Tata AIG General Insurance has had to deal with a lot of bad news this year. First came the troubles at AIG, which holds a 26 per cent stake in the joint venture with the Tatas. The company also underwrote the insurance cover for The Taj Mahal Palace & Tower, which was one of the main targets in the Mumbai terror attacks. In January, it also had to deal with the after-effects of the Satyam scam as Tata AIG is part of the consortium that provided Directors’ & Officers’ liability cover. In an interview with Shilpy Sinha, the company’s Managing Director & CEO Gaurav Garg spoke about all this and his plans for the next year, while betting big on customisation. Excerpts:
Do you see any problem with your joint venture partner AIG which is facing trouble?
Tata AIG is regulated by Indian regulators. We do not see any problem in the joint venture in which Tata Sons has a 74 per cent stake. We are well-capitalised in shape, size and form.
How do you look at 2008-09? Wasn’t it an unfortunate year for you as you had provided a large cover to a property attacked in the Mumbai terror attacks, and also sold the Satyam D&O cover?
There has been some unfortunate experience. In the Mumbai terror attack, we paid the claims within 24 hours. Our surveyors were there the very next day. Due to confidentiality, we are not at liberty to speak about the Satyam claims, but we will be handling it in a consortium with other insurers in a very professional manner.
How has the slowdown affected the general insurance industry?
Many people have called the September event as a financial tsunami. The first impact was on auto sales. As 50 per cent of the business is motor insurance, this had a significant impact on our business. The second business which was affected was travel insurance, as non-essential travel was put off. Third, a lot of projects were put on hold, which happens when there is general economic slowdown. The IPO (initial public offering) factor affected our business too. Insurance related to IPOs is not happening. Also, all marine trading activity is impacted. Premiums come in when shipments take place while the policy is active. But the number of shipments under one policy is much lower now.
Do you see things improving in 2009-10?
The industry will pick up a bit going beyond the March treaty renewals. We will see then what the world reinsurance market is doing. There will be some impact in the terms and conditions of treaties and rates. The government is doing a lot to improve sentiments and, accordingly, banks are reducing interest rates. We are very bullish because, if there is a place to be at this point in time, it is India as no other economy in the world is even projecting a growth rate of 7 per cent. In 2009-10, we are hoping to grow at twice the rate of GDP growth. This year, the growth will be in line with the industry.
What will be your strategy going forward?
In general insurance, there has not been too much of real growth. The penetration on GDP scale has remained almost constant over the last decade or so. So, what is happening is that distribution is being focused on the existing pie, and there is only organic growth along with the GDP’s growth. Our strategy is to expand the pie by getting into new areas of business. We are entering into the SME line of business where a package policy will be available to all small and medium businesses.
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The other segment is ultra-high networth customers. We are launching a private clients’ group. It will be totally customised, and it will cover high-value houses, villas, holiday locations, works of art, private aircraft, high-end cars and personal liability. Basically, we will customise products according to the customers’ needs.
Another segment is rural, as 60-70 per cent of the population still resides in this area. The premium growth in this segment is projected at 300-400 per cent. We are working at the right mix of products and the right delivery method as the premium per person will be very low. We are starting a health insurance segment too.
Do you see add-on products as changing the market dynamics?
Customers will have more choice. They will evaluate whether an add-on serves their purpose. It will change the way insurance is bought and sold. Price, ultimately, will find its level because what happens in businesses like motor is that the loss ratio is quite predictable. We have filed 70 add-ons in property, around 40-45 in engineering and 12 in motor. We have received approvals for 80 per cent of the products. They are getting attached to existing products. We aim to launch our new products by April 1.
Will the expansion entail capital infusion?
We are adequately capitalised till the next financial year. We will work on capital infusion once our business plans get approved by the board.