Health insurers may get solvency leeway
SAIL aims at cutting loss to Rs 900 cr this fiscal

 
 
HEALTH INSURERS MAY GET SOLVENCY LEEWAY 
 
 
BY A STAFF REPORTER
 
Calcutta, June 17: 
Solvency rules are likely to be relaxed for health insurers. A decision in this regard is expected to be taken at a three-day meeting of the 24-member insurance advisory committee that begins on Monday in New Delhi.

The Insurance Regulatory and Development Authority (IRDA) — the watchdog for the insurance sector which will be thrown open to private players later this year after a gap of over four decades — has set tough solvency rules that require insurers to have a net worth of Rs 500 crore, a cash reserve ratio of 10 per cent, moderate levels of non-performing assets and three consecutive years of net profit.

“We will discuss the matter at the three-day deliberations. We will have to take a fresh look at the solvency norms for health insurance sector. We want to encourage growth in this sector,” said IRDA chairman N. Rangachary who was in the city to address a seminar on insurance organised by the Bengal Chamber of Commerce and Industry.

“Companies have to fulfil the tough norms we have set for entry into this business. But in respect of health, we have a facility to show some concessions. The section of the Insurance Act which deals with solvency provides the maximum limits and we have to decide the actual percentage,” Rangachary added.

The insurance advisory committee meeting is being held to give a final shape to the draft recommendations that will allow private players to break into the closed club of state-owned insurers. The final notification on the ground rules for the insurance sector is expected to be ready by mid-July.

“We will give final shape to the 14 recommendations which have already been announced. More recommendations will come up before the board at the three-day meeting,” the IRDA chairman said.

Health insurance penetration in India is distressingly low. Barely two million of the one billion people in India have some form of health cover. Mediclaim — the largest health policy cover offered by the General Insurance Corporation and its four subsidiaries — is actually a losing proposition with claim settlement amounts far exceeding the premium income.That will be the kind of dubious record that the new health insurers will be taking a hard look at in order to find ways to plug the rampant abuse of the system.

IRDA chairman said July 15 has been kept the last date for submitting applications by new companies for entering into all the areas of the insurance business. “By end October, we expect to issue the first licences to the new companies,” Rangachary added.

“We would like to encourage long-term players who are not driven by quick profit but by providing quality service to the customers. We would also like to see that the investments by these companies funnelled into infrastructure. Infrastructure projects are long-term projects. The government has to introduce long-term paper facilitating investments in infrastructure. The industry is starved of long-term investment avenues,” the IRDA chairman said.

Rangachary said there was a provision for granting exemptions to existing insurance companies to give them more time to comply with the accounting norm changes.

“At the moment, we have decided to give Life Insurance Corporation of India a year’s time to switch over to the new accounting norms,” he said..

P. K. Banerjee, special secretary (insurance), department of company affairs, said consumers are denied the choice of products in monopolistic situations. With the advent of new companies, there will be more products coming into the market and the customer would get better and comprehensive products at competitive prices.

“This will help the existing companies to take quick decisions and even delegate responsibilities to the operating level offices to create a quick delivery system for the customer,” he added.    


 
 
SAIL AIMS AT CUTTING LOSS TO RS 900 CR THIS FISCAL 
 
 
BY A STAFF REPORTER
 
Cacutta, June 17: 
The Steel Authority of India Ltd (SAIL) hopes to bring down its loss to Rs 900 crore during the current financial year. The public sector steel behemoth suffered a whopping Rs 1,700 crore loss during 1999-2000.

Addressing a press conference here today, SAIL chairman Arvind Pande said the company had already started making cash profit because of the buoyant market demand.

“If the same trend continues and our business restructuring is done, we should be able to turn the corner within a short period of time,” he said.

Leading the process of turnaround is Bokaro Steel Plant which is expecting a net profit of Rs 400 crore in the current year against a profit of Rs 120 crore last year. The plant, which contributes over 46 per cent to SAIL’s operational surplus, is set to record a profit of Rs 100 crore during the first quarter.

Pande said Bhilai Steel Plant, too, had made a profit of around Rs 90 crore last year while the other two plants at Rourkela and Durgapur made heavy losses.

“Our major problem is that the profit-making plants are suffering because they have to carry the loss-making plants. If the loss-making plants fail to turnaround themselves, the entire company will suffer,” Pande said.

The public sector steel major has plans to form two separate companies, one for flat products and the other for long products.

While the steel plants in Bokaro and Rourkela produce mainly flat products, the Durgapur and Bhilai plants are the makers of long products.

Pande said the concept of forming separate companies for two separate product lines would take some time to materialise.

“Our first task is to complete the business restructuring process to get out of non-core and non-profit making businesses,” he added.

SAIL has recorded a loss of Rs 182 crore during the first two months of the current financial year compared with Rs 419 crore in the corresponding period last year. The company’s budgeted loss for the first quarter is Rs 256 crore against Rs 617 crore in the same period last year.

The company, which has a staff of around 1.5 lakh, has plans to reduce the strength to less than one lakh over a period of five years.

Pande said the reduction in manpower would be through natural and voluntary processes.

Bokaro Steel’s managing director B.K. Singh said the plant would continue to be the most profit making plant in SAIL stable.

Since one of the two cold-roll mills of the plant is very old, it needs an investment of at least Rs 200 crore for modernisation, he said.    

 

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