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RSA takes motorway to growth in India

Economic Times - Mumbai, 03 August, 2007


RSA is present in the country through Royal Sundaram Alliance, its joint venture with Sundaram Finance.

British insurer Royal & SunAlliance (RSA) sees motor insurance driving its growth in India. RSA is present in the country through Royal Sundaram Alliance, its joint venture with Sundaram Finance.

"The Indian business is among our top two companies in emerging markets in terms of potential," said RSA emerging markets CEO Paul Whittaker. In India, RSA has adopted a strategy of increasing net retentions.

In other words, the company prefers to cover risks it can manage on its own books and does not have to pass on entirely to a reinsurance company. In the UK too, RSA is known as one of the largest retail insurance companies with motor insurance accounting for close to 40% of its portfolio worldwide.

Insurers see challenges in distribution in India, even though the motor insurance market is expected to grow in line with the growth in the automobile sector. At present, RSA depends on agents and partners including banks and auto dealers to sell insurance.

This is a far cry from developed markets, where sales have moved online and to call centres. "In 2002, the internet accounted for 1% of auto insurance sales in UK; a year later, it was around 2%. The tipping point came a couple of years later and today, 60% of motor insurance sales are through the internet," he said. He added that India may well leapfrog from agents to internet sales as the market evolves.

According to Mr Whittaker, RSA India is unlikely to chase very large accounts offering big discounts merely to build volumes. "We don't ever allow our behaviour driven by objectives to gain marketshare or valuations. Besides, we have a very disciplined partner who would not allow us to get heady," he said.

In keeping with its focus on retail, the board of RSA India on Wednesday appointed Ajay Bimbhet, former head of IDBI Bank's retail business as managing director. The appointment follows incumbent Antony Jacob's appointment as the regional finance director - Asia and Middle East, Royal & SunAlliance. "Ajay's appointment is a reflection of our mission,"said Mr Whittaker, indicating that the new MD would be pushing forward with the company's retail objectives.

The thrust on retail is expected to help the company tide over the storm expected to follow the dismantling of tariffs in late 2007. Mr Whittaker said that premium rates were expected to come down initially, but the market would settle in a couple of years.
Although RSA has received a licence to set up a wholly-owned subsidiary with operations in Shanghai, Beijing and Guangzhou, it is not allowed to underwrite motor business until its enters into a joint venture. "We have seen this movie (free pricing) being played out in other countries. Our experience is that it is a painful process as customers immediately demand and get large discounts. After the traumatic 12-24 months, the market gets disciplined" he said.

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