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General insurance gets more segmented

06 February, 2007

The sense of aggression in the detariffed general insurance market is palpable. A trend of market segmentation is beginning to emerge as competition among the eight private insurers and four nationalised players is hotting up fiercely.

While the overall growth is expected to decline significantly this year, interestingly, the last nine months in a tariffed regime up to December 2006, have shown an overall growth of 24%. The private insurers, as a group, have notched up 35% of the total premium of the general insurance industry in the period.

It may be some months before an actual trend in the general insurance market emerges, but is clear is the segmentation in different sections of general insurance business.

"Each segment is expected to become competitive and a clear segmentation in terms of the insurer''s experience on various portfolios within motor, fire and engineering is likely to emerge," Dalip Verma, managing director and CEO, Tata-AIG General Insurance, told DNA Money.

This would effectively mean that every insurer with its own experience and profile would have its respective preferred choice of segments and this would be translated into aggression for such categories of insurance. This could be types of cars in motor insurance, or specific risks or perhaps industry classes in engineering or fire insurance.

According to Antony Jacob, Managing Director, Royal Sundaram Alliance, there is bound to be a correction in marine insurance prices, which was subsidised all along on the back of a decline in fire and engineering insurance prices. Health, personal accident and home insurance are also set to grow in the coming months, he says.

While the best rate commensurate with service standards will be the clincher for companies for attracting consumers, significant changes are expected to come about with the distribution channels.

"Insurers are building robust and practical rating models to arrive at the correct premium with the available data. The ongoing validation and refinement of these models would be based on the subsequent claims experience. There would be an increase in the use of virtual channels to reach out to and service customers to reduce operational costs and pass on these benefits to the end customer," Kartik Jain, head, marketing ICICI Lombard said.

While all the 12 insurance companies have registered a robust 24% growth in premiums in the nine months ending December 2006 at Rs 18,577.28 crore already, the last quarter will reflect on specific trends, if any, in a detariffed market which kicked off from January 1, 2007.