Amarnath Ananthanarayanan, MD & CEO, Bharti AXA, talks to Chandralekha Mukerji about the most recent changes in the insurance sector and their impact.
Q. Irda has finally decided to dismantle the commercial third-party motor pool and replace it with a declined pool with effect from April 1. Has this brought some relief?
A. This is good news as it would reduce bad underwriting practices and increase efficiency of managing claims. Some firms would pass claims without adequate verification and the whole industry bears the burden. The industry lost Rs 10,250 crore in 2011-12 on this account. According to the new rule, 20% of the claim amount has to be borne by the insurer. This is expected to make firms cautious.
Q. Companies are innovating with riders and introducing variable pricing for own-damage motor covers. Do you see a new trend?
A. Add-on covers offer opportunity for insurers to increase their earnings and differentiate in terms of product offerings. Vehicle owners also want to widen protection. We are also trying to develop usage-based covers, such as the pay-as-you-drive model.
Under this, premiums are based on factors such as driving pattern, the area the vehicle is being used, etc. Theoretically, factors such as a driver's profession and gender and past records can also determine the premium. The challenge to this model is the availability of accurate data. It might take some time to implement.
Q. Insurance penetration, especially general insurance, remains low. Do you think lack of product innovation could be a reason?
A. Lack of awareness and innovation is responsible. The industry hasn't been able to keep pace with changing needs. For instance, cyber fraud is common these days. Even so, most insurers don't even have an IT expert to design online policies in a way that would protect customers from scams.
Also, if you look at the health insurance segment, long-term care policies, which are quite popular in other countries, are not available in India. So, while I may not require hospitalisation, services such as a nurse attending at home is not covered. Insurers are designing and marketing products that they feel are good and not what the customer needs.
Second, alternate channels of distribution, apart from bancassurance, are yet not perfected. Companies have been trying hard to market their products using technology and diverse distribution channels such as the online platform and through post offices.
Q. It has been four months since portability of health insurance was allowed. How is it doing and are you getting enough requests?
A. Health portability hasn't picked up. While customers might be interested in switching, as agents has no incentive we hardly get requests. Also, what can be ported is limited. There is no guarantee on price and the premium may not stay the same for a similar coverage. So, firms are still competing to get new customers and maximum renewals.