Many years ago, when I started working, my father gave me two important pieces of money-related advice. One, to start saving and two, to buy an insurance product immediately. I followed it religiously and today, I am reaping the benefits of it. Well, this story is not really about savings but about insurance. Back then, buying a life insurance was a must; however, health insurance was not a very popular concept then. While it has gained some amount of traction over the years, its penetration level is still low in India.
Out of India’s 1.2 billion population, more than 90 per cent of them need general insurance cover. Considering the low level of penetration, there is a good scope for growth in this sector, which the industry players agree with unanimously. However, there are multiple challenges like low levels of literacy, lack of profitability and challenges in reaching out to the uninsured masses, which the industry and the regulator is finding ways to overcome.
In this edition, we have with us leaders of two insurance companies – Milind Kharat, CMD, United India Insurance and Sandeep Patel, Managing Director and CEO, Cigna TTK Health Insurance Company Limited – who will be sharing with us details about the sector in which they operate, its main challenges and their company’s future growth plans.
WE ARE SPREADING THE MESSAGE OF INSURANCE BENEFITS THROUGH VARIOUS EDUCATIONAL INSTITUTIONS, MAINLY HIGH SCHOOLS AND COLLEGES – SAYS MILIND KHARAT, CMD, UNITED INDIA INSURANCE
Incorporated way back in 1938, United India Insurance Company, a general insurance company, has grown significantly after the nationalisation of the sector in 1972. For the FY 2013-14, it has clocked a premium of Rs. 9,709 crore, an increase of Rs. 443 crore from the previous year. With motor and health insurance as its growth drivers, the company has introduced some low cost innovative products for its customers. With over 16 business correspondents and 2,624 BC agencies, it will continue to focus on retail, SME and rural segments. It is spreading the message of insurance benefits across deprived population segments, especially from the rural sectors, and wants to ensure that they are appropriately covered with the right insurance solution.
The company aims to reach a premium of Rs.11,000 crore during the next financial year and plans to bring down the loss ratio and improve profitability. It has reengineered its processes to deliver better customer service by having high targets for claims disposal and tight turnaround time for claims settlement. In this interview, United India Insurance’s, CMD, Milind Kharat , talks to us about the level of penetration of general insurance in India, the company’s growth plans and way forward.
Penetration of general insurance is still low in India. What should be done to improve it, when compared to developed nations?
One reason why penetration level is low in India is because of low level of awareness. As far as the industry is concerned, we have been issuing advertisements. In fact, a media agency was engaged by IRDA for the same. As far as our company is concerned, we are spreading the message of insurance benefits through various educational institutions, mainly high schools and colleges. We have an insurance literacy program for schools and have received an award for this initiative. Someone from our company goes to schools and talks to students about road safety and insurance products available.
The penetration level is also low because insurance products are not affordable, especially to the economically backward sections. We have to come out with products which are affordable and one of the methods to do this is to reduce the cost of distribution. This can be done by leveraging online sales. There has to be an increase in the use of common service centres through which online sales can go up and we can introduce affordable products. The company has designed a customer portal and agents portal. Through its agents portal, 15 lakh policies are being issued and through the dealer portal three lakh policies are being issued.
Do you think there is a need for product innovation in this sector? What is United India Insurance doing towards it?
We have been introducing innovative products. Very recently, our company came up with an innovative complete claims procedure. Right now claims are settled by insurance companies. But, we have given the settlement process to NGOs, who will collect and scrutinise the documents, and make their recommendation if everything is in order. Insurance company only pays the claim. The rest of the work is done by the NGO. There is a lot of trust of the insured with the NGO. The NGO knows whether a particular person was admitted in the hospital or not, whether the bills are proper or not. This effort is called Pudhu Vazhvu.
Apart from that, some innovative low cost products have been introduced, but this needs to be scaled-up.
Take me through the process of developing a new product? What are the factors that trigger a new product idea?
We take market surveys, in which expectations of insured are accessed. Based on that, we introduce a new product. The frequency is based on the needs. This is a competitive market and sometimes, competitor comes out with a product and we need to introduce similar or better products to not to lose out in the market.
What are the main challenges that the general insurance sector faces and how does one overcome it?
One of the challenges is underwriting losses. It is a major challenge for all insurance companies in India. If you really look at it, the underwriting loss is coming from, one, third party motor insurance and two, from health insurance. In third party motor insurance, price is regulated; IRDA decides price. The price correction must happen. We have been suggesting they bring in a cap on the awards. Currently, courts are free to give any award. For example, in the case of motorcycle insurance, we may be collecting a premium of Rs. 250 and if it meets with an accident with a wealthy person, the award given could be more than a crore of rupees. There is a mismatch. You will see that in railway accidents, there is a cap; in air accidents, there is a cap. But, in auto accidents there is no cap. Therefore, we have been talking to the Ministry to bring the cap on awards.
Can you talk to us about your geographical focus – urban vs. rural?
We have a focus on the rural sector as we find that rural market is unpenetrated. We are appointing agents and micro-agents in rural areas, tying up with business correspondence agencies, and common service centres. Low-cost products will also be targeted at them. For example, in personal accident insurance, for a premium of Rs 50, the insured will get a Rs. 1 lakh cover. And, we also plan to come out with low-cost health insurance products.
What are the critical success factors of winning in the general insurance space?
The company needs to get its marketing strategy right. It needs to decide on the focus area– retail or commercial. I feel commercial segment is not profitable as rates are low and hence, retail is where you should focus.
A company’s major outgo, almost 60 per cent to 70 per cent is towards claims. So, you need to manage your claims properly. For example, in health or motor, some frauds are happening, and hospitals or workshops are overcharging. So, if you are able to detect these frauds and control it, then, you will be able to control the claims. Activities such as direct marketing and online marketing will help in controlling costs, and, increasing sales and profitability.
How has this sector grown in India when compared to the developed markets?
This sector has grown by more than 16 per cent to 17 per cent in the last five years. And, developed markets are almost stagnant as they have not been growing. This is the reason why our share in the world insurance market is going up. Earlier it was 0.58 per cent, now it has gone up to 0.66 per cent. It has gone up as our growth rate is much higher than the world growth rate. Also, the penetration and the per capita premium have increased in India. During last five years, general insurance sector has done well as far as growth is concerned.
Where do you see United India Insurance five years from now and how do you plan to reach there?
We would like to grow at the market growth rate or more, so that we achieve a market leadership position in five years. Right now, we have a number three position. We would also like to grow our profitability and that is possible only when we accept good risk and manage claims.
OUR STRATEGY IS TO BUILD A ROBUST MULTI-DISTRIBUTION SALES CHANNEL. WE ALSO INTEND TO BRING IN CIGNA’S GLOBAL BEST PRACTICES IN THE HEALTH AND WELLNESS SPACE – SPEAKS SANDEEP PATEL, MANAGING DIRECTOR AND CEO, CIGNA TTK HEALTH INSURANCE COMPANY LIMITED
It is common knowledge that the health insurance sector is still at a nascent stage in India. With just over four per cent of the population being covered, and medical inflation shooting upwards, the market potential for companies from this sector is evidently good. Incidentally, the biggest downside it is witnessing today is in educating and creating awareness about the benefits of health insurance.
Among those operating in such a sector is the new entrant Cigna TTK Health Insurance Company (Cigna TTK), a joint venture between the U.S. based global health services leader, Cigna Corporation and the Indian conglomerate, TTK Group. The company received its regulatory license from IRDA in November 2013 and has launched operations from February 2014.
The Indian company is headed by Sandeep Patel, managing director and CEO, who is also the Chairman of Cigna Health Solutions India Private Limited (wholly owned Cigna entity). Based in Mumbai, he has been responsible for leading Cigna International’s review of the Indian Health Insurance and Service market. He also heads the India operations of Cigna Corporation and Cigna Health Insurance Company. With over 21 years of global experience in actuarial, financial services and healthcare, Patel has led Cigna’s entry into various global markets, including Japan, Brazil and Poland (for pension and investment), and Hong Kong, Australia and the Middle East (for international healthcare), both directly and through partnerships.
Cigna TTK is quite optimistic about its growth prospects in India and is capitalising on the market potential by leveraging the global expertise of Cigna Corporation. In this interview, Patel shares with us a sectoral overview and takes us through the company’s plans for the domestic market.
Cigna TTK received regulatory license from IRDA end of last year. As a new entrant in this sector, what kind growth strategies will help the company grow in this market?
Today medical inflation is growing in double digits, and there is a substantial increase in lifestyle diseases such as diabetes and hypertension. However, only 15 percent of the population has some form of health insurance cover, making out-of-pocket healthcare payments in India amongst the highest in the world.
This is where Cigna TTK comes into the picture. With our global experience in health services, we’d like provide innovative products and services, to help our customers improve their health, well-being and sense of security. Our strategy is to build a robust multi-distribution sales channel including branches, online and telemarketing. We also intend to bring in Cigna’s global best practices into the health and wellness space.
What is your marketing and promotional strategy?
We have a multimedia promotional strategy that has been running in print, outdoor, radio and online. The campaign is anchored in Cigna TTK’s proposition of taking care of customers through the continuum of care or the health lifecycle. What this means is that we encourage our customers to stay healthy, but when they do fall ill, we provide them with exceptional services to bring them back to their feet at the earliest. One of the key pillars of our proposition is the ProActive Living Program, which encourages customers to lead a healthy lifestyle. This program supports our proposition by offering a variety of healthy living programs to enable our customers take care of themselves.
In addition to the mass campaign, we also plan to work with local communities to promote health and wellness through on-ground activities.
Can you share with us your geographical focus – urban vs. rural?
In the initial phase, our focus will be on developing branches in urban and semi-urban centers. We initially launched our operations with six branches across Mumbai, New Delhi, Bengaluru, Chennai, Kolkata and Hyderabad. In the coming years, we intend to expand our network pan India.
Online marketing and telemarketing are the key strengths of Cigna globally and hence, we intend to leverage this expertise in India too. We intend to reach out to our customers in places where we do not have physical presence through online and telemarketing channels. Rural markets require a differentiated distribution, product and service model which we will develop over a period of time.
Take me through the process of developing a new product? What are the factors that trigger a new product idea?
We take a holistic view when designing a product. It starts with a customer and ends with customer. We firmly believe in identifying the needs of the customer and developing concepts based on research, testing and right pricing.
Once a customer need has been identified, we develop product concepts which are again tested with the customer for acceptability. Once it’s approved, we get into the next phase of development, pricing and final launch.
Cigna TTK Health launched “Pro-Health” recently? What is unique about this product?
ProHealth is a comprehensive, feature rich product which caters to all segments of customers and allows them to choose the right option most suitable for them. It has sum insured ranging from Rs.2.5 lakh to Rs. 1 crore.
Keeping our philosophy of healthy living in mind, our product has a reward program designed to encourage healthy behavior. The product also has health maintenance benefits that can be used to cover regular health expenses that you incur. Moreover, to leverage Cigna’s global network of healthcare providers, worldwide emergency health cover is a standard feature in all our product variants. It covers policy holders in case of any medical exigencies that may arise when travelling abroad. Apart from this, we provide 100 per cent restoration of sum insured when the sum insurance is insufficient for a new claim.
Do you have any further new product launches on the anvil?
Yes, we have a pipeline of products that are being filed with the regulator over the next few months and should be launched shortly.
What is the need of the hour for the health insurance industry?
Creating more awareness around the importance of health insurance is critical for the growth of the industry. Also, working closely and engaging with the healthcare providers is important for the long term development of the industry and in making it more customer-friendly.
Where do you see Cigna TTK five years from now and how do you plan to reach there?
We foresee Cigna TTK as one of the leading health insurance players. We would like to be known as a company that has developed products and services, keeping our customers at the heart of everything we do.
THREE MAIN THINGS A PERSON SHOULD LOOK FOR WHEN HE IS BUYING A HEALTH INSURANCE FOR HIMSELF AND HIS FAMILY
Look for a customer focused company. It basically depends on what kind of claim settlements and turnaround time they have.
You should look at a good product, price and claim settlement.
Look for cashless facility. Otherwise, the customer has to pay money from the pocket and claim later, which is not good considering the high health cost. You may have to struggle to get it reimbursed.
QUICK BYTES FROM SANDEEP PATEL:
Online marketing and telemarketing are the key strengths of Cigna globally and hence, the company intends to leverage this expertise in India too.
ProActive Living Program offers a variety of healthy living programs to enable its customers take care of themselves.
Its product ProHealth caters to all segments of customers and allows them to choose the right option most suitable for them. It has a reward program designed to encourage healthy behavior and has health maintenance benefits that can be used to cover regular health expenses that one incurs.
To leverage Cigna’s global network of healthcare providers, worldwide emergency health cover is a standard feature in all its product variants. It covers policy holders in case of any medical exigencies that may arise when travelling abroad.
The company provides 100 per cent restoration of sum insured when the sum insurance is insufficient for a new claim.