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General insurance companies in India will find it difficult to get themselves listed on stock exchanges as they are yet to achieve a turnaround.
According to Ashok K. Roy, Chairman and Managing Director of General Insurance Corporation of India, it will take some more time for general insurance companies to be able to list themselves.
“Today none of the insurance companies can come and get listed because they are still to make profits,” Roy said at an interactive session on insurance organised by the Indian Chamber of Commerce here on Friday.
Draft regulations
The Insurance Regulatory and Development Authority (IRDA), had, in September last year, come out with draft regulations for general insurance companies to raise capital through public issue of shares.
Once firmed up, the norms could pave the way for the Government to shed stake in state-owned general insurers.
As per the draft regulations, a company can come out with a public issue on completion of 10 years of its business. IRDA, had however, said that no general insurer should approach the Securities and Exchange Board of India for public issue without the “specific previous written approval of the IRDA”.
IRDA’s approval would be based on the applicant company’s overall financial position; its regulatory record; the proposal for issue of capital and the purposes to which the share capital proposed to be raised will be applied.
This apart, the IRDA will consider, among others, parameters such as embedded value, maintenance of regulatory solvency margin and compliance with the corporate governance guidelines.
According to industry insiders, it was quite difficult to adhere by these norms and go ahead with the listing process. “Today insurers are pumping in more money because of their low solvency, they hardly have any reserve and they are losing out on underwriting. May be in the next one-to-two years, once the market improves then they might be able to do this (listing),” Roy said.
Health Insurance
Insurance companies should look at increasing the pricing of health insurance products and negotiate with hospitals for bringing down costs in order to be able to cut down on their underwriting losses.
“Insurance companies cannot continue with 120 per cent claims from the health insurance business so they have to look for ways and means. They need to take a combination of steps, including increasing the price of products and bringing down costs to address the issue,” he said.
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