Private sector general insurance companies are once again going back to retail as they face severe pricing pressure and concentration of risk in the corporate business segment.
Following de-tariffing, fire and engineering segment have witnessed a drop in prices. In addition, general insurers tried to woo corporate clients through heavy discounts and freebies over the last couple of years.
But they suddenly find themselves in a situation where reinsurers are raising concerns over insuring the same amount of risk, if not higher, at lower premium rates. “When reinsurance deals come up for renewal at the end of March, general insurers will have to cough up more,” said a senior GIC executive.
At the same time, the profile of the retail business, which includes health and motor business, is changing. With the insurers deciding to carve out a separate pool for third-party risk, the business is not longer a losing proposition. In addition, the add-on covers which will come into the market this year, are expected to help insurers gain.
Similarly, health insurance claims are also being managed better, helping companies recover some of the losses.
“The recent shift in the industry is because the retail segment, especially health insurance, is the biggest growth driver for the industry” said T A Ramalingam, Head Underwriting at Bajaj Allianz General Insurance.
So, players such as ICICI Lombard are eying 60 per cent of the premium to come from the retail segment. “The continued growth and rising awareness towards the benefits of insurance will drive retail business. The contribution of retail to the overall pie may also increase with innovation in distribution, products and services,” said Rakesh Jain Director Corporate Centre and CFO ICICI Lombard.
“With the premium collection from fire and engineering shrinking, retail has become more profitable. Corporate business is exhausted and at the same time retail does not have an untapped market,” added Iffco Tokio Marine CEO S Narayan. The company already gets 65-70 per cent of its total premium income from the retail market.
“Within the space today there is a decent amount of corporate business which is very good quality business in terms of risk and price. We look at the risk very pragmatically and we see there are a number of risks were price is justifiable and the discount is not as huge as 90 per cent,” said Deepak Sood CEO Future Generali Insurance adding that the company hopes to get 50 er cent of the business from the retail segment, compared with 43 per cent at present.
“None of the insurers have created a value proposition over the years. So, they were destined to lose the corporate side of the business. At the same time, retail looks lucrative now but the volumes are high and it needs a daily monitoring,” said Rahul Aggrawal, CEO, Optima Insurance Broker.
