Higher govt spending on infra crucial factor in sector’s revival: KG Krishnamoorthy

Our growth is closely linked to the GDP as both the rise in consumption and investment leads to an uptick in insurance demand. The government’s higher spending on infrastructure is an important factor and a lot of things are linked to it. Companies executing infrastructure projects relating to roads, ports, power plants need insurance. With a rise in infrastructure spend and overall economic growth, I expect the general insurance industry to grow between 15 and 20 per cent this year. By comparison the growth last year stood at 13 per cent and in the year before it was 9 per cent.

Do you see a significant change in activity and is business coming now?

Over the last two years, a lot of projects were stuck up. As they started to get clearance, some investment began on the ground. There is movement even in projects that were partly completed but then got stuck. While activity on these have begun, one thing that is still to come up is companies putting up new plants and investing in them. This is because many of them are still saddled with excess capacity.

Which segments are doing better and what has caused stress?

It is mostly the individual segments in the areas of health, personal accident and home that is doing fine and there is a better loss ratio. Last two years had not been good because of several natural calamities and it has resulted into rise in loss ratio. Ideally, it should lead to a rise in premiums but the competition in the market is leading to a situation where one can raise the premium. I, however, do not see this situation to continue forever and premiums will go up going forward.

While the e-commerce companies and their businesses have grown a lot over the last couple of years, how is it growing in terms of premiums for the industry?

Marketplace companies take two kinds of insurance — marine insurance and liability policies (liabilities relating to e-commerce companies). While the liability policies are still fine, there is problem with the marine insurance taken by these companies. While these companies take marine insurance to insure goods sent through couriers etc, against damages, insurance companies have been incurring high losses on this business. There is a lot of moral hazard as the goods returned are damaged and insurance is claimed on it. You don’t know where they got damaged.

As the pain for the real estate sector continues, are developers taking insurance cover for their projects?

Except for a few developers, most of them don’t take insurance and that is the sad part. If something goes wrong with the project then a lot of them will not have a way to recover their losses whereas if they take insurance then as long as it is legal and there is an insurable damage, they can get the money for damages. Now-a-days, in cases, where developers are constructing very tall buildings, they are taking the cover and also because of the rise in natural calamities, a lot of people are now taking it. While there has been some improvement, but still it’s very less and a lot of small developers don’t take the insurance.