General insurance products are yet to gain the same level of acceptance in India as life insurance products. The general insurance industry,which includes risk covers for motor vehicles,health,accident and home,has a penetration of just 0.71 per cent as against the global average of 1.5 per cent to 4 per cent. But the sector could see rapid growth over the next few years,according to Rakesh Jain,CEO,Reliance General Insurance. In an interview with The Indian Express,Jain said that products like home insurance are also likely to catch up. Excerpts:
General insurance is usually regarded as one of the most neglected areas in the insurance sector and its penetration in the country is very low. Your advice to investors?
In terms of priority,general insurance is still way down in the list. However,in most countries,insurance gain acceptance once average per capita income crossed $1,000. We in India are at a higher per capita income level but still our penetration level for insurance is low.
In my opinion,the general insurance industry in India is expected to grow thrice the GDP growth rate for the next 8 to 10 years,that is if the GDP growth is five per cent we expect the industry to grow at 15 to 20 per cent. The new set of existing and proposed regulations will also give a boost to the sector.
The general insurance industry had met finance minister P Chidambaram last year to discuss issues being faced by the industry. In that backdrop,what is your take on the Union Budget 2013-14?
Banks can now work as brokers. Permission to open branches in tier II and other smaller cities without regulatory approvals,selling of micro insurance products through banking correspondents are the three welcome steps which will help in deeper penetration.
Adverse impact of de-tariffing is now moderating and rates are improving. I believe today that the general insurance industry is well positioned for profitable growth in the future.
The industry has proposed capping on third party claims liability,time frame for filing of claims,special section in the Income Tax Act towards rebate for general insurance premium as some of the changes that will help the industry grow faster.
Home insurance cover has still not caught up in India to a large extent. Do you think it is as essential as a health cover?
Insurance awareness for home insurance in the country is poor and majority of customers still limit their protection to motor insurance,which is somewhat mandatory,or to some extent to health insurance.
I believe the social demographic pattern in the country in changing very fast and concept of nuclear families is picking up. People are leveraging many years income and salaries for buying and furnishing homes. In such a scenario, protection of the assets,borrowers is absolutely necessary and should be part of financial planning.
Premium rates for third party motor insurance have been hiked from April 1 but general insurers have sought a further hike. Your comments on the issue,given that many transporters are unhappy with the move?
Insurance cost for the transport industry is one of the smallest components of their operating schedule. It is nominal,compared to the other costs such as those on fuel or repairs. So it is difficult to understand why the insurance premium should not be appropriate to claims experience,when every other form of cost is being compensated.
The general insurance industry has suffered more than Rs 10,000 crore losses in the last two to three years only in third party Motor commercial vehicles insurance. Though the Insurance Regulatory and Development Authority has taken steps to correct the pricing in the last two years,there is still a significant gap between the loss experience and the premium paid.
Even for the last year,there was a loss ratio of 145 per cent and the premium hike was just around 16 per cent. We need an appropriate one time hike in the rates to bridge the gap and after that only normal increases linked to claims experience will be required. In order to have a healthy general insurance industry,risk based pricing is crucial.
What is your outlook for Reliance General Insurance for 2013-14? What are your plans for expansion and hiring in the next fiscal?
In the current financial year,Reliance General Insurance is growing at 19 per cent as against low single digit growth recorded in the financial year 2011-12. Over the last one year, we have taken various initiatives around product development,strengthening of product mix,channel development,technology enablement in sales fulfillment, risk management services and training and development. This has resulted in quality service delivery along with growth.
On business strategy in 2013-14,we will continue with growth through product diversification and service differentiators. We have approvals to launch various products and many more new products are being filed for approval with the regulator.
On the sales side we will like to increase our agency strength by another 4,000-odd agents over the present 10,000-plus agents. On the service side our in-house health and wellness team will have the most significant investments.
Overall,the employee headcounts can increase marginally,but we are looking at productivity growth of about 20 per cent.