M Ramadoss, Chairman and MD, New India Assurance, tells Sarbajeet K Sen what is ailing the home insurance sector.
Health and motor portfolios of insurance companies seem to be growing. Do you see a similar trend in the home insurance sector?
This is not happening to the extent we had expected. We are also disappointed that the number of home owners buying insurance, remains very low. Even in Mumbai, despite people being affected by the 2005 floods, there are still many houses that are uninsured. There has to be more participation and better awareness.
What do you think is the reason for this apathy?
It may be a combination of the Indian psyche and the fact that a person is unable to price the risk in an underdeveloped insurance market. Everyone knows there are risks that need to be covered. You can walk down the road and get killed, your house can be burgled or you might need hospitalisation. Though a person is aware of such contingencies, it is difficult to convince somebody to pay a certain amount of money to cover these risks. Everybody is aware of such perils, but unfortunately nobody wants to pay a premium for it. Our psyche does not permit parting with the money.
Are you seeing a change in the Indian psyche, however slow it might be?
Yes, it is changing, especially in urban areas. But there are huge unpenetrated markets. We have to expand distribution channels to tap these markets. Today, distribution channels available to insurance companies are very restricted. Insurance products can be distributed only by an Irda permitted entity-be it individual agents, corporate agents or brokers. These entities cannot outsource their work and cannot have sub-brokers. Till the time we depend only on such entities, penetration will not happen quickly. There is a need to develop second-level or third-level brokers or agents.
Is it pricing issues that keep the consumer away?
In India, the cost of insurance against natural calamities is very low. It is absolutely negligible compared to other countries. The premium rates are very thin and it is very easy for home owners to get their houses insured. Moreover, these products are available online and are extremely easy to buy.
Coming to health insurance, how would the recent regulatory decision to allow portability impact the market?
I think that unlike number portability in the telecom industry, portability in health insurance may not result in many policies being shifted between companies. People would not like to shift insurers just for the sake of doing so, since there is no great incentive for a customer to change firms. Customers will use the facility only if they are unhappy with the service provided. That means you need to have a claims experience and only if you are not satisfied with that would you be able to decide whether to shift or not. Until you don't have a claims experience, you don't know.