THE WORLD OF GENERAL INSURANCE

THE WORLD OF GENERAL INSURANCE

Dr. Amarnath Ananthanarayanan, chief executive officer and managing director, Bharti AXA General Insurance (Bharti AXA), brings with him over a decade of experience in general insurance and consumer finance. Under his leadership, Bharti AXA has touched Rs. 500 crore in gross written premiums (GWP) in only its second full calendar year of operations in December 2011, making it one of the fastest growing insurance companies in India.

Prior to joining Bharti AXA, he worked at General Electric in various capacities. Ananthanarayanan holds a doctoral degree from the department of Economics, Rutgers University where he received the Sidney Brown Prize for the ‘Most Outstanding Ph.D. Student’.

Here, he discusses the emerging trends and challenges in the general insurance (GI) space and the strategy adopted by Bharti AXA to continue on the growth path.

You have over a decade of experience in the insurance sector. How do you think this sector has evolved?

Today, there are over 20+ players in the Indian GI sector, ever since the government opened up the market for private players in 2000. Over the years, the share of private players in this sector has gone up to 40 per cent. However, the market in India is still at a nascent stage with a contribution of less than one per cent to India’s GDP and thus, offers many players the scope to explore the untapped business potential of this sector.

With the advent of many private players, the GI sector has seen a paradigm shift in the way companies approach it. Many companies are coming up with unique propositions and customer-centric initiatives to sustain themselves in today’s fiercely competitive market. In fact, all these changes give the customers plenty of alternatives to choose from. The de-tariffed environment from 2008 has also benefitted the customer with much lower prices than the case in the past. The advent of government supported programs like the Rashtriya Swasthya Bima Yojana has given a huge impetus to the growth of health insurance.

The real challenge that the industry has been hit with, despite tremendous growth, especially with the creation and dismantling of the Motor Pool for third party liability for commercial vehicles, is one of non-existent profitability.

What are the emerging trends in the GI industry? What will propel the growth of this sector over the next two decades?

The GI sector is on a steady growth trajectory as it already has over 20 major players in India, the urban market being a key contributor for the sector. The insurance companies are adopting the latest technology to service their customers in a better way, while also making them aware of their customised services and products that would prove beneficial to them in the long run.

Companies are increasing their access points and distribution channels to spread awareness among people by informing them about the benefits of having an insurance policy. They are also adopting cutting-edge technologies like e-marketing and institutional marketing for a deeper penetration in the rural market.

The growth of the GI sector depends on brokers and agents, who are the face of the company. Primarily, they are entrusted with the responsibility of educating the under-informed customer in risk-management and risk-improvement, accept more reasonable policy deductibles and seek better policy coverage. Hence, well-informed agents and brokers will contribute to the growth of the sector.

Secondly, selling of insurance policies to customers through the online space is gaining a lot of momentum in recent times. Typically, customers buy insurance policies online for products like motor, travel and health. Hence, the upgradation of technology and telecom solutions will be the foremost factor in determining the future growth of the industry.

What are the major challenges that the GI sector faces today? Do you think any regulatory improvements are needed for this sector?

The complex procedures involved in the settlement of claims discourage many customers from buying a GI policy and is a source of lack of trust for the industry in general. This poses a great challenge for the sector, even though a lot of players are streamlining and expediting their claim processes. Hence, initiatives need to be taken in order to ensure that customers have a less complex and hassle-free claim settlement.

Another major challenge faced by the industry is the dearth of trained insurance professionals and technicians at all levels in India. To bridge this gap, insurance companies need to urgently pick and train professionals in the best of practices that benefit the company in the long run. And last but not the least the lack of profitability poses a serious challenge to the sustainability of this sector.

The regulatory changes that could be brought about to take the industry to the next level would include increase in FDI in this sector to 49 per cent, allowing flexibility in policy wordings for Motor & Commercial lines of business, creating overall framework for product creation rather than requiring approval for product creation, and possibly changing the service tax rules for promoting micro-insurance.

What strategy should insurance companies adopt to counter the rising competition and costs? Is dependence of technology an option that can be considered? How technology dependant is Bharti AXA?

At Bharti AXA, we drill down the problem one step below to a place where we formulate strategies for commercial and retail separately. While for commercial, we look at aspects like corporate client profiling, high premium retention, effective reinsurance negotiations and efforts to retain good commercial talents within the company, for retail there’s a fair amount of expectation and dependency that we repose on technology to automate processes as much as possible. Retail warrants high volume, low premium business where service delivery is majorly a differentiator. Furthermore, this business experiences frequent seasonal spikes, where technology only can play an effective role rather than deploying buffer resources and incurring cost. While treading a delicate line between consistent service deliveries at a reduced cost, we favour proper use of technology.

Bharti AXA knows the importance of technology, and appropriate investments are done on time to time basis to formulate a robust and effective platform for revenue and service delivery enhancement. Apart from normal IT spends, the IT team constantly augments possibility through newer technology or processes to achieve scalability and reduction in time to market and solution cost. Technology has always supported us in achieving a high growth in retail segment.

How is Bharti AXA’s marketing strategy different from that of other brands?

At Bharti AXA, our marketing strategy revolves around two strong pillars: customer insights and innovations to redefine the way the customer looks at insurance.
Our research- based approach has helped us create products, which have challenged existing market norms. When the customer told us that he believes that his health insurance should cover more illnesses, we created our Critical Illness Cover, which covered the most number of critical illnesses in the country viz. any GI player.

This was not all, we went ahead and offered the customer lump sum compensation upfront so that not only were medical bills covered like in any health insurance cover, but the customer was now empowered to manage lifestyle expenses like paying the child’s school fees, monthly EMIs for the house/car and even grocery expenses in case he/she had the misfortune to be diagnosed with a critical illness. This truly redefined the way a consumer saw health insurance from just covering medical bills to a ‘lifestyle protector’.

Our brand advertising pushed the creative envelope further and used humour for the first time in a category that did serious ads: the TV campaign, which ran during the 2011 Cricket World Cup created dissonance in the consumer mind by saying, “Please don’t diagnose this illness as my insurance doesn’t give me permission to get it”, underscoring the fact that with Bharti AXA, he can be safe as we cover the highest number of critical illnesses by any GI insurer.

What is the profile of Bharti AXA’s customer currently? And how do you see this transforming over the next few years?

Today, the average profile of our customers is predominantly male in the age group of 26 – 45 years. One of the main reasons for this is the financial independence of men belonging to this age bracket. Demographically, our target group resides mainly in metropolitan cities.

With the fast-evolving economic scenario, this is bound to change as there is a phenomenal increase in the number of working women in the country. We also expect a change in the demographic base of our customers with the economic growth benefits trickling down to rural, Tier II and Tier III cities along with an increase in the level of awareness among people in these regions.

Where do you see Bharti AXA in the next five years? Where do you see your growth coming from?

We are one of the fastest growing multi-line GI companies in India and have been performing phenomenally well since our inception in 2008. In fact, Bharti AXA is one of the few private players that have crossed the Rs. 500 crore (GWP) mark only in its second full year of operations. For the year 2011-12, we generated close to Rs. 900 crore of revenues. Keeping our current growth rate in mind, I see Bharti AXA as the preferred GI company in the country five years down the lane.

To maintain this growth rate for the coming years, our focus will be to capitalise the opportunities in the health segment. Considering the fact that rural Tier II and Tier III cities still require a lot of attention as the awareness levels in these regions are minimal, we aim to work collectively towards creating awareness about our healthcare policies especially in the smaller towns.

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