Bhargav Dasgupta: Pricing (for the industry) was freed up in 2008. We have grown well at a time when pricing has collapsed in a few segments, particularly in the corporate line. So one way to look at it is that underwriting losses were made up by investment income. But while the topline has grown at compounded annual growth rate of 17 per cent, the bottom-line, which is profit after tax has reduced by 12 per cent compounded. In the long-term you have to focus on underwriting profits because that’s the core of your business. If you earn a premium of Rs 100, you must make at least Re 1 as profit, which means your combined ratio (for measuring profitability in the insurance business) must be 99 per cent, but the industry is operating at about 118 per cent (and running at a loss). Unfortunately, it does not leave enough capital to scale up, invest, and add new innovative products. Companies that keep on losing money will gradually become less and less relevant. The industry has to focus on underwriting profit, this will benefit not only the companies but also policyholders.
Will predatory pricing kill marginal smaller players?
Anup Rau: When you are fighting for your market share I think the laziest thing to do is to compete on pricing or to compete on commissions. At some level it also displays lack of imagination, innovation and customer focus. Unless you actually revisit the way we look at customers, this will continue to be a challenge. Unless you stay focused on having innovative products and processes, and give the customers a better claims experience, this problem will persist.
What is your outlook on the industry?
Sanjay Kedia: There's always two sides of the story and what the policyholder says it wants is innovation. The regulator has allowed freedom in coverage to the insurance market, but the insurance market is yet to take up this opportunity and offer tailor-made coverage for different industries and customers. Corporate India tremendously benefited after de-tariffing from 2008. The premium rates drastically fell. But what has happened in the last couple of months is a very big shock. They are going through a downturn and there has been a change in terms of GIC-led reinsurance (rates), which has made property insurance more expensive, on an average a minimum of two times to as much as 10 times. Corporate India is saying that the regulator allows competition, but this takes away competition completely from the insurance market. Also the challenge for customers is that there is no competition, no coverage improvement and complain that claim settlement speed isn’t good enough. So with this, mistrust in the insurance sector has increased in last three months.
The regulatory sandbox, which IRDAI is experimenting with, how do you see it pan out?
Anuj Gulati: Time to time the regulator has allowed for some product innovation, but I don't think we have been able to take a big bang approach. That's where sandbox becomes interesting. It opens up avenues for bundling a whole bunch of services and newer ways of distribution with insurance companies. With new-age technology being available, it will also open up new distribution avenues.
Rau: At Future Retail’s Big Bazaar and other retail formats, customers can buy insurance at the billing counter. Somebody who is shopping can buy a product to protect himself or herself from mosquito-borne diseases. We call that a vector product. There's baggage insurance, where everything in the bag is covered. Innovation has been happening with respect to channels of distribution, more than for products.
Dasgupta: One of the products that we've got approval for is a motor insurance product, where you pay your premium based on the quality of your driving. It's not just about how long you drive—the number of kilometres but also the quality of your driving. And over the years, we've been experimenting with devices to figure out the quality of driving and correlate that with risk, in terms of claims.
Why is there mistrust when it comes to health insurance?
Gulati: Earlier when you went into a hospital to a TPA desk and said, I'm from insurance, typically the charges would be much higher. There is a realisation that as we account for a larger share of a patient’s hospital bill and their overall revenue, our ability to work with them and offer more standardized fare services improves. From the regulator's side, there's been a lot of work that has been done, in terms of permanent exclusions and so on. The grievances (from patients and hospitals) helps the industry review the products continuously and with the regulator, continue to standardise the product. There’s also a request to consumers –when you buy a product, please declare. Over declaration will not hurt you, but under declaration leads to unnecessary delay at the time of claim.
From the distributors’ point of view, what are the risks?
Kedia: Property risks (are high) because of poor fire safety. But business interruption losses are going up. As a thumb rule, I can say in the last ten years, two-third of the loss of the insurance market, for corporate consumers, comes because of the business interruption losses not because of the property damage. The need of the consumer is increasing on non-damage risk issues. The Coronavirus is an example of a pandemic risk. Also, customers are concerned about supply-chain risk issues. When a risk opens up in Japan (for example), businesses in India in spite of having carried out supply-chain risk analysis, say that if this issue continues they will run out of critical supply parts. Many businesses are at the verge of this supply-chain risk. This is a big opportunity for the insurance market. Cyber risk is the fastest growing insurance line across the globe. India will catch up. The new data privacy laws will create a very different level of demand. In the insurance market we will have certain areas of risk going away, but there are new areas coming up, particularly out of the sectors such as technology, litigation, and (simply because of living in an) interconnected world.
What innovations do we need to ensure that we don’t have lazy insurance in the country?
Rau: When it comes to any product or service, you're talking about the proposition which is very important. The second thing is, the buying or selling process has to be frictionless. Now, whether it's through technology or without technology, online, offline or using AI or not, it doesn't matter. For example, health insurance isn’t really attractive for the younger age group because the proposition is weak. Secondly, certain kinds of products, they are just not accessible easily. We did a survey on our customers using some health products on why they bought the product? The answer was because nobody else came to us, which is not a great place to be in. It means, we have a problem with the delivery of the distribution channel. So the conduit is the issue.