Insurance firms cannot be assessed on quarterly basis, says GIC Re CMD

Five heads of leading non-life insurance companies are optimistic about the industry's future and expect public sector insurers to spring back

On state-owned general insurers’ revival

Alice Vaidyan:  You have to look at how the state-owned general insurers have served the country and how they have grown over the years. Yes, I agree that there has been a fall in the market share of public sector insurance companies from 55 per cent to 45 per cent. Probably, the announcement of the merger of the three companies did not give much confidence to the public. The government has not gone back on its decision on the merger. As far as we know, the merger is going ahead.  

Varun Dua: India is made of about 20-30 cohorts. There are areas in this country where the PSU insures can provide their service and private insurers will never get there or get there over a very long time. What might happen is that players like us will focus on Digital India and millennials, the private general insurers are looking at the urban to tier-2 population, but there is a large section in the country in the rural areas or tier-3 cities which can only be serviced by PSU insurers.

Anuj Gulati: As the economy has grown, so has insurance. Within that, competition has intensified. The knowledge base that the PSU insurers have helps them stand out in the market. And, a lot of us from the private sector continue to learn from them. As the market has gone retail, their ability to have changed along with the market through technology and processes to deliver has been slower than their private sector counterparts.

Neelesh Garg: The private sector has gained market share by creating new demand in the marketplace and convincing customers. It’s not that the public sector has lost space. There are three kinds of customers — corporate customers, urban retail customer and rural retail customer. The first and the third is where the PSUs have a very strong advantage in terms of capacity, knowledge or the rural reach. In case of millennial customers, digital customers, the private insurers have advantages in terms of speed and technology.

Bhargav Dasgupta: One of the challenges that the PSUs had was for some time there was focus on market share, and market share at the cost of underwriting can always create damage. We are seeing a correction on that front. All the PSU insurers have been doing correction on the pricing and the underwriting side. Then they will have the capital to invest in some of the more futuristic aspects.

On underwriting losses

Vaidyan: Insurance new for investors. One cannot assess insurance companies on a quarter to quarter basis. Insurance companies, the world over, are benchmarked on annual performance. The non-life market has been making underwriting losses ever since property and fire were de-tariffed in 2007. So, that has rubbed off on all the companies. But, the climate of investment income is very good and the investment income has been subsidising underwriting losses.

Dasgupta: Indian accounting standards are much more conservative than international standards. Indian general insurers’ combined ratio is not as bad as it optically looks. Insurance is a volatile business, especially general insurance. There will be quarters where we will have investment losses because we look at investment from a long-term perspective. I would urge investors to understand the industry from a long-term perspective rather than getting carried away by what has happened in a quarter.
 

Vaidyan: We are seeing growth of 13-15 per cent and this growth is here to stay. It’s only a matter of time before India becomes the fastest-growing insurance market in the world. We are the 10th largest in life insurance and the 15th largest in general insurance globally. It’s only a matter of time before it will become profitable. Investors should be a bit patient and it will be both rewarding and satisfying for them.

On product innovation and regulatory restrictions

Garg: There is a significant amount of product innovation that has happened in the last 20 years. Product innovation depends on the size of the market and customers’ interest. Four or five insurance companies have title insurance products though few sales have happened. Cyber insurance has taken off in a big way in India. We have products which cover merger and acquisitions, IPO.

Dua: It is a matter of time that products like vacation cancelling will come into India.  From the regulatory side, we need lighter regime on product approvals.

Gulati: From the regulatory angle, what we have seen in the last two-three years is significant freeing-up of product. From group side, there is the use and file method. There is discussion to the same in the retail side.

Dasgupta: As an industry we have to be very responsible. When we push the regulator, the regulator worries about the consequences on the policyholders. We have to launch products in a manner which is sustainable from the policyholders’ perspective and for our shareholders. While the regulator is making a lot of changes on the group side and the sandbox idea that they have talked about and it’s a very good idea. What we need is a much differentiated approach to different companies in the market.