Page 38 - Insurance Times July 2021

AN OVERVIEW OF

OPERATING EXPENSE

RATIOS OF INDIAN

NON-LIFE INSURERS

AND THE PRACTICES

RELATING THERETO

ABSTRACT:

The success of a venture depends primarily on the soundness and viability of its business model. At times even sound and
viable business models may fail, if they lack the efficiency in implementation of the model. There are several indicators of
efficiency. Expense ratio is one of them and it forms an important element of pricing. Hence defines the organisation's
competitive strength. Therefore expense ratio is always on the management's radar. Also in a regulated market it is one
of the important issues, attracting the regulatory focus. This write up presents important different dimensions of the
Operating Expenses of General Insurers in India. It is based on the Annual Reports for the year 2019-20 of 25 Indian Non-
life insurers. The study excludes GIC Re, ECGC and Agricultural Insurance Corporation. Few insurers are not included, due
to inaccessibility of their annual reports. A review of the overall and segmental ratios is attempted and the issues for the
attention of the Insurer's board and for the attention of the regulator are listed.

Introduction: Y Expenses relating to Reinsurance Operations

Insurers incur expenses of different types. Broadly they can Y Expenses relating to Investment Operations.
be grouped under the following heads. Y Other expenses, like expenses involved in raising capital
Y Expenses relating to Insurance Operations etc.

About the author Expenses relating to insurance and reinsurance operations
can again be classified into two categories
S H Gejji Y Acquisition cost (Commission and Brokerage)
Post Graduate in Commerce. - M.com Y Operating Expenses
Degree in Law. - LLB(General)
Fellow of Insurance Institute of India. - FIII In the interests of policyholders, Insurance regulator IRDAI,

38 The Insurance Times, July 2021