|"Before liberalisation, the industry had a laid-back culture," says Bajaj Allianz General Insurance CEO Kamesh Goyal. Goyal should know; he was earlier with the public sector New India Assurance.
With only a few companies, there was no price competition. Distribution channels were few, and hardly any technology had been deployed. "Most of all," he says, "the industry witnessed no employee attrition at all."
But just five years of competition have turned the insurance industry upside down. Several new private sector competitors are in the fray, and employees and clients move from one insurer to another, keeping companies on edge. "With its all-India presence, Bajaj Allianz General has become a fertile ground for poaching," he says resignedly.
Goyal feels the growth in the industry has come from the motor, health and liability insurance segments. "All other segments have seen premium pressures and could not grow," he says.
Among private non-life insurers, Bajaj Allianz General is the most transparent. It not only publishes its full annual report on its website, but also puts out a white paper on claims settlement. "We would like an independent agency to develop benchmarks and parameters on the basis of which a customer can take an informed decision," says Goyal in a candid interview where he does not duck or skirt any questions.
Excerpts from an interview:
To what extent have private insurers increased penetration, launching innovative new products and quicker claims settlement in the last five years since the insurance sector was opened up?
On all these counts, the private players have fulfilled their promise. By tying up with banks, we increased the geographical penetration of insurance. We have a presence even in Kashmir through a tie-up with the J&K Bank, whose branches are spread over the entire state. After the recent earthquake, we received over 700 claims.
Innovative products like 'Silver Health', 'E-Opinion' and 'Wedding Insurance' have been introduced in the market. Ours is the only company that publishes claims statistics and ensures complete transparency; no other company in Asia does this. Our 24-hour call centre is available for claim registration, product enquiries and other services.
Can you compare and contrast the strategies followed earlier and now?
Bajaj Allianz General began its operations in 2001. Right from day one, our strategy was to focus on the retail segment. In the corporate segment, the company was always positioned on getting 100 per cent of the business risk and is the leader. In terms of policy renewals, retention is higher in the retail segment than in the corporate sector.
Bajaj Allianz General is the leader in some prestigious projects like the Essar refinery project at Hazira, the Konaseema power project and the Vivekananda bridge project at Kolkata. We recently issued a mega policy for all the Indian Oil refineries.
Some experts say that detariffing will benefit corporates more than individuals. Do you agree?
We feel that detariffing (scrapping of administered prices) will help insurance companies to come out with better products and allow segmentation of customers. This will help our retail customers more than any other segment. In the corporate segment, health and marine premiums would go up, but fire premiums would come down. Overall, though, there will be no premium reduction.
Detariffing is expected to increase the insurer's cost (with higher brokerage and commissions) while reducing premium income. How do you plan to manage?
It is very difficult to anticipate the scenario once detariffing happens. Profitability would be an issue. Better information and knowledge gathered over the years would stand us in good stead to manage this challenge. Bajaj Allianz General is looking at the business with a long-term perspective. Short-term ups and downs will be taken in our stride.
Do you think insurance brokers are ready for the detariffed regime?
Brokers are a new entity in India, and it is too early to comment on their capabilities, though I must say that some of them do enjoy a good pedigree.
What is the current market trend?
The industry focus is more on market share than on profitability. This means better risk profiling, and knowing more about risks through risk inspection and data warehouses. The growth in the future will predominantly come from the retail segment.
In which segment do you expect the highest growth rates?
Growth will come from infrastructure segments like ports, roads, airports and the power sector. Credit insurance is another area that has a potential for growth. In the retail segment, the motor and health insurance portfolios will witness tremendous growth, with increasing awareness and new products gaining ground.
A very large number of claims are under litigation…
The third party claims ratio is not good. In most cases, Bajaj Allianz General tries to go in for an out-of-court settlement after one-to-one discussions with the claimants and their advocates. We arrange conciliation meetings for compromise settlements. We have a healthy claim settlement ratio, 94 per cent for the financial year 2004-05. If we exclude third party claims, the figure would be around 97 per cent.
Do you get orphan claims - motor accident claims on the company without any policy details - on the presumption that the concerned vehicle is insured with the insurer?
We do receive orphan claims. When we receive such claims, we run a search on name, vehicle number, and other parameters to co-relate with the claimant. At any point of time, we have at least 200 such claims.
In the health sector, a lot of complaints are heard about third-party administrators (TPAs). How can these issues be resolved?
Yes, Bajaj Allianz General too has experienced this. We have decided to administer the hospital reimbursement scheme on our own by setting up a separate health administration team (HAT) equipped with doctors and paramedical personnel. HAT has tied up with over 1,400 hospitals and nursing homes across the country.
One of the complaints is that private players do cherry picking. They do not insure heavy vehicles. Even in the case of cars, they insure only own damage and ask car owners to take third party coverage from some other insurer…
Bajaj Allianz General was the first among the private general insurance companies to do motor insurance in a big way. Today, we insure more than 20,000 heavy vehicles every year. We also continue to issue third party policies on standalone basis.
How has the company fared during the first half of the current fiscal?
The table below shows our 2005-06 first half performance:
|(Figures in Rs crore except where indicated) ||2005-06 ||2004-05|
|Gross written premium ||622.24 ||405.08 |
|Net written premium ||353.37 ||221.25 |
|Profits before tax ||35.44 ||33.32|
|Profits after tax ||21.68 ||18.76 |
|Underwriting profit ||11.61 ||11.68 |
|Claims paid ||171.07 ||74.37 |
|Number of policies (in lakhs) ||22.00 ||8.80|
|Combined ratio (%) ||95.80 ||92.90|
|Total assets (Rs crore) ||857.52 ||592.07 |
|Assets under management (Rs crore) ||671.90 ||486.53|
During January this year the company has crossed the Rs1,000 crore premium figure.
It is said that private insurers are glorified reinsurance brokers because of their low retention capacity. Is the trend changing?
Bajaj Allianz General has a retention capacity - it is around 55 to 56 per cent. This is healthy and reasonably high for a five-year-old company. We strongly disagree with anyone who says that private players are glorified reinsurance brokers.
Could you do a SWOT - strength, weakness, opportunities and threats - analysis of Bajaj Allianz General?
Strengths: Strong promoters, best people with domain knowledge, all-India network, offering products across all lines, Strong IT infrastructure.
Weakness: Its all-India presence and good track record makes Bajaj Allianz a fertile company for poaching by other private insurance companies.
Opportunities: A vast, untapped potential for health insurance, geographical expansion. De-tariffing will offer differential pricing for our customers.
Threats: An industry where everyone focuses on increasing market share and aggressiveness greatly increases pressure on profitability.
Could you give me the premium break-up between tariff and non-tariff business?
|Line of Business ||%|
|Fire* (Property & Engineering) ||42|
|Health, Accident & Travel ||10|
Within the non-tariff business, which segment, is witnessing higher growth rates? What is the market size and what are the challenges?
The health, accident and travel segment is witnessing high growth rates, owing to several players' focus on the retail segment. The challenges that we face are loss-ratio control, reaching a geographically spread-out customer and dealing with fraud.
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