Listing of General Insurance Companies – How will It Affect the Policyholder?

Listing of any company on the stock exchange would imply increased public shareholding. In a recent decision taken by the Government, around five major public sector General Insurance companies are going to be listed with reduced share of the Government to 75%. The decision comes at a time when there is a lot of pressure on the 28 general insurers in the market. The direct premium income of non-life insurers registered growth of 13.81 per cent during 2015-16. This suggests a reduced focus on the core business income that must come from the underwriting procedure.

Public shareholding will tend to change this trend. It will also ensure better accountability of the insurance procedures adopted. It will enable the insurance companies to raise money from the market rather than depending entirely on the Government. However, the pricing of certain policies (especially the Group covers) might also increase, thus proving to be an important benchmark for the business owners. Let’s see the changes that a policyholder will experience till the end of this year when the general insurers are likely to be listed on the stock exchange:

1. Increased premiums in some policies (like group mediclaim)

  • Listed companies need to disclose more information as they are always under the direct gaze of the public and the Government. To prove their potential in the market, they need to make sufficient profits.
  • One of the ways to ensure increased underwriting profits is to reduce the ratio of the claims paid and the premium received. This can be feasibly done by increasing the premium of both the retail and the Group Policies.
  • According to reliable analysts, the Group and Retail Health insurance schemes are relatively underpriced as compared to other private insurers. So, the premium pricing would be adjusted accordingly to get viable profits.
  • This will also be done to remain at par with the private insurers whose claims ratio is just 60% as compared to the public-sector companies which end up settling more claims than the amount of premium received.

2. Increased number of Products

  • Underwriting profits form the core of the insurance business.
  • These are likely to improve through a public listing of insurance companies.
  • With the listing, the companies will be forced to work on their core business strategies rather than focusing on gaining profits only through investment returns.
  • With the new law, General insurance players, whether public or private will need to work on bringing in more quality insurance products for the consumer to sustain the competition in the market.
  • The areas of risk management and costumer acquisition will also require reassessment to reduce the underwriting losses which have been consistently on the rise.

3. Improved transparency

  • Public listing will ensure that the insurers try to bring in more discipline and accountability in the underwriting procedure.
  • The focus will shift from increasing the policy pricing to the needs of the policyholder.
  • This will, in turn, enable efficiency and transparency in the insurance procedures, reducing laxity in the claim settlement process.

4. Safety of investments

  • General insurance companies are growing at a rate of 25% every year which reduces the need to ask for additional capital from Government.
  • With the public listing, a policyholder’s investments are likely to be safer as there will be no dearth of capital.
  • The net reserves of the companies will also be sufficient to sustain growth.
  • So, one need not worry about the investments with the companies when they are listed.

From the above points, it is clear that the new law of listing of the public sector General Insurance companies will change the face of the Insurance industry. Even though prices might increase for some policies, the policyholder/consumer will end up better equipped and enriched by the changes.
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