Chennai: He is a mechanical engineer and a chartered accountant by qualification. And now he heads India's leading private general insurance company. That is Bajaj Allianz General Insurance chief executive officer Sam Ghosh in brief.

After working in an accountancy firm in Britain, Ghosh moved to Australia to join an Allianz group subsidiary. He was involved in setting up Allianz subsidiaries in the Asia-Pacific region (the Philippines, Malaysia and the Pacific Islands).

In 1998, Ghosh came to India to take over the Allianz representative office. He was subsequently involved in the tie-up with Bajaj Auto to set up insurance operations. ''The work is phenomenal, since the biggest challenge is to set up a green-field project. Very few CEOs have such an opportunity to set up a company from scratch in a new market. It is indeed very challenging,'' he says.

Ever since it started operations, the Rs 110-crore equity-based Bajaj Allianz has been notching up an impressive performance. ''We have earned a premium of Rs 130 crore during the first half of the current fiscal,'' says a proud Ghosh. Last year, the company closed its accounts with a premium of Rs 142 crore and has sold more than 8 lakh policies till date. ''The business generated from the Bajaj group is very negligible.''

While motor insurance forms a major chunk of its total premium income, Ghosh says his company is also a big force in the corporate/project insurance field, accounting for 35 per cent of the total premium. But Ghosh is silent on the company's underwriting results (the premium income minus claims outgo). Bajaj Allianz's total investment stands at Rs 200 crore.

With most of the new general insurers following the strategy of market penetration by accepting the co-insurance share in the case of corporate accounts, Ghosh says Bajaj Allianz will like to lead insurers wherever and whenever possible.

Excerpts from an interview:

It is said that non-tariff products (policies for which the Tariff Advisory Committee [TAC] does not fix the rates) offer insurers flexibility in bundling risk coverage and that it is better for new companies to go in for such products. Your comments.
Eighty-five per cent of the total general insurance market comprises tariff products. The non-tariff market is comparatively small, but growing fast. Bundling non-tariff products in terms of risk coverage as well as premium rates is not advisable.

Should the TAC stipulate the premium rates? Don't you think that de-tariffing or liberalising will cause anarchy in the market, thereby risking the policyholder's money or risk coverage?
The IRDA [Insurance Regulatory and Development Authority] is taking the initiative to de-tariff commercial vehicles. Insurers are not happy with the July 2002 increase in motor premium. The customers feel that they are in some cases being treated unfairly by the insurers. We feel that de-tariffing will go a long way in minimising the losses suffered by general insurance companies on the motor portfolio. De-tariffing will result in a premium competition as is evidenced in the marine market; the customer ultimately will get the best price for the risk being insured.

On the competition from other insurers and your marketing strategy…
We are facing a close competition in the retail as well as corporate business. We want to concentrate on both retail and corporate business so that we have a balanced portfolio. We want to create a trained force of agents so that we can penetrate the market and offer more innovative products and services to the customer.

How far is pricing a deciding factor in choosing a general insurer?
Since most of the products are governed by tariff, pricing is uniform with all the insurers. The more important aspect while selecting an insurer is the value-added services offered by the company. Bajaj Allianz offers cashless claim settlement in some regions for motor claims. Our recently launched Health Guard offers cashless settlement of bills through the network of hospitals empanelled with third party administrators (TPAs). In case of a permanent total disability under the personal accident policy, we compensate for 125 per cent of the sum insured as against the 100 per cent offered in the market.

Security of their money and the insurer's ability to honour their promise weighs in the insured's mind. What is your solvency ratio? Your view on getting the company claims paying capacity rated by a third party agency.
Since we are a new company the rating agency are not looking at rating this year. We will be rated in the next two years.

Insurers are big investors. What is your investment philosophy? What are the company's total investments (equity, debt, government securities)? Your total investment income last year and the current year target and the trend? What is the yield rate?
Our total investments are over Rs 200 crore at this point. Our investment philosophy is as per the IRDA guidelines. Ninety-seven per cent is invested in government securities and AA+ rated corporate bonds, and the remaining 3 per cent in equities and mutual funds.

What impact does the sliding of interest rates have on your business plans? How do you take care of that?
The company aims to ensure that the underwriting results are positive and investment income is surplus, hence we are not relying on investment income.

On the payout side, what is your total claim outgo last year and in the current year?
The portfolio in which we experienced a major loss is motor insurance. The claims ratio under motor is approximately 75 per cent. At Bajaj Allianz we believe in speedy and hassle-free settlement of claims if all the documents required to settle the claim are correct. The claim settlement ratio at Bajaj Allianz is 85 per cent.

What is your reserve for unexpired risks? Can you specify your management expenses as a percentage of the total premium?
The company has set aside a reserve for unexpired risks. Ours is a two-year-old company and, thus, at a start-up stage. As such the company has high management expenses. At present there is no selling expense. The commission to the agents is paid as per the IRDA guidelines.

Can you tell us about your reinsurance programme and your risk retention levels?
The company uses AA and above-rated reinsurers for its reinsurance programme. The company has three types of reinsurance arrangements: a) 20 per cent is reinsured with General Insurance Corporation of India (GIC); (b) surplus treaty arrangement: this arrangement is with various reinsurers; (c) excess of loss protection per risk and for catastrophes. Besides these the company uses facultative reinsurance on large, whenever the reinsurer is ready to offer capacity at that particular time. All portfolios are reinsured with all or one of the above arrangements.

In respect of motor third party claims, what kind of claims settlement mechanism do you have?
We deal with third party claims with direct negotiations.

Can you tell us about your distribution set-up? The number of agents and the kind of business they procure?
Bajaj Allianz has an agency force of 1,000. The insurance advisors are mostly into selling personal-line products. Most of our business comes through intermediaries. We have a network of 32 branches across India and have plans to expand to 40 branches by the end of the next year.

Do you have tie-ups with banks, auto financiers or housing loan companies for business? Who are they, and what is the business generated from them?
We have sold more than 8 lakh policies through our distribution channels like banks, motor dealers, motor manufacturers, direct selling agents, non-banking finance companies, travel agents and insurance advisors. We have tied up with Bank of Rajasthan, Bank of Punjab and Jammu & Kashmir Bank for Bancassurance. We have tied up with Maruti Udyog under motor manufacturers and Amadeus, Galileo, SOTC, SITA for selling travel insurance policies.

How many employees does your company have? From which sector do you hire people?
We have 334 employees. We have employees from the insurance as well as the non-insurance sector. The employees from the marketing and the technical departments essentially have an insurance background.