Listing of non-life insurance companies on the bourses has brought back the industry’s focus on profitability, which for the past decade was driven purely by topline.

 However on the flip side, this will result in premium rates rising for individuals and companies.

Already loss making segments such as group health insurance (health insurance covers bought by corporates for their employees) have seen premium rates going up by 40-50 per cent.

 The other insurance segment that is likely to see a rise in premium rates is motor own damage covers.

According to industry sources, already the four public sector general insurers, who control more than half of the market share, are being less aggressive on group health covers.

Barring one or two players, all the general insurance companies continue to make underwriting losses (losses from operations) while some manage to report overall profitability from their investment book.

KG Krishnamoorthy Rao, managing director and chief executive officer at Future Generali India Insurance told Financial Chronicle, “With the lowering of interest rates, the investment income of the general insurers has taken a hit.

There is a need to bring in underwriting discipline among insurers.

Listing will bring in more transparency and investors will question if insurers continue to report underwriting losses, which will definitely contribute in improving profitability.”

“The main segments where insurers are making losses are group health and third party motor covers. Group health is already beg­un seeing an increase in premium rates. Now since motor third party rates are regulated, the rates on mot­or own damage will have to rise to compensate the lower premium rates in motor third party insurance policies. Even property covers are not under priced and will see an increase,” added Rao.

Since the industry was de-tariffed, insurers have been offering 30-70 per cent discount on motor own damage covers in various categories of motor covers. Said another head of a private general insurance company, “Private insurers had completely vacated the loss making group health business, which was largely being underwritten by public sector general insurers. Now with the four PSUs planning to list, there ma­ybe pressure from the mi­nistry to improve their bo­oks. So we are seeing that they are moving away from those risks which have adverse claims history.”

Listing will bring in compliance and improve the service levels of insurance companies, said an insurer. Prior to 2007, the non-life insurance industry was under tariff controls. The insurance regulator lifted price controls in 2007, which led to cut throat competition among insurers to grab high volume corporate covers.

As a result, for the past 10 years, companies have enjoyed steep discounts while buying insurance for their assets as insurers continued to offer steep discounts to grow their topline despite many of these sectors having adverse claims history.

As a result most insurers continue to make operating losses, but managed to register overall profits with the help of their investment book.

The country’s largest private non-life insurer ICICI Lombard General Insurance launched its Rs 5,700 crore Initial Public Offering (IPO) last month. It was the first IPO from the non-life insurance industry. On the other hand the country’s largest non-life insurer New India Assurance IPO has already got the nod from Sebi. The other three public sector general insurance companies—National Insurance, Oriental Insurance and United India Insurance Company will list next year.

The Rs 11,370 crore IPO of the country’s only reinsurer General Insurance Corporation of India (GIC Re) will open this week. State-owned GIC Re IPO is in a price band of Rs 855-912 per share. The IPO will open on October 11and close on October 13. Through the initial share sale, the national reinsurer will dilute 14.22 per cent of its post-offer paid-up equity share capital. Of this, the government will dilute 12.26 per cent stake and the corporation itself will dilute the balance 1.96 per cent, the company had said last week.