ONE of the largest local composite players, MCIS Zurich Insurance Bhd, is in the process of revamping its entire non-life sector, a move which will involve selective participation in future general insurance business.
Gone are the days when the main focus was on greater market share and growth in premiums. These twin factors are no longer considerations and what we want to do from now on is to single out specific portfolios in general insurance that are both practical and viable, its chief executive officer L. Meyyappan said during an interview.
For a start, the company that underwent a trouble-free merger and acquisition move in July last year, has identified three critical areas of business activity that will come under the microscope.
The three segments of non-life business currently being reviewed are health, motor and burglary.
Meyyappan said the health insurance portfolio was not entirely profitable at the moment as feedback showed that a claims ratio in the region of 100% was registered over the last six months.
So, we have decided to cut down on cashless hospital insurance card schemes. If the 100% ratio were not checked, bottom-lines would drastically be eroded and overall general insurance sector profits would be noticeably affected, he said.
This measure is also being taken to avoid not being able to meet solvency margins, a problem some companies are having to deal with these days.
Our intention is also to avoid having to ask shareholders to pump in additional capital which could easily be utilised for more constructive and profitable purposes, Meyyappan said.
On motor insurance, the company has detected a continuous increase in theft and own damage claims over the past six months and, as a result, the motor claims have hit the 85% level, something that is becoming a cause for serious concern.
If the acquisition of motor business and management costs and expenses were added, the total ratio would easily exceed 100%, resulting in a loss of profits, Meyyappan said.
So, MCIS Zurich has decided to check the motor business volume by introducing more stringent underwriting guidelines. One of the main guidelines relates to not accepting any targeted vehicles for general insurance coverage in future.
Future coverage of any motor vehicle must include added security features and failure to provide them will result in the company not accepting potential policyholders applications.
Among the principal security features being considered are - alarm systems, steering locks, satellite tracking systems and sand blasting of registration numbers on windscreens.
(For the six- month period from July to December of last year, the company recorded a premium income of RM217mil, an increase of 11%, with life premiums contributing RM151mil).
MCIS Zurich is projecting a growth of 15% in life insurance premiums over the next two to three years. However, in the case of general insurance, the growth rate may be moderate depending on the profitability of the business, Meyyappan said.
The third area of general insurance business being reviewed is burglary, a source of growing concern to the company as evidenced by the rising number of cases reported over the past six months.
The claims experience regarding burglary has also not been very positive, and this has led us to be more selective in that new strict underwriting guidelines have been introduced to check the rising trend in burglary claims, Meyyappan said.
He conceded that with such measures in place, the end result could be a slightly lower premium income for the company in the days ahead.
The plus point is that in the long run, we will definitely experience a more favourable claims experience and costs would be drastically reduced, Meyyappan said.
With the imposition of new restrictions and cost-cutting measures in place, MCIS Zurich is also introducing other new policies that will complement the companys aggressive move towards business-related changes in the general insurance portfolio.
For example, fire insurance, personal accident insurance and engineering coverage would feature prominently in general insurance business activities from now on, Meyyappan said.
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