& #39;Innovation To Prop Risk Sector & #39;

A report prepared by Fitch Ratings shows that the Indian insurance sector is expected to register a very high rate of growth in the next couple of years. The growth will be propelled by factors like new and innovative products, better services, open and transparent environment, retail reach and branding strategy of the insurers.

Distribution of financial assets of household sector reaffirms the growth potential. A substantial amount of financial assets of the sector is kept idle as cash which if tapped can fuel growth, said the report. The study also indicates that allocation to insurance in the sector can reach 20 per cent.

 

Fitch Ratings India feels that while insurance fuels growth of an economy, the industry failed to realise the full potential so far. It is characterised by low penetration, high premium, low returns and poor service.

Lack of innovative products prevented adequate growth of insurance in India. Indian insurance companies, the report says, thus far created products and tried to find markets rather than design products as per market requirements. While perceived risks varies in number, lack of tailor-made products prevented higher penetration, said the report.

According to the study, branding will assume importance and insurance companies will need to strive for greater customer focus, regardless of whether the customer is the end user of an intermediary.

The global insurance industry is witnessing a period of consolidation and companies are trying new methods of making brand equity serve their purpose. Further, with Internet redefining the way it does business, brand proposition needs should be reworked. In cyberspace clear corporate branding is even more vital in the absence of physical presence and issues of trust and reliability are more important, the report read.

Insurance companies in India will need to leverage information technology to service a large number of customers efficiently and bring down overheads. Technology can complement or supplement distribution channels cost-effectively. It can also help improve customer service levels considerably.

New companies will need to use data warehousing, management and mining to gauge the profitability and potential of various customers and product segments and ensure effective cross selling, for understanding its customers better will enable the companies to design appropriate product, determine pricing correctly and increase profitability, the report emphasised.

With a little more than 20 per cent of the insurable population being covered, the potential is very large. However, only increasing retail reach can ensure increased coverage. While the existing players have a strong coverage, new players would require a number of years to achieve the same if they go on their own. Hence, of late, there was a number of tie-up between the insurance companies and non-insurance entities with established retail reach, said the Fitch study.