Prudent risk pricing is the key

Q&A: Swaraj Krishnan, CEO, Bajaj Allianz General Insurance

While general insurance companies are offering discounts to woo customers, Bajaj Allianz intends to stay away from price wars and focus on good quality business. In an interview with Shilpy Sinha, Chief Executive Officer Swaraj Krishnan said that there was a need for the industry to have self regulation. Excerpts:

Private insurers have reported a decline in premium income in April. In your case, the decline was nearly 16 per cent. How do you view this development?
Traditionally, most corporates have their renewals planned on a financial year basis. So, the April premium figures basically show renewals of corporate business. On the other hand, indiscriminate pricing, coupled with a general slowdown affecting infrastructure projects and expansions, have directly affected property insurance. This has pulled the growth southwards for most of the insurers.

Moreover, Bajaj Allianz consciously did not enter into pricing war, prevalent in the corporate segment. The company believes in having growth with profitability, which is in the best interests of all the stakeholders. Insurers should write risks prudently. I hope prices would stabilise, so that everyone can price a risk properly. But we hope that the industry moves towards having self regulation.

If public sector insurers continue to offer high discounts, will your profits come under strain?
We place a premium on service and only service can be the differentiator in the long run. This has resulted in Bajaj Allianz General Insurance managing a profit of Rs 95 crore.

What is your strategy for growth in 2009-10?
We expect a marginal or flat growth in the first half. But the economic revival may come in the second half on the back of new policies coming into force.

At the moment, motor and health are our growth drivers and we expect the same to continue. Health is growing at above 30 per cent, while motor sales have come down due to the sluggish growth in the auto manufacturing sector. Also in motor, the premium paid in the second year is always less than in the first year. If there is a NCB (no-claim bonus) discount provided in the second year, the premium comes down.

Simply expanding reach cannot be an engine for growth. But we are looking at avenues, including tie-ups with financial institutions, to expand the spread to newer areas and customers. Bancassurance and agencies have been our largest channel and we will continue to focus on balancing the contribution of each channel to our total business.

Will Allianz increase its stake in the general insurance company to 76 per cent by 2016?
This is a matter to be decided by the shareholders, and I believe that necessary clarifications have been issued.

After 10 years, even general insurers have to go public?
It is a decision to be taken by the shareholders.

What will be the impact of the second phase of detariffing?
In the second phase of detariffing, the regulator has allowed insurers to file add-on covers to the erstwhile coverages present in the terms and conditions. We have also filed some add-on covers and an approval is awaited.

Health is one of the portfolios where insurers are facing high claims. How is Bajaj Allianz managing it?
In health insurance, generally group health business has always been incurring losses and the trend is witnessed in individual portfolio also, which has seen combined (claim) ratio exceeding 100 per cent. Hence, we need to be careful in this highly customer-centric portfolio. We manage this balance as all hospitalisation and travel claims are settled by an in-house health administration team and not by any third party administrator (TPA). This gives us an unique advantage in managing claims and detailed MIS for better pricing.

Did Bajaj Allianz see hardening of reinsurance rates?
We did not see any hardening in rates. Our portfolio with reinsurers has been very comfortable as we have been a profitable company since our first full year of operations. We underwrite risks very prudently, which helps us in getting better reinsurance rates than others.