Benchmarking Indian General Insurance Firms

This paper determines a set of marketing, financial and operational variables to predict benchmark financial strength of general insurance firms in India. It incorporates qualitative inputs from practicing managers and industry experts before carrying out quantitative modeling and analysis. We collect, compile and analyze the key financial, operational and business data of eight Indian insurance firms. The NAIC IRIS ratios method was used to obtain an initial risk classification. Linear regression and logit techniques were thereafter applied to estimate the significant factors (direction-wise and magnitude-wise) which influence insurer solvency. The results suggest that the factors that most significantly influence Indian non-life insurers are lines of business, the firm's market share, the premium growth rate, the underwriting performance and the claims incurred. Further, the factors which have the strongest effect are market share, change in inflation rate, firm size, lines of business and claims incurred. The paper provides insurers with easy-to-use operational and marketing indicators to benchmark their solvency risk. It will lead to competitive goal setting for continuous improvement. Estimation of appropriate market/economic parameters can be a useful input for regulators