King of Reinsurance

Orissa-born Ajit Jain is the key lieutenant of legendary billionaire investor Warren Buffett, the Oracle of Omaha, report Sruthijith KK & Shilpy Sinha

Afew years after Ajit Jain went to work for Warren Buffett, the legendary investor wrote to his parent in New Delhi, asking if they had one more son like him at home. "Of course I knew the answer before writing. There isn't anyone like Ajit," Buffett recalled in his annual letter to shareholders in 2007.
Jain's parents were naturally overjoyed. "To my absolute embarrassment, they framed that letter and put it right in the middle of the living room. I had to put my foot down and get that out because it was so awkward," 59-yearold Jain, among the most successful business executives to be born in India, told ET.
Buffet, the world's most successful investor and third-richest man, has been showering high praise on Jain in his famous letters to investors year after year. "Even kryptonite bounces off Ajit," he wrote in 2010, describing the outsize achievement of the Orissaborn executive, who heads Berkshire Hathaway Reinsurance Group, a giant business that is at the heart of Buffett's sprawling empire.
Jain, the Superman of Buffett's world, has been for years been considered a leading contender for the ultimate prize at Berkshire Hathaway, indeed anywhere in the business world today—the job of the CEO of the diversified $136 billion group, succeeding 80-year-old Buffett.
"I truly believe I have the best job in the world," says Jain, whose friendly and unassuming manner can fool people into underestimating his wisdom, stature, and achievement.
If little is known about Jain in his home country despite his stellar achievements, it is because he is reluctant to talk about himself. "The real story is about Berkshire and our insurance business, but ok…" he hesitatingly said, relenting to ET's repeated probing about the life and times of a towering business figure.
He says he has been extremely fortunate to be working with Buffett. That is why he hasn't budged from the reinsurance division he joined in 1986. "The opportunity to work for Warren is like winning a giant lottery. Quite honestly, no amount of money can substitute for working for a boss for whom you have the utmost respect, almost to the extent of worshipping him; who has treated you more than fairly; who you have learned a lot from," he said, letting us in on why nobody in America has been able to poach away Buffett's prized warhorse.
How does he react to the praise the world famous investor heaps on him? Does it distract him, and does it spawn jealousy among his peers? "He is very kind with his words. I wish I do something to deserve it some day," Jain says, meaning every bit of it.
But Jain says there is no jealousy among other CEOs of the group or his peers. "That is certainly not the Berkshire culture. We are a collegial group. Each one runs his group with no interference from others. On the contrary, I certainly see a lot of my colleagues celebrate and genuinely compliment me in terms of what Buffett has to say."
Jain was born in Orissa, but his roots are in Rajasthan. He graduated from IIT Kharagpur in 1972. Having the IIT name on his resume opened a lot of doors initially, he says. For his first job at Tata Steel Company, and then in securing admission at Harvard Business School for an MBA.
But he says he wouldn't recommend any 16-year-old spends five years growing up at an IIT. "It's tough work, good discipline to train your mind early on," he says. But IIT Kharagpur was a godforsaken place in those days, with no women and terrible food," he says, laughing.
Subsequent to HBS, Jain worked at McKinsey, where his boss was one Mr Goldgerg, who subsequently moved to Berkshire Hathaway. "Buffett told him to find some people to join the new insurance business he was planning to enter. Goldberg, being a lazy guy, instead of doing a proper search, called his flunkey at McKinsey who had been useful in carrying his bags. That's how I went to work at Berkshire," Jain says. That operation would grow to become one of the largest insurance businesses in the world.
Jain says Buffett, his boss of quarter of a century, is an easy and flexible person to work with. "You get what you see. He is a very simple, down-to-earth person with very simple tastes. He loves what he does, enjoys his work, loves where he lives… He is just happy where he is."
Buffett looks for managers with a solid track record, Jain says. "He is looking for managers who love their businesses and love their work more than they love the money. People who have delivered over a meaningful period of time." Buffett especially watches out when he buys companies, Jain says. "When he buys businesses, he looks out for this. Because when someone sells a business to him, he gets a big cheque. If he loves the cheque more than the business, that manager is gone, and Buffett is not getting what he thinks he is buying." Jain says he doesn't worry about the succession issue one bit. "If you watch Buffett, he has more energy at his age than I have now. So I don't worry about the succession issue because I don't think about it at all," he says.
If a marquee building like the Sears Tower, once the tallest building in the world, wants to buy insurance, an insurer has to take on a huge deal of risk. Or if a massive sporting event, like the 2002 Winter Olympics wants to buy insurance, a year after 9/11 , you need to structure an extraordinary policy. If a high-profile baseball player wants to insure his health for the next ten years, days after signing the biggest contract in the history of the sport, you need to master the idea of risk to be able to write out a policy.
It's an esoteric world inhabited by the elite few of the financial services industry. The risks are enormous, and so are the rewards. Ajit Jain is the emperor of that world.
"From a standing start in 1985, Ajit has created an insurance business with float of $30 billion and significant underwriting profits, a feat that no CEO of any other insurer has come close to matching. By his accomplishments, he has added a great many billions of dollars to the value of Berkshire," Buffett wrote in 2010 in his letter to investors. With that kind of a track record, and impressive recommendations from a man admired by investors and businessmen, Jain seems set to take on any job, and any risk, in the world.
Board to Support Ajit for CEO: Buffett
NEW DELHI Berkshire Hathaway CEO Warren Buffett said directors would support Ajit Jain as the company's next head if the reinsurance executive decided to seek the post. "He loves what he does, he's not looking to take my job," Buffett said yesterday at a news conference in Bangalore. "If he was, the board of directors would probably put him in there in a minute." "Ajit has probably made a lot more money for Berkshire Hathaway than I have," Buffett said in his response to a question about whether Jain, 59, would succeed him. "I really feel about him like I would a brother or a son." — Bloomberg

MAN WITH MIDAS TOUCH: Ajit Jain, CEO, Berkshire Reinsurance

Policyholders Across India Picking Cashless System Of Claiming Insurance Over Reimbursements In Currency

Policyholders preferred the cashless system of claiming health insurance last year to cash reimbursements, making a deeper dent in the coffers of insurance companies, a study recently released by the Insurance Information Bureau (IIB) shows.
In 2009-2010, insurers had to fork out an average of Rs 25,384 per medical claim under the cashless system in comparison to the average of Rs 13,865 paid through cash reimbursements. The difference of 83%, some say, is a clear indication of what policyholders favour.
"More and more people are preferring to go for the cashless form of settlement. Nobody wants to pay from their pockets when such a facility is available," said Sudhir Sarnobat of Medimanage Insurance Broking, adding that that "the expenses involved today are huge".
Another reason for the disparity, Sarnobat explained, is that "these days, policyholders do not want to waste their time and energy on recovering money through the lengthy procedure of reimbursements".
Interestingly, the difference in the two forms of settlement has risen significantly in recent times. In 2008-2009, insurers disbursed an average of Rs 25,736 through the cashless method, although the figure for the reimbursement system stood at Rs 19,033—a disparity of about 35%.
Dr Dinanath Vedpathak, an insurance analyst, said: "The huge jump in the cost of cashless claims in the last one year has justified the introduction of Preferred Provider Network by public sector insurance companies. The figures show that earlier…there were no checks and balances to curb the fraudulent practices adopted by some health service providers."
According to the IIB, the preference for the cashless procedure extends across all 22 types of diseases considered for its study. In the case of arthropathic and mental disorders, the claims settled through the cashless system was more than double of that paid through reimbursements. For 11 other diseases, it is more
than 50%.
A senior official from an insurance company said, "Cashless may be the preferred form of settlement, but it comes at a price for the policyholder. Many hospitals have different rates of treatment for cashless and reimbursement insurance policies. If the cost of treatment is higher under the cashless procedure, the consumer has to pay for it in the long term as insurance firms increase the annual premium."
Significantly, the study shows that the highest number of medical claims in 2009-2010 originated from hospitals that fall under Category A; meaning, from hospitals that have more than 25 beds and possess super-specialty facilities. During this period, a total of 47,374 claims were filed through Category A hospitals, for which insurance companies paid Rs 191 crore at an average of Rs 40,504 per claim.
Meanwhile, the average claim doled out for Category D (less than 15 beds with single specialty facility) and B (15-25 beds with multi-specialty facilities) hospitals was higher—Rs 41,602 and Rs 41,491, respectively. The number of claims originating from these two types of hospitals stood at 8,094 and 19,614, respectively.
Note:
All claims paid in rupees
Hospital A: More than 25 beds and super-specialty facilities B: 15-25 beds and multi-specialty facilities C: 15 beds with single or multi-specialty nursing home D: Less than 15 beds with a single specialty facility E: Single specialty or day-care hospital