Inadequate product pricing leaves the end user feel short-changed. An appropriate pricing, on the other hand, leads to innovations, better distribution and reach and reliable customer service. Tapan Singhel, MD and CEO of Bajaj Allianz General, in an interview with DNA shares his perspective on the general insurance industry.
Can you share industry trends?
General insurance industry has got more scope for business and growth. Some of the products like motor insurance are mandatory, hence the question is from whom you need to take a policy. But the penetration of the industry has to increase. We will have to reach out to the rural segment. Hence, there is a large scope for the sector to grow. One good thing is health business has started to pick up.
Your views on health insurance draft regulations.
The draft has been put up for comments from life and non-life insurers. Pricing is the first and foremost concern in health space. Escalating medical inflation is another area of concern. Hence, the pricing of the health products is not matching up with medical costs. As far as the insurer is concerned, the claims ratio for the industry is more than 80% and specifically for the group health, it’s over 100%.
From the consumer’s perspective, he should go for an adequate sum assured for health insurance plans. If the pricing doesn’t correct, the end consumer will suffer. Pricing has to be appropriate to meet innovations, distribution, reach and reliable customer service. Inadequate margins will not allow us to meet these requirements.
The life-time renewability that the draft proposes will really benefit the customer. The prices may move up again. If a customer buys a health cover late and there are no claims experience, insurers will price it right so that the services will not be affected.
The market share of the health business is on the rise. Our vision is to take the health portfolio further and get more focussed. We are the first company to set up an in-house third party administrator (TPA) and others followed. By doing so, we are able to provide that differentiation level. It will help maintain the cost at a minimum level and our pricing will be the best for customers.
Do you think revised pool will help in bringing down losses?
Because of the nature of the third party cover, the industry has been incurring huge losses for years. So, the regulator has taken the right step in terms of a declined pool. With the pool getting dismantled, losses have been booked by companies.It will help you understand the portfolio and how to manage it well. Earlier, your control of the pool was minimal.
There have been talks about limiting the liability on the third party cover. What’s your take?
Like airways and the railways, for accidents you have a cap, so the liability should be limited and the timeframe for filing should not be. For a consumer not so well-off, who earns an average income, claims will not go beyond `10 lakh. Also, the money is needed in the first year of death or disability itself. When you allow unlimited timeframe, the chances of fraud are more. I strongly believe that limited third party cover should be in place for avoiding fraudulent claims.
Your take on bancassurance.
These are cost-effective and powerful channels of distribution and play a very vital role in penetration. There are pros and cons of the bancassurance draft. We have supported the draft guideline from our side. But agents give personalised services to customers. They are still the backbone of the industry and cater to a different segment altogether.
What about agent dropouts?
The earning of the agent has to be good and lucrative. They are the ones who actually reach out to people and explain various products available in the market. If remunerations are not adequate to meet their livelihood, they may shy away. When the pricing of the product goes to unsustainable levels, the share of the distributor will also go down.
http://www.dnaindia.com/money/interview_agents-still-the-backbone-of-insurance-industry_1737245
