Customers can look forward to improved services from New India Assurance, National Insurance, United India and Oriental Insurance —- the four public sector general insurance companies —- which are currently engaged in a turf war with private players.
Taking a cue from private players, the public sector insurers will soon begin online sales of health, motor, householder and shop insurance policies. Plans are also afoot to set up call centres to address grievances. These are signs of change for the state-owned companies, which are trying to set the house in order after losing 42 per cent of the market to private players.
Adopting this strategy that was effectively used by their private peers, the public insurers are also setting up specialised verticals for retail clients, large corporates, bancassurance and brokers.
Nearly eight years after the first private player started operations, the public sector players are setting up special cells to handle large insurance brokers. Insurance brokers, who were allowed to operate in 2003, now control more than 20 per cent of the business emanating from companies and have played a significant role in the growth of private players.
The process of re-engineering the business model was initiated after the government directed them to do so in 2007. There are 10 active private general insurers in the country at present after the sector was opened up in 2000 and many others are in the process of setting up business. “We have decided to revamp the organisational structure with less layers, performance linked incentives, service centres and agency back offices to serve customers better,” said a senior Oriental Insurance executive.
Oriental Insurance has been pushed down to the fifth position by top private player ICICI Lombard in terms of premium during the first quarter of the current financial year. During the period, the public sector firms reported an 8 per cent rise in premium, which was estimated at Rs 4,895 crore. In contrast, the 10 private players saw their premium income grow by over 22 per cent to Rs 3,542 crore.
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Private players further tightened their grip by improving their market share to 42 per cent at the end of June, from about 39 per cent at the end of the first quarter of 2007-08. Apart from ICICI Lombard, the private sector assault has been led by Bajaj Allianz and Reliance General.
While National Insurance has hired PricewaterhouseCoopers to advise it on business restructuring, the other three have roped in the Boston Consulting Group. According to industry players, the PSUs are also on the back foot in the motor and health insurance businesses, which are service oriented. While all the top private players offer cashless health cover, not all public sector players provide this facility. The new players also have an upper hand due to their advertising and marketing campaign, which the public sector players are now pushing for.
Sources said that the public sector insurance general insurance companies continue to have multiple offices at a single location and are unable to redeploy manpower by shutting down some of the offices. “The issue needs to be addressed but the government itself is not very keen on this,” said an insurance company executive.
The detariffing of general insurance from January 2007 has also posed a major challenge as premium rates have dropped by up to 70 per cent in fire and engineering. The initial advantage of public sector firms - which would get significant re-insurance commission from foreign re-insurers - is slowly eroding thanks to competition. “With large corporate accounts shifting to the private sector,” an executive with a private firm said, “the handicap will only rise.”