Asia Insurance Post - Cover Story - Antony Jacob, 31 August, 2006
On the opportunities on retail insurance front in India:
India has a huge retail market. In the current market scenario, Retail is becoming the buzz. Today, we see more and more people with higher disposable incomes. There is increased spending on personal assets such as cars, houses and contents. This increased spending and the growth of the middle class has fueled the growth of retail insurance in India. Post detariffing, we can expect significant growth in this segment. In the future, the retail insurance segment would be an area of focus for both the public and the private sector players.
On the size of company's retail portfolio:
Royal Sundaram earns more than half of its premium income from the retail segment. During the financial year 2005-2006, the retail insurance business recorded a growth of 45 per cent, achieving a gross written premium of Rs. 293 crore. Motor insurance being one of the largest retail portfolios of Royal Sundaram contributed 51 percent of our total premium. Among the other retail portfolios, personal accident contributed 5 per cent and health contributed 11 per cent respectively.
Over the next two years, retail will constitute two-thirds of Royal Sundaram's business. Royal Sundaram believes that future growth will be driven by the retail segment.
On the Profitability of the retail portfolio:
The retail insurance sector is definitely a profitable portfolio. It is a growing business and has good potential in the future. There are various strategies such as providing innovative products, effective marketing, best in class customer service etc. that helps in increasing the sales of retail insurance products. Royal Sundaram's prime area of focus is excellent customer service. We strive to deliver best services to our select customer base and this has helped us to make products like motor and health insurance profitable.
On the Kind of retail products in demand:
Motor Insurance is one of the biggest growth areas in the Insurance sector and with the recent increase in passenger car sales this product is expected to have a greater demand. Amongst the other retail products, Health Insurance presents a sizeable opportunity for growth followed by Home Insurance. The escalating cost of medical treatment today can put a big dent in bank accounts of consumers. This will lead to the demand for health insurance. Similarly, disasters such as the Mumbai floods will lead to people seeking insurance cover for damage against their home and assets.
Detariffing will bring in an open and free market where insurers will be able to offer value added services to the customer. In the tariff free market, a high-risk customer will pay a higher premium than a low risk customer. Insurers will be able to offer competitive rates to customers who are safe drivers and follow a few preventive measures to mitigate risk.
On the various channels for distribution of retail products:
The Insurance Industry has adapted some of the best marketing channels. Bancassurance partnership is one of the effective strategies in India where local and multinational banks have very strong brands and even greater customer loyalty and reach. Banks offer one-stop shop facility to customers for all their financial needs. Therefore, insurance products have greater reach through the bancassurance channel. Other distribution channels such as agents, brokers and automobile dealers play an equally important role in getting prospective customer. They have direct access to customers and provide products to cater to their needs.
Apart from the above channels, our intermediaries are also provided with the facility of issuing policies directly to our customers through various on-line platforms.