Key participants at the BS Insurance Round Table 2020 were unanimous in their views on predatory pricing in general insurance, with Bhargav Dasgupta, MD & CEO, ICICI Lombard, stating that the practice would kill competition.
Stating that since ‘detariffication’ in 2008, the industry had expanded at 17 per cent compound annual growth rate (CAGR) to reach a size of Rs 1.7 trillion in 2019, he said that the sector's profit after tax had declined by 12% on a CAGR basis during the same period. Dasgupta said the industry had to focus on underwriting profits and that there wasn't enough capital in the hands of the industry to build new products.
Concurring with Dasgupta, Anup Rau, MD & CEO, Future Generali India Insurance Company, said fighting for market share using outpricing as a tool was the laziest thing to do. He said the industry should revisit the way it looked at customer, and offer him a better claim experience, improve distribution channels and superior products.
Anuj Gulati, MD & CEO, Religare Health, whose firm is a standalone health insurer, said the country spent Rs 6 trillion on health care. In developed markets most of the health care costs were covered by the government or health insurers. That said, India is a very large market with several segments, and sub-segments, so there is an opportunity to dig wells deeper and focus more on building sustainable businesses, according to him.
Sanjay Kedia, country head and CEO, Marsh India Insurance Brokers, which serves over 5,000 companies in India, asserted that companies typically demanded innovation in coverage, such as tailor-made plans for the steel and pharma industry, as they had to compete on the global front.
Insurance players hail sandbox
An interesting fact thrown up at BS Insurance Round Table 2020 was that the Insurance Regulatory and Development Authority of India (Irdai) is only the third regulator, besides those in Singapore and the UK, to test the mechanism of the regulatory sandbox, in which new products and processes are introduced in the market on a pilot basis. In case the insurer is satisfied with the experience, the products become part of its regular offering, if not, the company can withdraw it.
Stating that the sandbox is a forward-looking development, Gulati of Religare said insurance was highly regulated, with guidelines governing product design, distribution, and fees payable, which was why a big-bang approach to product innovation was absent. In such a scenario, sandbox is an interesting development. The response to the regulator's initiatives has been overwhelming, with some 10,000 policies having been issued over a six-month period.
Kedia of Marsh said sandbox was progressive and created possibilities in product innovation, distribution, among other things. Concurring with him, Rau of Future Generali spoke about his firm's experience in using the Future Group's outlets to sell baggage and handbag insurance, and small-ticket covers (sachet insurance). Asserting that innovation needn't be limited to product feature enhancement, but could also embrace distribution, Rau said his company sold a staggering one million products through Future outlets.
Dasgupta of ICICI Lombard claimed that his company had five approvals for sandbox. Stating that India was the accident capital of the world, he said there were no products that incentivised better driving behaviour. One of ICICI Lombard's products is about improving the quality of driving. The vehicle is fitted with a device that not only tracks the number of hours a car is driven but also the speed and other aspects that have a bearing on safety. Based on the data generated by the device, ICICI takes a call on rewarding a good driver by lowering his premium, or maintaining it if there is no improvement in on-road behaviour.