What is aiding positive sentiment in non-life insurance companies which have been outperforming in the last few days?
The advantage that non-life insurance companies have is that it has still not penetrated to the level it can, which means that as awareness goes up, as the market gets better, the industry’s penetration and the growth keeps going up. If you look at last 18-20 years, it has always had a double digit CAGR. From that perspective, the results you see in terms of growth are pretty normal. That is how I believe it will continue.
In the non-life space, have more avenues of growth opened up? Also, what is happening in terms of premium trends, specifically in the auto sector?
In the auto sector, the new car sales has dipped but if we look at the non-life industry, it is ensuring all the cars on the road therefore the new cars would be contributing about 7% to the entire premium. Let us say out of that 7% there has been 20% drop in terms of sales, that means that on a 100% basis it is just about 1-1.5% down. If you look at it on a standalone basis, it looks big that the new car sales is down 20% but at the level of the industry, condering all the new and old cars put together, it is not a big impact on the industry.
In terms of with the new traffic rules, what is the sense that you get in terms of hike that has happened? Has that been absorbed by the industry?
The impact of traffic is mostly on two wheelers because about 70% of them are not insured. Of the four wheeler, 80-85% are only insured in commercial vehicle basis . So, there was a hike in the insurance of two wheeler business happening the fines were announced. Personally, I feel that the fines were a good step by the government because most accidents on the road happen because of carelessness in terms of driving. There is a huge change in the driving behaviour and pattern since but as the states have diluted, the fine has lost its importance. Fines would have played a big role in terms of less road accidents and more discipline on the road which are critical compared to the kind of vehicle density we have vis-à-vis the infrastructure. We did see a good spike in two-wheeler insurance but in 20-25 days, it again started dipping down. It is better than what was earlier but much lower than when the fines were announced.
What segments are showing growth into the general insurance space besides autos? Which segments dominate your product mix going forward?
The awareness on health has really moved up, fundamentally because the cost of healthcare has been going up. When I was a child if I had a headache and fever, a stare from my mother would heal me. Today it costs Rs 40,000-50,000 to get treated which is good because if something has to be detected early, it should be treated. People are realising the importance of health and that is why health growth is faster than the other lines of growth in the business. The other upcoming line of business is liability, 10-12 years back nobody thought liability would become such a big issue but that is really moving up now. So liability, crop insurance, health are moving up. Auto obviously still holds its ground and contributes about half the business of the industry and that is how the growth will continue moving forward.
What is the share or the growth coming in from online market?
The online market contributes about 3% of the industry. Online market would typically be more transactional in nature like automobiles and health. Complex insurance like the factories or liability insurance are still being sold by distribution mechanism which we have. The issue with online is that the price difference for a customer who moves online to being serviced by a distributor is not valued at times. The role of distributor is more valuable. Also, looking at the numbers, the distribution market is still holding stronger and over 95% of sales is in terms of distribution sale.
What do you expect in terms of online growth?
Online growth will happen with new ways of insurance. For example, mobile insurance has picked up online. Travel insurance, too, has picked up a lot online. The online business growth is going to be created by new products. The new sachet based product which is going to redefine the product and distribution happening. So, it will not be eating much into the existing lines of businesses. It may into the auto and health, but online is predominantly going to create its own product and its own customer niche, which is very exciting. I already see that happening and picking up more.
Do you see at some point an industry with fewer quality players left? Also, do you see private players gaining market share from the government players at all?
In the first seven-eight years, the private players captured 40% of the market share and today, they are close to 50% of the market share. It is not about private or public sector, it is about well-run companies with good solvency and sustainable performance in terms of delivery, customer equation, customer service and profit. Companies that do all these well will sustain in the market because insurance is not a business which you do for couple of years. To enter into insurance business, you should have a horizon for at least 100 years, some of the biggest insurance companies in the world toda have an existence of 100 years. The companies which are well run, capture market share and also a good share of the profits. Also, customer grievance will be the lowest, and the claims highest. Companies which are not well would have high loss ratios, huge customer issues and would be slowly moving out in terms of the market that they have. This is how this is going to be moving ahead.
How are you are viewing the merger of three public insurance players the government is expediating? How it is going to impact the overall industry dynamics?
I am not the right person to answer this question because that is something which the government would be deciding and the public sector companies’ CEOs can answer this question much better. Whatever I know is from the news that I read and there are times when they talk of merger, there are times when they do not talk of merger. But any loss of company from the industry’s horizon is sad because insurance is a product which people have a lot of apprehension about. Good customer service orientation has to be there. Companies have to stand and they should do business in a manner in which they can sustain for a long period of time.
What is your outlook for the quarter with regards to the company’s growth and of the industry as a whole?
Insurance makes a huge difference to people’s life. A lot of people keep it on the backburner because the cost of insurance relative to the benefit when things go wrong is huge. The only thing I like to convey through your platform is that look at insurances at a personal level or a term insurance for yourself. It is critical. I have seen so many losses, so many families get destroyed when they are not insured, I feel very said because it does make a huge difference.