Till as recently as 2001, personal insurance products like health, household or travel insurance were not a priority for insurers. The only interface that insurers had with retail customers was through vehicle insurance, which is a mandated product by law. The focus was on corporate business that contributed more than 60% of the total insurance.
Today the scenario has reversed. Private insurers such as Bajaj Allianz General Insurance do about 60 per cent business with individual customers and focus on improving services and products to cater to them. I foresee retail becoming at least 70 per cent of our portfolio in two years.
The customers’ expectations have gone up too. They are not only looking for policies tailored to their requirements but also expect error-free and prompt service. The distribution has changed from customers seeking out insurance to insurers seeking out customers. Policies are now issued at auto dealerships, at travel agencies and even at banks. Earlier customers received notices for policy renewal. Today they are chased with reminders and options.
The big changes are taking place not only in how and where the product is sold, but also in the core structure of the policy—claims. With private insurers ushering in cashless settlement of vehicle and health claims, customers are realising the benefits of taking insurance products other than vehicle insurance which they had to compulsorily have.
For instance, for vehicle claims a customer has to only visit the workshop, get the loss on the vehicle assessed and the insurer settles the bill. All that the customer has to pay is the depreciation differential. In the case of health insurance, policyholders go for treatment and the insurer settles their bills directly with the hospital.
Last year when we launched wedding insurance, many customers asked me whether divorce is covered. A lot of new products will be launched over the next few years. Title insurance (for property) will help people when they are buying real estate. This policy will take care of any losses arising out of defects in the title of the property. Health insurance will get extended to cover treatment abroad (presently it is valid only in India). The de-tariffication from 2007—which will allow insurance firms a free hand to develop and price policies— will be the catalyst for the next big push.
Let us see how things have changed in other financial services which have a bearing on the changes in the insurance industry. In banking, one had to earlier maintain a minimum balance in savings accounts. This is slowly going. One had to physically visit the bank for withdrawals and statements. That is history now. In the past three years, I have not visited my bank branch.
In the new competitive market scenario, insurance companies will have to change their business model significantly. Price competition will force companies to reduce costs, decrease commission to intermediaries and customise products for different segments.
These changes will empower the customer and offer him greater choice of price and policies. Customers will be able to buy a policy on the phone, through SMS and on the Internet. They will be able to compare products across companies before buying the one they like. All this means that insurers will have to offer a lot more to customers at lot lower prices.