“Despite the hike, third-party premiums are very low”

Now that the premium for third-party insurance for motor vehicles has been raised, will the industry relent on its demand for a cap on theinsurance cover for motor accident victims?
The hike in premium will provide some cushion for insurers in view of the increasing third-party claims, both in number and in terms of the compensation amount. In India, there is a cap on the compensation payable to victims of rail accidents and air crashes, but not for road accidents. The price of third-party cover is still not adequate to cover specific risks. The premiums should also be brought into the free pricing regime. This will allow insurers to charge premiums as per the risk profile of the vehicle. We will also be able to reward good drivers, just as it happens in the ‘own damage’ part of motor insurance. This will be better than raising the prices every year and will also end the cross subsidy prevailing in the present scenario.
Does this mean that the industry will continue to press for a cap on compensation?
Besides the capping of compensation, another burning issue is the time limit for filing third-party claims. Today, an individual can file a claim irrespective of the occurrence of the accident or loss. We have had cases come up even 8-9 years after the accident took place. The longer the time taken to file a claim, the greater the chances of fraud. There should be a time limit for filing a claim. It should be restricted to three years after the accident, though one year would be better.
Some private companies refuse to insure vehicles beyond a certain age. Is this justifiable? What should a buyer do in such a situation? Bajaj Allianz does not have any underwriting guidelines on not insuring cars beyond a certain age. We insure cars of any age as long as they are fit and roadworthy and have a valid registration certificate. The only issue that remains from a vehicle owner’s perspective is the extent of depreciation. As the vehicle becomes older, thedepreciation comes down. Beyond a certain years, most vehicle owners consider it a better option to buy the third-party insurance instead of paying the full premium for old cars.
The growth in the insurance industry slowed down in 2012-13. Will it manage to revive this year?
A major chunk of the general insurance business comes from the auto and industrial sectors. However, auto sales are down month on month and the industrial output also looks bleak. So, the overall growth of the economy would be slower than in the previous year. It will be challenging to revive general insurance on its own.
Though your company managed higherthan-average growth, smaller rivals are catching up. What will be your strategy to counter this?
Competition is always good for the industry as well as customers. It also helps increase the penetration of general insurance in India. Our strategy will remain the same—maintaining growth with profitability. We will aim to continue to grow a little more than the industry, even as we focus on keeping the costs low. This would ensure that we remain one of the most profitable insurers in the country.
If the focus will be on growth and profit, what happens to the customer?
The word ‘profit’ is not as bad as it is made out to be by some people. If a company makes profit, it is a clear indication that it will be in the market for a long time. It also shows that the services provided to its customers will be very good because they are under no pressure to compromise on claims payment as a result of a desperate situation to turn in profits. So, our company’s strategy is clear—we shall aim to maintain or gain market share, but also be the most profitableinsurance company in India, with a clear focus on customer service and providing a superior customer experience. Bajaj Allianz is one of the few companies that have been consistently profitable since our first full year of operations in 2002-3.
Some insurers feel that standardisation of health insurance policies will kill innovation. Will standardisation help the customer at the cost of the industry?
The penetration of health insurance is still very low in India. This is not because of lack of
product innovation, but
predominantly a question of distribution and reaching out to the masses. Only a very small percentage of Indians has or can afford health insurance. So, insurers should focus on improving the distribution. In the long run, this will be beneficial for the customers, the society and the country.
Home insurance is still a neglected risk. How can this cover be made more popular among masses?
I agree that the penetration of home insurance is minuscule in the country. We, as an industry, have failed to create awareness or use our distribution effectively to sell the product. Home insurance is something that everybody needs. People spend decades building, furnishing and decorating their dream homes, but a single calamity can wipe out decades of hard labour. This can be easily protected by a premium as low as 3,000 a year. It is my commitment that our company will focus on this product more because we strongly believe it is good for the customer.

Source :The Economic Times.
Date : 10/06/2013
Writer : Tapan Singhel
CEO & MD, Bajaj Allianz General Insurance
The CEO of the second largest private general insurer in India tells Babar Zaidi why third-party insurance should be free from price control, how health cover can be made more popular, and why home insurance is crucial.


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