Similar to several insurers, even the SBI General Insurance has received commitment from its foreign partner Insurance Australia Group for additional FDI as a result of the Insurance Bill getting cleared by Parliament. Bhaskar J Sarma, MD & CEO, SBI General Insurance told Sandeep Singh that it will help the industry reach the hinterland and generate volumes. Excerpts:
While everyone is talking of deeper penetration as a result of higher capital availability from the foreign partner, how confident are you of it since the industry has not done much?
Capital is the most costly input and is critical in building your infrastructure and have a business plan in place. The penetration of general insurance is only around 0.8 per cent in India and that throws a great opportunity for everyone and that opportunity is attracting the FDI. This capital, however, has to work and has to generate return on investment (RoI) for which one has to go to the hinterland and that fact has been been proven in all kinds of businesses.
When are you getting capital from your foreign partner?
Very soon. Our partner has already committed and will raise its stake to 49 per cent. Since it goes through the FIPB (Foreign Investment Promotion Board) route, it may take some time but I am hopeful that it will happen in the first quarter of FY16. The process has already been initiated.
What on developing products for the masses?
To succeed, the product offering and its distribution have to be right. One will have to make products that are simple, easy to understand and also build credibility of the company. With penetration you get volumes and that brings down your claims ratio following which the prices can be brought down. The industry will also have to look at innovative products to cater to the masses and needs of a large category. For example — in case of the working population, while they have some health cover from their employer during the course of their employment, once he retires that is not available and also at the time of retirement, buying a health insurance gets very expensive. So to cover them a product can be structured where one can contribute into an annuity fund every month during the working age and build a corpus and that can then take care of the health insurance premium for post-retirement life.
Is the focus more on health insurance?
We want to give a push to it because in India almost 70 per cent of the expenditure on health is made out of one’s own pocket as compared to around 15-20 per cent in developed markets. Also the health expenditure inflation is around 18 per cent and everyone must have it.
Do you have differentiated products that cater to the needs to smaller towns and which are affordable?
We have some products. While I can’t say that they are very different from those which are there in the market but we are trying to build upon the credibility of the company and the brand. The personal accident policy is sold in large quantity. We have integrated it with the bank. So if one buys the policy, we send it by ordinary post because its a low cost policy. Also since it is integrated with the bank, so next day it is available with the bank and they can take a print out and give it to the customer.