Govt insurers score better in claims settlement

Government promoted non-life insurance companies paid higher claims in FY 2018-19 compared to private players, as per IRDAI’s latest numbers.

IRDAI’s annual report shows that the net incurred claims ratio (ICR) of the public sector non-life insurers stood at 103.46% compared to 76% of their private peers in FY 2018-19.

Incurred Claims Ratio is the net incurred claims to net premium. Simply put, it is claims received for the premium paid towards insurance policies in a year; hence, a low incurred ratio indicates healthy growth prospects and higher profitability in non-life business. Typically, a ratio of less than 100 indicates that insurers are making money from a segment.

Gurpal Singh Dhingra of Prudent Insurance Broker attributes this to stricter underwriting norms by private insurers and said that they are much more selective as compared to PSU insurers. Government promoted insurance companies indulge in risky business and end up making huge underwriting losses.

The underwriting losses of general insurance companies increased over 45% to Rs. 22320 crore in 2018-19 as compared to the previous year. The ratio of underwriting loss to net earned premium for public sector insurers, private insurers and standalone health insurers in 2018-19 was 33.34%, 6.10% and 7.26% respectively.

For PSU insurers, health insurance remained an unprofitable proposition, whereas private insurers fared better in this category. IRDAI data shows that the government owned insurers’ incurred claim ratio stood at 107.12% in 2018-19 and that for private insurers was 75.85%.

Among PSU non-life insurers, National Insurance has the highest incurred claim ratio of 109.94% followed by United India Insurance with 109.40% of incurred claim ratio in FY 2018-19. Among private players, only Edelweiss General Insurance reported incurred claim ratio higher than 100%.

On the other hand, DHFL General Insurance and Reliance Health Insurance have recorded an incurred claim ratio of less than 50%.

It will be interesting to see how the PSU non-life insurers deal with this situation and improve their underwriting practices.