'Profitability remains the biggest challenge' - DNA INDIA

Royal Sundaram Alliance Insurance, one of the first-gen private insurance companies has registered an almost 20% growth in business, one of the highest in the general insurance space. Ajay Bimbhet, managing director, shares his thoughts on the industry and the company''s plans in a detariffed regime.
 
Ajay Bimbhet, MD of Royal Sundaram Alliance Insurance, shares his thoughts on the industryy and the company''s plans.

What are the biggest challenges for you in the deregulated regime?
The detariffing of the insurance industry has led to drastic fall in premiums on intense competition amongst the insurers, especially with the arrival of the new insurers. This has also led to the elimination of cross-subsidisation. Earlier, non-profitable products were subsidised along with profitable ones. In current market conditions where it is difficult to retain premium at the same level for the profitable products, subsidised products will have to stand on their own. In light of this scenario, profitability remains the biggest challenge. However, in the long run, only insurers with strong fundamentals will sail through. The other challenge is educating and creating public awareness about the need for insurance. Though awareness has increased from what it used to be during the initial years of privatisation, we have a lot to cover. It is sad but true that only a fraction of the population is fully covered. In fact, even now, health insurance is looked at as a tax-saving tool. No one seems to be bothered about the extent of their coverage until an eventuality occurs. There is a strong need to increase awareness not just by the players but by the government as well.

What is the expected premium by year-end and your business mix?
We have grown close to 20% in the nine-month period. In the current market scenario, we would like to sustain growth and ensure that we stay well above average market growth rates. Motor forms a significant part of the portfolio. Going forward, we are looking at increasing our penetration in product categories such health, home travel, and SME.

The automobile sector is going through difficult times. Has the auto insurance segment been affected?
Though the automobile industry has been impacted by the slowdown, this will have a marginal impact on our motor business. The fall in new business growth will be tempered by the robust renewal business.

Which are the product segments that would see variations in the current detariff regime?
The motor, property and fire segments will see bulk of the enhancements. For example, in motor we could get a waiver of depreciation and modification of compulsory deductibles and in the fire segment, we might be able to modify deductibles and introduce contingent business interruption cover. We have filed some new retail products with the regulator. However, we will share the details closer to the launch of products.

Does market share worry you?
Like any other player in the insurance industry, we are concerned about our market share but without compromising on profitability, sustainable business and without giving to irrational competition. With our strong fundamentals and focus, we hope to retain our market share by the end of the financial year.