The general insurance industry is scheduled to be de-tariffed from January 2007. How will the de-tariffing impact customers? As of now, the tariff of almost 70 % of general insurance products is decided by the Tariff Advisory Committee. This will end on January 1, 2007, when a de-tariffed regime will take its place. What de-tariffing will mean to customers is that the prices of insurance products will become more competitive.
When will lower prices begin to kick in?
I expect the full effects of de-tariffing will begin to be felt within 18-24 months of the new regime coming into place.
With general insurance firms free to set tariffs, isn't there a threat of companies forming a cartel to keep prices high?
That's unlikely, because it will be regime of free pricing. Competition will be intense so the players will be looking for ways to increase their market share rather than forming a cartel. Cartels by commercial insurance firms have not been seen in markets which freed the tariff structure, so there is no reason why it will happen in India.
Royal Sundaram Alliance has been in business for more than five years now. How is the market for general insurance in India?
In the five years the private sector was allowed into the general insurance segment in India, the market grew by 14-15% per year. In the last year, however, it grew by over 20 percent as India's economy has been growing strongly, and there was increased demand from industry for insurance products. India is still a nascent market, and we believe that the market will continue to grow strongly in the next few years. That's the reason why both Sundaram Finance and Royal& SunAlliance, both of
which had their own insurance companies till the general insurance industry was nationalised in 1972, are committed to investing in the business.
What does Royal & SunAlliance bring to the business?
Apart from holding a 26% stake in Royal Sundaram Alliance, Royal & SunAlliance brings its global experience of nearly 300 years and technical expertise in terms of products to the company. Royal Sundaram has an equity base of Rs.140 crore, which is sufficient to meet the solvency requirements set by the IRDA for this year, and probably for next year as well. The company had a GWP of Rs.460 crore in 2005-2006. The two shareholders in the company have indicated that fresh capital will be invested as required.
Which are the segments that Royal Sundaram is strong in?
We have a substantial presence in motor and fire insurance, engineering and healthcare. Insurance for private motor vehicles is growing strongly, while healthcare insurance has emerged as a large segment with the launch of our Hospital Cash plan.
This plan provides specified cash payments to meet out-of-pocket expenses during the insured's stay in hospital. Ten percent of our business is now contributed by healthcare insurance. The third-party insurance segment is one of the fastest growing at Royal Sundaram.
Going back to the free pricing regime, what is Royal Sundaram's strategy for a de-tariffed market?
We have been preparing for such a regime since we launched operations in India in March 2001. We have trained risk engineers who work closely with clients to ensure that the risk for their business is kept at a minimum. The success in a free market regime depends on how well we manage risk, and we believe we are prepared.
What is the claims settlement percentage of your company?
About 60 percent
Healthcare will be a key area for us. The healthcare market is underserved in India, and we will design products to suit various segments of the population. With the economy growing at a healthy clip, there will also be a lot of traction in the engineering, or the manufacturing side apart from insurance for personal motor vehicles.
How much do each of the four regions contribute to Royal Sundaram's GWP?
As the Sundaram group has a strong presence in southern India, the south accounts for 40% of the business, followed by western and northern India with 25% each, and eastern India with 10%. Our plan is to grow around the country.
How do you spend your leisure hours?
I love playing golf, and go for a round of golf whenever there is some free time. I love travelling as well, alongwith my family, both in India and abroad.