The lockdown has been eased. How has premium collection fared so far?
In April, the overall premium collection for the industry would have been down by 15-20%. But if I look at the line of business, motor premium was down by close to half, health was minus three which is very surprising but fire was positive. So, overall for the industry, motor insurance premium collection was down simply because new vehicles were not selling. But my surprise was the falling health premium.
With Covid around and Indian insurance companies clubbing Covid in the heath policy, I was expecting retail health policy to be moving up because that is a very good policy for the price it offered. But the average cost of Covid treatment is coming in at Rs 1.5 lakh and is going up to Rs 5 lakh-8 lakh. The treatment is expensive and with the Indian insurance companies offering Covid as a regular health product, why would people not buy Covid cover is one question that have to be answered. I have told my team to start talking to customers.
Motor insurance has picked up in May and that deficiency has fallen minus 30 now from minus 50. Motor sales have started picking up and in June and July, we expect motor premium will to pick up. If I look at the general insurance business, the interesting part is it has not been a new business which they cover but they are covering an existing business.
Also, even if motor sales were 70-80% down in April, it makes for only 8% of the portfolio for the entire industry. That getting down 80%, means about 5% down overall. So I do not see a major impact for the industry in terms of degrowth. Maybe 5%-10% in the worst case scenario or the industry may actually come out positive by year end. That is how I look at it.
IRDAI has withdrawn the long-term third party package and own damage policies that insured cars for three years and two-wheelers for five years. Given that motor insurance accounts for over 40% of the general insurance business, what is going to be the impact on your sector?
They have not withdrawn the long term third party insurance. All they have withdrawn is the long-term comprehensive cover, which.they said should not be there and they are offering now one year OD (own damage) plus the long term third party. So, the third party long term have not been withdrawn. The customers get service when their own damage (OD) claim happens. Now in locking the customer in for five or three years, if he is not happy with the servicing he is getting from the existing insurance company, he cannot leave it.
I think the regulators have done a good thing by freeing it up. The customer now every year can take a decision based on the services of the insurance companies.
Now let us look at the impact to the industry. The long term policies do not constitute more than 25% to 30% of the entire business of the industry. In 30% also, the third party is not gone. The OD percentage, at the beginning may have been 50-60% of it. If you break it all down, it is not going to have such a significant impact on the industry from a premium perspective. But from the customer perspective, it is a very good move from the regulator as it gives the customer choice.
Given that motor insurance accounts for nearly 47% of your total products mix, with IRDA decision coming in. do you see it adversely impacting the top line? Also, will it narrow the motor insurance sales going forward?
In our company, we have always believed that what is good for customers is good for the company. We welcome what the regulator has done and I am personally super excited about it! As a company, we have serviced the customer well. So, why should my business get affected? Second, this is also an opportunity for good companies. People who are not happy with the existing company may shift to us. So, why should I see a drop in the top line from my company’s perspective?
If I serve the customer well, my intentions are good and if the customer sees value in what we offer, our top line should move up.
At the start, you were mentioning health insurance. Looking at Covid-19 and the spread of the pandemic, do you see more people opting for health insurance? How big a segment would this turn out to be?
I mentioned in the beginning that the April growth for retail is minus 3% for the industry. However, as a company, we were like close to 10% growth. Now if Covid is on and insurance companies have the Covid cover in their policies, then why are the servers not crashing? The pricing is reasonable also. Good health cover will cost you about Rs 6,000-7,000 for the entire year and you are very well covered.
So it is something very surprising but then it comes back to the statement that I have made many times — that insurance is a conversational sale and I have always said that if you have a conversation and you understand the importance of having a good cover, then you can get treatment from the best hospital by the best doctor and that will actually make a difference between your life and death. For the dignity of your life, why will you not pay Rs 6,000-7,000 a year to get yourself a good cover?
So it is a conversational sale. The industry has to have more conversations with more customers. It is our duty to ensure that the maximum number of people are covered under health insurance because with Covid spreading and the cost of treatment being pretty high, if people have good cover it will make a big difference.
In May, it has started moving up a bit but not to the level that I feel it should move up. But let us see how June, July and August come up.
Do you think customers are trying to conserve cash? Will the deferment of those renewal premiums lead to loss of customers and business? Is that what you see happening and have you revised the growth estimates for FY21?
So first to look at conserving cash. You can conserve Rs 7,000 in a year but then you have to spend Rs 5 lakh on Covid treatment. Do you think it is a good move to conserve cash? I do not think so.
So I do not think that is the reason. I think as an industry, we need to reach out to customers and have conversations. As an industry, we should push for it.
Second, what exactly was the deferment of the policy? It is simply if you are not able to pay for renewal of the policy. Whenever the lockdown is lifted, you can pay the premium from the date which your policy had expired. The deferment was not that the policy was extended, it just said that you can pay the premium from the date the policy expired and the benefits would continue. That is what the deferment policy said.
Now if you look at this policy of deferment, why would you lose some premium.Whenever the customer renews within the timeframe, given his policy gets renewed from the time the policy had expired in the past, it means full premiums are coming. But more than that, as a company we launched a pay as you go system because the customer may not be using the vehicle full time. So he can buy the number of kilometres that he would think that he is going to move his vehicle and that is the kind of solutions companies have to come out with. There is also a laid up policy for customers who feel that their vehicle will not leave the garage. They should take those extensions in terms of the laid up vehicle or they should look at buying the number of kilometres to be used. That is what the customers should be looking at.
General insurance industry is directly linked with economic growth. Now with growth dropping significantly, what does this imply for the industry and for your business?
If you look at the last year’s performance of the industry, after quite some time it has hit a single digit growth. Covid had started at the end of the year. So, it is not just the Covid impact. The economy as such was going through a slow phase.
The general insurance industry had seen 9% growth. As I mentioned in the beginning of my interview, currently the overall GI industry is at minus 10% growth following the Covid lockdown. It would be 6-7% maximum as we progress further.
ET Now: What is your post Covid strategy? What are the segments Bajaj Allianz is focussing on?
Tapan Singhel: Covid taught us two important things. As a company, we had been pushing digitalisation and ease of customer servicing. A lot of times, the push back was from the distributor not adopting, the customer not adopting, people being used to paper. When I was in Singapore, I noticed that in Singapore which is so digitally savvy, 95% of insurance business was still paper. So I was somewhere losing hope on this but when Covid happened, overnight there was an amazing shift to digitalisation.
We should be close to 30 lakh policies in the lockdown period. We settled close to 15-16 lakh claims digitally. It was phenomenal, completely paperless and I was very impressed.
So post Covid, one of my strategy is that I would like to continue this digital move. Has the customer behaviour changed? Have distributors changed because they might have seen huge convenience. It must be so easy now to get a policy, it is so easy to get a claim, you just get down click pictures, upload and your money is getting transferred.
So behavioural change would happen. My strategy is to see how can I make the experience for my customer more frictionless and how can digitalisation be on the forefront of the insurance industry?
Second, as pay as you go kind of products come, why would somebody buy the full motor policy for the full year when he is going to drive only 50-100 kilometres in the entire year? Driving may become less as more and more people work from home and with only one-third staff going to office. So, products like this will emerge.
Third, as a company, we have retail cyber cover. Cyber risk is so high now. At least one out of every 10 people have already faced a cyber attack. The last I spoke to was a colleague who said one and a half lakh rupees from his account was transferred about 2 in the night. Cyber attacks have become so common that policies like retail cyber, cyber cover are needed.
As company liability claims start coming, the industry has to come out with new risk, new covers, the pandemic cover for business interruption which people have been talking about. Those kind of covers have to start coming in. It is a new era and the learning that we had from the Covid crisis, has to materialise. We obviously will do it and I hope the industry will also pick up on these lines.
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