Consolidation in insurance

31 December 2004

Top performers show excellent growth. V. Jagannathan reports.

Chennai: All in all, though 2004 can be described as a sedate year for domestic insurance companies — both life and non life — the most important event of the year was the government''s decision to impose service tax on life insurance premiums.

Some of the significant events during the year were:

• The road map for ''detariffing'' (dismantling of administrative price control by the Tariff Advisory Committee) of motor insurance own damage (damage to the vehicle) cover was announced.
• The Insurance Regulatory and Development Authority (IRDA) revised the commission rates for non-life insurance intermediaries. The regulator also flexed its muscles against some insurance intermediaries by cancelling their licences and banning licensing of new corporate agents.
• Insurers were allowed to invest in derivatives.
• IRDA also sought views on creating an earthquake pool and hiked the limits on the terrorism pool.
• IRDA announced draft regulations for agency training institutes.
• The four government-owned non- life insurers implemented voluntary retirement schemes (VRS).
• The government appointed-consultancy firm gave its report on the restructuring of the four public sector non-life insurers.
• The IRDA came out with a draft micro insurance regulation to facilitate easy coverage and provide quality service to the insured.
• Life insurance came under the service tax net.
• The IRDA set up a Mortality and Morbidity Investigation Bureau.
• The definition of the term `rural area'' has been brought to par with the classification followed by the census department.
• The IRDA mandated that all the insurers should make in- house investment arrangements by the end of this year.
• The government agreed with the industry''s demand to increase the foreign direct investment limit to 49 per cent.

The year began with top level changes in the Bajaj group''s insurance outfits — Bajaj Allianz General Insurance Company Limited and Bajaj Allianz Life Insurance Company Limited. Kamesh Goyal was promoted to take the chief executive officer''s (CEO) mantle at the non-life company, while Sam Ghosh was elevated as Allianz''s country manager with dual charge as CEO of the life insurance company.

The year-end saw top level changes at the public sector insurers — National Insurance Company Limited, Oriental Insurance Company Limited, United India Insurance Company Limited, the Life Insurance Corporation of India (LIC) and the Export Credit Guarantee Corporation of India Limited. The year also witnessed the employees of government-owned, profit-making, non-life insurance companies going on strike to demand a wage revision that was long overdue.

At the individual company level, the Kolkata-based National Insurance Company grew at a scorching pace. For one month, National Insurance occupied the number one slot — in terms of premium income — in the industry, displacing New India Assurance. The latter subsequently regained the top slot.