lives there. The industry is also willing to create an insurance pool to cover defence assets provided the government gives a guarantee for the purpose, said Ramaswamy Narayanan, Chairman and Managing Director of General Insurance Corporation of India (GIC Re), the largest reinsurer in the country. Narayanan said every insurer and reinsurer will be more than willing to write the insurance cover. 'Some part of it they can retain, they can reinsure with us, we will have our own capacities for that,' he said in an interview to The Indian Express. Stating that going forward, people may start thinking about this cover, he said, 'If you see Rajasthan and Gujarat, there are some big investments and people who have put in those investments could be worried. There could be pressure from lenders as well as damages can happen. In a traditional cover, war is not covered and so you will need to possibly buy a war cover. So there could be demand,' he said. He said that he was waiting to see if somebody, especially those close to the border, would be interested in a war cover. 'I, however, realised that the time frame was small, and also people would have thought that looking for a cover when the event was ongoing would mean that it would be very expensive,' Narayanan said. When asked if anything changed due to the India-Pak conflict, Narayanan said nothing changed because it was too brief to make a difference. 'I was actually waiting and we had spoken to insurance companies and brokers that if somebody wants additional cover, we are willing to look at it,' he said adding that 'drone attacks have become a big challenge and it has been seen both in the recent conflict between India and Pakistan as well as the ongoing Ukraine-Russia war.' GIC Re Chairman said that while defence establishments in India are not insured, the industry can look to provide it just like it was done for nuclear facilities. 'Traditionally, it has never happened. I don't think even globally that is happening…. We could try, but the investments are huge. We need to have that capacity. We can manage it provided the government gives its guarantee. You charge a premium and you put it into the pool, and if for five years there are no losses, we can use the pool to pay as we would have created a kitty by then. However, if the loss happens in three months, then the pool is not enough and in that case, the government will have to say that their guarantee is there, and they will pay it off. If that kind of a thing is there, we know how to manage it for the government,' he said. He said that normally, when insurers cover and reinsurers back up, they would want to inspect the facility and see the risk management features before giving a price and a cover, but then the government will not want their facilities to be inspected by someone. It happened in nuclear (facilities). 'It was not covered and the government had kept it to themselves, and then later they asked us to issue a policy. We then scouted internationally for support because the cover was big. They (international partners) said that without an inspection they cannot do it (issue policy) and they would need to inspect (nuclear) facilities. We told this to the government, and they said no to it as it was a security issue. How can anybody inspect our nuclear facilities? So, then we created a pool with us and others putting their net capacities and issued a policy,' he said. He said the nuclear pool is small because it is only the government properties which are being insured. 'But now there is a demand, so we are looking into it (for expansion). In the budget, the finance minister also made an announcement about allowing private operators. We are still waiting for the fine print to come, in terms of how it will work. Once it comes, we will open up the pool for private operators also,' Narayanan said. 'If they are open to having their facilities inspected, I am sure there should be enough reinsurers to provide capacity. But if they want to keep it closed to scrutiny, then we can use the pool,' he said. On the impact of the Ukraine-Russia war, the GIC chairman said that the fallout was a sanction on Russia, which meant that getting products from Russia insured was a problem. 'We created a pool (currently around Rs 470 crore) by which we are providing capacity. So Russian crudes get insured under the pool. Then there are project cargo coming from Russia which gets insured under the pool. But there is a demand. Reliance Industries has been asking us to increase capacity because now they are importing more crude from Russia,' Narayanan said.
Indian Express
6 days ago
- Automotive
- Indian Express
Insurers may have to shell out money for cargo involved in 2 ship mishaps
The two recent ship accidents off the Kerala coast in the last weeks are expected to impact cargo insurance providers. While Indian cargo insurers had some exposure, the vessels involved were container ships carrying goods for multiple owners, which is likely to limit the impact on soft cargo premium rates. However, the vessel owners are expected to face higher costs, with increases anticipated in both hull insurance and protection & indemnity (P&I) premiums. Both vessels were smaller sized feeder vessels bringing import cargo containers to India, insurance officials said. Indian insurance market may have potential exposure under the marine cargo segment, GIC Re Chairman and MD Ramaswamy Narayanan said. 'On both these vessels the Indian cargo Insurers had exposure but since these were container vessels carrying cargo for multiple owners the likely impact on soft cargo premium rates will be minimal. However, for the vessel owners their hull insurance and P&I premiums will go up,' said Gaurav Agarwal, Vice President, Marine Speciality, Prudent Insurance Brokers. A clear picture of the value of cargo in both the ships are not known. Indian insurers reported a gross premium underwritten of Rs 5,535 crore in FY2025 in the marine insurance segment. Of this, Rs 3,940 crore was for marine cargo insurance. 'The first vessel MV Elsa 3 sank due to flooding in her holds and the latest one MV Wan Hai is still on fire with 18 crew members rescued and 4 missing, here the possible cause is dangerous cargo which caught fire which eventually spread due to high winds e.g. lithium batteries for EV's or hazardous chemicals,' Agarwal said. However, Indian insurers are unlikely to have any exposure in hull insurance — physical structure of the ships and machinery — of the two ships. There are three areas of insurance applicable to a cargo vessel — cargo insurance for insuring cargo, hull & machinery for insuring the vessel hull and equipment and protection & indemnity (P&I) which covers all possible liabilities which can happen on account of operating a vessel like pollution caused by oil spill. 'We are expecting no major impact on cargo premiums and on the shipping industry,' Agarwal said. According to GIC Re Chairman, as the vessel in question is foreign flagged, its hull and P&I insurance are not underwritten by Indian insurers. 'However, Indian insurance market may have potential exposure under the marine cargo segment. GIC Re, as a reinsurer, does not directly influence primary insurance rates, particularly in cargo lines that are not predominantly reinsurance driven. The impact on direct insurance pricing will be determined by the respective primary insurers,' Narayanan said. Hari Radhakrishnan, an expert with Insurance Brokers Association of India (IBAI) said the two events are disparate. 'One is a capsizing and the other is fire on board. Fires on container ships are not uncommon. The capsized ship reportedly sank due to ballast problem coupled with its structural age. To put the events in perspective, there are, at an average around 2700 shipping casualties and incidents each year. So, a couple of incidents near the Kerala coast does not indicate any pattern of higher casualty incidence or higher risk for ships passing through the shipping corridor, which has the potential of impacting marine premiums,' he said. MV Wan Hai 503, which caught fire between Beypore and Azhikkal ports, off Kerala coast on Monday, was carrying was sailing from Colombo to Mumbai. MSC ELSA 3, a Liberian container ship, sank off the Kochi coast on May 25 due to flooding, triggering a major environmental threat. The vessel sank with 640 containers, including 13 with dangerous cargo and 12 with calcium carbide. It was also carrying 84.44 MT of diesel and 367.1 MT of furnace oil. Marine insurance provides coverage for goods, ships, and other transport means against risks like damage, theft, or loss during transit. The policyholder pays a premium based on the value of the shipment and the associated risks. In the case of a covered incident, the insured files a claim, and the insurer compensates for the loss or damage as per the policy terms. Marine insurance can be customized to include coverage for specific routes, cargo types, or additional risks like piracy. This ensures businesses safeguard their financial interests during domestic or international trade.
Time of India
27-05-2025
- Business
- Time of India
GIC Re Q4 profit falls 17% as underwriting turns negative
General Insurance Corporation of India ( GIC Re ) reported a 17% decline in net profit to Rs 2,183 crore for the quarter ended March 2025, down from Rs 2,642 crore in the same period last year. The state-owned reinsurer's profitability was impacted by weaker underwriting performance, even as premium collections rose. GIC Re's combined ratio rose sharply to 103.56% in Q4 FY25 from 89.26% a year earlier, indicating a deterioration in underwriting efficiency. The company booked an underwriting loss of Rs 392 crore in Q4 FY25, compared to an underwriting profit of Rs 570 crore in the year-ago quarter. Despite this, GIC Re's board has recommended a dividend of Rs 10 per equity share for FY25. Gross premium income rose to Rs 10,367 crore during the quarter, up from Rs 8,724 crore in Q4 FY24. On the premium front, the reinsurer recorded an 18.8% increase in domestic premium while international premium declined by 7.8%. Domestic business contributed 75.25% of total premium in FY25. The company's solvency ratio, a key measure of financial strength, improved to 3.70 as of March 2025, compared to 3.25 a year earlier. However, investment income rose to Rs 3,930 crore during the quarter, up from Rs 3,036 crore last year. Live Events
Business Upturn
26-05-2025
- Business
- Business Upturn
GIC Re board recommends Rs 10 dividend for FY25; record date set for September 5
By News Desk Published on May 26, 2025, 20:21 IST General Insurance Corporation of India (GIC Re) has announced a final dividend of ₹10 per equity share for the financial year ended March 31, 2025, which represents a 200% payout on the face value of ₹5. The dividend is subject to shareholder approval at the upcoming 53rd Annual General Meeting (AGM). The dividend, once approved, will be paid within 30 days from the date of its declaration at the AGM. The Board of Directors also fixed Friday, 5th September 2025, as the record date to determine eligible shareholders for the final dividend payout. The board meeting commenced at 4:00 PM and concluded at 6:10 PM (IST). GIC Re also confirmed that the audit reports for its FY25 standalone and consolidated results were issued with an unmodified opinion by the joint statutory auditors. Disclaimer: This article is for informational purposes only. Business Upturn does not provide any investment advice or stock recommendations. Investors are advised to consult a qualified financial advisor before making any investment decisions. News desk at
