After a fall in its growth rate in FY06 to 31.7 per cent
from 74.3 per cent the previous year, private non-life
insurer Cholamandalam MS General Insurance Company Limited
(Chola MS), recovered a little last fiscal.
logged 41 per cent growth with a gross premium income
of Rs314.6 crore. The profit after tax stood at Rs12.4
crore and the underwriting profit was Rs7.5 crore after
factoring net claims outgo of Rs70.8 million.
the first quarter performance of Chola MS, located literally
on the Coramandel coast in Chennai, is certainly creating
ripples in the industry if not waves. The company accelerated
its premium earnings to Rs147.93 crore up from Rs79.80
crore made during the previous year''s corresponding period.
Chola MS wiped out all its accumulated losses.
The company, a 74:26 joint venture between $2-billion
turnover Murugappa Group and Mitsui Sumitomo Insurance
group, Japan, literally located along the Coromandel coast
is making waves in the industry with its resurgence.
one looks at the figures in the light the rumours that
floated in the market in the recent past-like promoters
exiting the business, and also the drastic cut in the
fire and engineering insurance rates early this year,
Chola MS'' performance is quite impressive.
the current year Chola MS has fixed a target of Rs600
crore premium income, nearly 91 per cent over last year''s
achievement. And by 2010 the goal it hopes to become a
Rs1,000-crore premium outfit.
this ambitious targets, M Anandan, managing director and
his lieutenant S S Gopalarathnam, president, operations,
are hard at work to overtake other private sector insurers
like another Chennai-based insurer, Royal Sundaram Alliance
Company Limited, that belongs to the TVS group.
fiscal first quarter Chola MS lagged TVS group''s Royal
Sundaram by Rs75.48 crore. At the end of June 2007, Chola
MS has reduced the lead to just Rs19.87 crore. While Chola
executives expressly don''t say so, it is evident that
they are itching to overtake Royal Sundaram.
interesting, Chola MS'' resurgence is happening under three
Murugappa Group veterans who are not from the insurance
industry. A chartered accountant by qualification Anandan
headed the group''s non-banking finance company Cholamandalam
DBS Finance Limited before he came to Chola MS in April
cost accountant Gopalarathnam has been in finance function
as well as selling steel tubes for Tube Investments of
India Limited. Later he became the Group''s vice president
(corporate and strategic planning) before he moved to
the insurance company in 2002. And Shivkumar Shankar,
senior vice president, retail was earlier general manager,
marketing at Tube Investments.
was nothing to unlearn. All we had to do is to transplant
the shop floor work practices to office," says Gopalarathnam.
The factory practices-delegation of authority at all levels
and working as a team, were adopted by the insurer. For
instance, the underwriters have been authorised to accept
risks up to certain levels. Similarly the culture of teamwork
towards the corporate goal is being practiced amongst
of the growth and ambitious targets employees say the
work environment in Chola MS is peaceful without much
pressure. This coupled with the growth story has enabled
the company to lure talents from competition.
the business front the company decided to change track
and become intermediary friendly.
Gurpal Dhingra, vice president, south, Prudent Insurance
Broker Pvt Ltd, "Earlier Chola MS was focussing on
direct sales and didn''t encourage brokers. Now the situation
change expressed by brokers is that the company is actually
transacting insurance business, underwriting risks. Earlier
the company was conservative in accepting risks. "Today
the company not only underwrites risks but also suggests
the corporates ways to minimise chances of a loss,"
remarks Yash Parashari, assistant vice president, Marsh
India Private Ltd.
its sister company Chola MS Risk Services Limited, risk
minimisation consultancy services are offered to the clients.
In some cases the insurer gets business from clients of
the risk management company. (See: Reducing
risks for policyholders)
are in retail
However, the company''s growth details largely lie in its
retail strategy. The start of last fiscal saw the decision
to beef up its sparse branch network numbering 18. Last
year 47 new offices were added. In the first three months
of this year the company added 10 more branches taking
the total to 75. The plan is to have 100 branches by this
year end and 300 in the next three years.
growth in branch network naturally led to increase in
the company''s agency force to 2,000. In addition Chola
MS developed 600 people strong new cadre-direct sales
second strategy is signing up with vehicle manufacturers
or dealers to become their preferred vehicle insurer.
With two such agreements in its bag, one with Toyota Kirloskar
Motor Private Limited and the other with Hyundai Motor
India Limited, Chola MS is confident of working similar
pacts with Honda, Mahindra & Mahindra and also with
one of the two largest car manufacturers in India.
companies like National Insurance Company Limited has
struck similar deals with two-wheeler players, Gopalarathnam
says that segment is underpriced and the company is not
interested in tie-ups.
fiscal Chola MS earned Rs97 crore selling motor insurance,
up from Rs52 crore earned in FY06. With the formation
of separate pool for motor third party risks, the company
is now going all out to insure commercial vehicles. For
the current year the company has targeted Rs240 crore
topline contribution from motor business.
the third quarter onwards the company will be focussing
on growing its Rs38 crore health insurance business further.
The target from retail business for the year is Rs400
crore a steep increase from previous years earning of
third part of the retail game plan is increasing the number
of bancassurance partners presently the weak link. The
company has just one major bank and couple of cooperative
banks and hopes to sign two more bancassurance soon. Group
company Chola DBS Finance Limited sells the insurance
products through its outlets.
advantages of the retail business are many. Firstly, while
the per ticket risk exposure is low, the premium retention
would go up placing more money with the company for investment
opportunities. During FY07 the company''s net retention
ratio (net premium / gross premium) went up to 0.50 from
0.44 the previous year. Secodly, there will be more stability
in business unlike the corporates which switch insurers
based on the rates.
the investment front, the company earned Rs15 crore last
year from its investment portfolio of Rs257 crore. During
the first quarter of the current year the investment book
size went up by another Rs60 crore and the company targets
Rs22 crore as investment income for the year.
the ''J&K'' corporates
When Chola MS officials say that they are looking at J&K
corporates it does not mean companies in Jammu and Kashmir
but Japanese and Korean (J&K) companies operating
in India. Barring Maruti Udyog Limited, the Murugappa
company is the lead or the sole insurer in the J&K
separate strategic business unit (SBU) is busy strengthening
the company''s leadership position in this segment. Earning
Rs30 crore last year (prior to detariffing of fire and
engineering lines) Chola MS is confident of increasing
the pie to Rs40 crore this fiscal.
to the business mix, Chola MS underwrites small and medium
sized risks where retention could be high compared to
writing large risks. It is the sole insurer in nearly
70 per cent of its corporate accounts; have leadership
position in 18 per cent and a junior partner in 12 per
MS wants to be known as a dependable and consistent insurer
in the corporate world. To a large extent it has succeeded
in building this brand equity. At a time when many private
non-life insurers cancelled their loss making corporate
group health insurance policies midway post fire and engineering
insurance detariff, Chola MS is perhaps the only private
player not to do that even with one policy.
company is gearing itself to meet the fresh challenge
of custom design policies by going in for a new core insurance
to Gopalarathnam, the new solution is to enable custom
design policies and also to mine varied data to arrive
at a premium rate. "We plan to launch around 25 new
policies in fire, engineering, motor and workmen compensation
portfolios," he adds. (See: Chola
MS General Insurance looks for a core insurance solution)