General #insurance players believe the industry will break-out over the next few years. The companies are likely to consider a segmented or specialist approach based on their strengths, and offer products accordingly. For instance, some may primarily function online, some companies may specialize in area or industry specific products, some others may be boutique companies.
“General insurers will need to specialize over the next 10 years. This will help build expertise especially with more and more online sales happening,” says KG Krishnamoorthy Rao, MD & CEO of Future Generali General Insurance. However, general insurance players will have to continue selling few common products mandated by the regulator like third party motor insurance.
The present set of niche players in the market ——- therefore, have a big opportunity ahead of them, feels the industry. And the industry feels that smaller companies or new entrants having a specialist approach would help in gaining market share.
Agreed Naval Goel, Founder & CEO, PolicyX.com, “Potential customers are looking for value from insurers and to offer value companies will have to distinguish themselves. And to be able to do this, many companies may consider hiving off their health business.” Companies like Reliance Capital and Aditya Birla Financial Services Group are exploring the possibility of setting up separate #health insurance companies.
And after the Insurance Laws (Amendment) Bill has lowered the minimum capital required for a health insurer to Rs 50 crore from Rs 100 crore earlier, there many regional health insurance players coming up.
Goel said that industry numbers also show that niche health players are drawing as many policyholders as general insurance firms. “As per the IRDAI’s annual report, ICICI Lombard did business of Rs 1,500 crore in 2014 and Star Health did business of Rs 1,100 crore. The gap has narrowed,” he says.
Segmentation will also help cut losses. The industry registered a growth of around 9% (as on March 2015) on the back of high underwriting losses dues to bleeding third party motor insurance and group health insurance accounts. Premiums from the motor insurance segment are down due to slow auto sales.
“Worldwide, for example, large companies specialize in health insurance. General #insurance companies in India today try and sell products to all customer segments across all geographies. This would change as they migrate to what they can do best. This specialist approach would also help companies develop deep understanding of specific fields and bundle their products and services to cater to specific needs. This will help the industry grow,” said Rakesh Jain, CEO of Reliance General Insurance.
He adds that Reliance General Insurance would like to break out based on customer segment. “We have started to focus on the SME segment. The challenge with this segment is reaching out to them. They are so varied and spread out, and are uninsured. Also in terms of premium, if retail premium stands at Rs 8,000-10,000 annually for policies of Rs 1 crore, policies for SMEs cost Rs 30,000-40,000,” Jain said.
With some companies focusing vertically and some horizontally, insurance penetration is bound to increase.