No, Monopolists Aren't Insured

PRIVATE entry into insurance is all set to become reality with the Insurance Regulatory Authority Bill finally tabled in Parliament on December 15. Though it has been temporarily shelved with a parliamentary committee, the Bill promptly sparked a strike by insurance workers the very next day. Yet, despite the promise of a long battle by the insurance workers and Left parties, it's only a matter of time before Indians get the freedom to choose from a wide range of innovative global insurance products with matching service.

Several Indian companies have already tied up with foreign insurance majors like Prudential, Royal & Sun Alliance, Eagle Star, Chubb, Commercial Union and Allianz AG to bring in global expertise, innovations and new insurance products into India. And most are confident of striking it rich, as India's current insurance coverage is pitiful.

Does this mean your frantic search for an insurance agent every year—to extract the last bit of tax advantage out of your life insurance policy—will end? Does this also mean you no longer have to make unending—sometimes, hopeless—trips to the general insurance company to get your car accident or household theft claims settled? Yes. Next year, you may finally decide to go in for an insurance cover offered by a private/foreign insurer where you, the customer, would be king.

Exactly what kind of benefits can the customer expect? Outlook spoke to a few companies which are waiting in the wings with stacks of innovative ideas that would give the state-run GIC and LIC really tough competition for the cream of the insurance business. A glimpse of what will be on offer:

Customised products for you: Says Yvo R. Metzelaar, chief representative of ING Insurance in India: "Our focus would be on unbundling products to fulfill specific requirements of the people. Our products will take into account not only the income of the policyholder, but also other factors like family composition, financial insecurity and investment preferences of the people, before offering a scheme. There will be no set parameter. It will be adjusted with customer preferences."

The totally customised product line, tailor-made to suit individual needs, will not only improve the scope of the product, but will also give the customer much better value for his money. Says Antony Jacob, CEO, Royal & SunAlliance Insurance, India: "Why should a seasoned driver of 40 years pay the same premium as a negligent rookie who's just got his licence?" A relative-risk factor, calculated according to an individual's capabilities, will decide the kind of cover he needs rather than the current practice of imposing a set format on every customer. "Unless the risk factor and all other parameters are the same, no two persons should have the same cover," says Jacob.

The insurers plan to simplify the policy language to make it easily comprehensible. While some have adopted a 'Simple English' approach, others plan to go vernacular.

Untapped areas: Such as consumer products insurance. Nandan Maluste, VP, Kotak Mah-indra Finance Ltd, which has a tie-up with Chubb Insurance of the US, feels that small product-specific covers like home insurance, and electronics and consumer product insurance have not been properly promoted in India. While consumer finance has picked up well, consumer insurance has not. So, expect combined packages of finance and insurance of consumer products.

Health insurance, for instance, where GIC's only scheme, Mediclaim, with 5 lakh subscribers, covers just 0.005 per cent of potential customers. Then there's the Indian corporate sector which offers a tremendous opportunity to sell new covers. According to estimates, less than 100 standard Business Interruption policies are sold annually in the Indian market of 10,000 large and medium-sized companies, apart from small entrepreneurs. Other products, such as Alternate Risk Finance and low penetration areas like Pension Funds and Term Life Business, can also find a ready market in India, feel private insurers.

One of the most popular schemes worldwide likely to be brought into India is a 24-hour insurance hotline facility where a customer can access his insurer in emergencies and get round-the-clock help. Several companies like ING Insurance and Commercial Union have successfully tried this in the past. "Such hotlines have become very popular in the West. A 24-hour claim reporting line and a health insurance line are areas that private companies are looking into," says Sam Ghosh, country manager, Allianz AG India.

Along with the 24-hour helpline could come a host of add-ons that will make life simpler. For instance, says Jacob: "If your home gets flooded suddenly, call us to send you a plumber immediately." You can also call in if you want some odd carpentry jobs done. Or if you want to get your phone or electricity bills paid in a hurry.

SETTLEMENT of claims, a grey area in Indian insurance, is another issue that private insurers intend to address. Most promise settlement within 24 to 48 hours. Pre-settlement of policies nearing maturity and help in reinvesting policy proceeds will also be offered, something unprecedented in India.

Taking care of inflation: Your insurance policy can be made to work like an inflation-indexed investment fund, too. ING Insurance plans to set up a pricing structure that would ultimately benefit the customer. Says Metzelaar: "If there is high inflation, a policy for Rs 1 lakh may have little or no value after 20 years. Pricing and final value thus have to be adjusted accordingly." For instance, the premium may go up in proportion to the inflation rate, but so would the final settlement to give maximum return on investment.

The service edge. That's where private operators score over subsidised government companies. Says a private sector executive: "The process of getting a government insurance policy is tiresome. There's poor service before, during and after the sale of a policy. And the document doesn't reach you for months." Most private insurers promise prompt, customised service before and after sales. "In India, service standards have been stagnant for years; in competitive markets, companies have adapted practices in accordance to changing consumer needs. The Indian customer can now look forward to the creative use of technology to enhance service quality," says Jacob.

Of course, there's no free lunch: All these services will come with a price tag. With enhanced service and returns, private insurance will be a costlier affair than doing business with LIC and GIC. According to Maluste, there'll be a price implication for quality service but not necessarily in that proportion. He feels that since private insurance won't be subsidised as in the case of LIC or GIC, customers would have to shell out more for better services. Says an expert: "Insurance premia in India are among the world's lowest. With enhanced service through the private sector, these will increase. "

But is there enough scope? Says Maluste: "In India, less than 20 per cent of the population is covered by insurance. And they too are underinsured, as the risk cover isn't adequate. Here it's still insurance by force—the idea is to get tax relief rather than a financial cover. Private companies will change this to insurance by choice." And to ensure enough choice, companies are working on various product combinations.

Says Naren N. Joshi, chief advisor, ING Insurance: "The number of underinsured people in India presents a formidable market. A survey shows that LIC covers only 70 million lives." The coverage is still less in general insurance. Adds Jacob: "Less than seven per cent of the insurable population is covered by any form of general insurance; the market potential is large and growing." Today, LIC and GIC together offer over 300 policies, but the choice in India is limited to a handful. Says Jacob: "Indian companies have an extensive product portfolio. The question is: how many are actually sold?" That's answered by the fact that 80 per cent of LIC's revenue today comes from only four products which also offer tax incentives. The story for GIC is similar.

Despite their attractive arsenals, private operators will find insurance a hard nut to crack in a country where the sector accounts for only 2.2 per cent of the GDP. With their vast experience, huge infrastructure and extensive network built up over the years, LIC and GIC may reign supreme for awhile. In the first few years after opening up, feels Maluste, no private company would get over 1 per cent market share. Unless they spare as much effort to educate people about modern insurance as in marketing their wares.