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Presents Many Opportunities for the Insurers
Interview with M. Ramadoss, CMD, The Oriental Insurance Company Limited

What is the overall scenario of non-life insurance sector in India?
The Insurance sector in India remained nationalized for more than 25 years and after many debates and deliberations the sector was finally opened up to private companies in the year 2000. The Indian insurance industry experienced a new era of liberalized market which was adequately regulated and supervised by the IRDA. The new entrants were subject to rigorous scrutiny and entry norms in relation to capital adequacy and prudent investment policies to ensure their transparency, stability and financial strength.

What are your views about the significant progress of Indian non-life insurance sector since its nationalization?
The current liberalized regulatory environment has attracted many domestic enterprises which were leaders in their fields and their foreign collaborators which were well established as insurance companies with considerable experience in the developed and emerging markets across the world. The global experience and the enthusiasm of the newcomers, coupled with financial stability and maturity of the existing public sector companies, led to a flourishing insurance industry which has shown unprecedented growth in the past 8 years.

How does Indian non-life insurance sector compared with the rest of the world?
The non-life segment has shown a significant growth from Rs.9450 crores in 1999-2000 to Rs.29,000 crores (approx.) in 2007-2008. The retail market has grown at an impressive rate and the client today has access to diversified range of products and customer service experiences of a new kind. Even though the non-life segment has made a significant impact in the domestic market with customized products and technology driven efficiencies, it is yet to achieve the desired level of penetration as compared to the non-life penetration level in the developed countries. The penetration level of non-life insurance in India is as low as 0.60% as against 4.80% of US & 1.60% in Asia.

What are the key issues that the Indian non-life insurance sector is facing today?
After detariffing, premium rates have come down and this affects the bottom line.  Fastest growing segments like Motor and Health are also producing losses.  Due to economic recession volume is also coming down.  Investment Income is down due to poor trading in stocks and low index.  So the challenges are how to grow with profits in these times.

What are the threats and challenges ahead of OICL? How well is OICL geared up to face the challenges?
The threats are competition from other companies and the market share is coming down.  How to maintain the market share in this falling premium rate and still be profitable is the biggest challenge.  Although, we have the best financial strength how to give the best customer service is another challenge.  For this, we have improved IT infrastructure, web enabled transactions, special offices to serve different market segments and different distribution channels and give top most importance to customer grievances.

Do you suggest any measures to improve the status of the non-life insurance sector in India?
The changing dynamics of the Insurance industry presents many opportunities for the insurers but capturing of these opportunities by them will require a well defined and pro-active business response. Eventually, true growth will come from focusing on empowerment of distribution channels. Along with the expansion of traditional modes like the agency force, the insurance industry has moved to explore alternative channels like Bancassurance, tie-ups, brokers and corporate agencies. Technology enabled Low Cost channels like Web Portal and Internet Selling will have to be cultivated further to improve the penetration levels. Aggressive marketing strategies and improved distribution network will buoy customer awareness and expand the market for products.

The insurance industry has been innovating constantly to introduce new reforms and simplify procedures. Moving a step forward in this direction, we are working on the modalities of simplifying the policy forms from an 8 page document to a simple one page document. The finer details would be available to the customer on the website.

How do you look at the potential for the growth of the Indian non-life insurance sector in the changing economic environment?
With the Indian economy forecast to grow at around 7% and, given a higher rate of growth among the insurers, the country’s insurance industry is optimistic about increased demand for their products. Intense competition from new entrants who have inherited the cost effective process and technologies from their foreign collaborations met with a prompt response from the existing Public Sector Companies who have garnered their in-house resources and professional support to initiate reforms and re-engineering processes.  There is huge untapped market in rural and semi urban areas where there is huge potential.

How do you see the Indian non-life insurance sector in the year 2020?
The non-life insurance industry has grown more than 16% p.a. CAGR (Cumulative Annual Growth Rate) since opening of the Industry till date.  There are 21 non-life insurance companies including the specialist companies dealing with Health Insurance and Export category insurance.   Of course, due to economic slow down, the growth of this industry will be less than 10% for a couple of years.  However, considering the huge size of Indian Market and also the untapped potential in personal lines of business, the industry will definitely achieve greater growth in the next 10 years.  Presently, the non-life insurance penetration is around 0. 6% of GDP and in a matter of 10 years, I am sure this will rise to 3-4% of the GDP.  I feel, many more number of Companies with regional focus and concentrate on products like householders’ insurance policy, shop-keepers insurance policy or small-scale industry insurance may gain prominence and will deepen the market.  More and more varieties of distribution channels are possible and the growth of individual agents should be encouraged if such a growth of non-life industry is to be achieved. In the fastest growing sector of health insurance, there must be complementary regulation on the health service providers like hospitals, pathological lab so that there is a regulated growth of this market.

Which are the thrust areas of operation for OICL in India?
Oriental Insurance, because of its sound financial strength, is able to retain a large portion of mega risks and hence is already a leader or co-insurer in almost all the mega industrial risks in India.  With our increasing financial strength, we will continue to focus on these risks by providing tailor made insurance solutions to them.  However, more than 40% of our premium is from motor insurance and around 18% is from health insurance.  If we have to sustain overall premium growth, we have to definitely grow in these two segments.  Apart from this, we will focus on semi urban and rural areas with effective marketing of rural and micro insurance products.  We feel liability insurance is an area where there is huge potential for growth and our Company will definitely focus on this segment also.

What is the OICL’s growth rate since its inception?
The Oriental Insurance Company Ltd was incorporated at Bombay on 12th September 1947. The Company was a subsidiary of Life Insurance Corporation of India from 1956 to 1973 (till the General Insurance Business was nationalized in the country). In 2003 all shares of our company held by the General Insurance Corporation of India has been transferred to Central Government. Oriental specializes in devising special covers for large projects like power plants, petrochemical, steel, chemical plants, aviation and marine hull. Oriental Insurance made a modest beginning with a first year premium of Rs.99,946 in 1950.

ORIENTAL with its head Office at New Delhi has 26 Regional Offices and nearly 900 operating Offices in various cities of the country. The Company has overseas operations in Nepal, Kuwait and Dubai. The Company has a total strength of around 16,000 employees. From less than a lakh at inception, the Gross Premium went up to Rs.58 crores in 1973 and during 2007-08 the figure stood at a mammoth Rs. 3900 crores.

What are OICL’s future plans?
Our first priority will be to grow in the gross premium with profits. Our priority area will be to bring down the combined ratio, which is ratio between the total outgo versus premium which is around 123% presently, to less than 100% in a period of 5 years. We will strive to be a dominant player in almost all segments of insurance and be a one stop shop for all types of insurances. Treating Customers Fairly(TCF)will be our primary focus area wherein we will ensure that the customer is given a fair deal and all the grievances are addressed. We will also ensure delivering the quality policy in the shortest time and also settle the claims at the earliest to utmost satisfaction of the customers. We will develop our HR policies as well as our IT system keeping the customer satisfaction as the main code.

Do the government policies support the growth of non-life insurance sector and what are your views on the government’s recent policy “49% FDI in Indian insurance sector?
To support the growth of non-life Insurance Sector, the Government has already opened this sector to the private insurance companies. IRDA, the regulator, has also been taking steps like detariffing, freeing of terms and conditions of the policy etc. to enhance the competition in the non life insurance industry so that the customer gets sufficient options and also the best of service. This has been proved successful with huge expansion of the market and the price fall, after that. Naturally with the premium going up, the private insurance companies will have to bring in more capital. When most of the foreign partners of the private companies are willing to put in more capital, if permitted by the Government, I do not see any reason as to why this extra FDI should be restricted. Of course, this will increase our competition but I feel even if the foreign partners equity holding is not increased to 49%, the local partner will bring in more capital commensurate with increased premium. Hence as far as we are concerned, we certainly will have competition whether or without increase in this FDI limit to 49%.  Hence, this factor does not affect us.

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