The Hindu Business Line : Insurance companies making rapid strides

A zone characterised by high rural density, relatively conservative investment orientation and lukewarm economic climate – the eastern and north-eastern regions, however, continue to have substantial growth potential for both life and general insurance companies.

A high level of awareness among people and closer family bonding have acted as principal drivers in the growth of the insurance sector in the region, according to insurers.

In general insurance, the four public sector entities– National Insurance Company, New India Assurance, Oriental Insurance Company and United India Insurance Company, and in the life insurance segment, LIC accounts for over 65 per cent market sharecommensurate with the national average. However, different public sector insurance companies are rapidly increasing their foothold in the region by infusing higher degrees of competitiveness and launching innovative products.

Regional Leader

The Kolkata headquartered National Insurance Company (NIC), the market leader in general insurance in the zone, earned a gross direct premium income (GDPI) of Rs 390.55 crore (14 per cent growth over last year) during April-October from the eastern markets. Its market share in the zone was 37.4 per cent during the period. Of the national target of Rs 4,500 crore of GDPI, NIC has set itself a target of Rs 665 crore for the zone this fiscal. NIC’s premium income was Rs 234.56 crore from West Bengal, Rs 68.86 crore from Bihar, Rs 37.47 crore from Orissa and Rs 49.66 crore from the north-astern States.

The combined GDPI of the four public sector general insurance companies during the period was Rs 1,044.21 crore from the eastern and north-eastern zone, Rs 3,841.05 crore from the western zone, Rs. 2700.39 crore from the northern zone and Rs 2,902.14 crore from the southern zone.

Mr V. Ramasaamy, Chairman-cum-Managing Director, National Insurance, told Business Line, “Our main focus in the eastern region is the retail customer base as the corporate clients in the region are limited.” Of the different initiatives in the zone, he said, NIC would soon undertake a project of distributing insurance policies under the Union and State Government funded Rashtriya Swasthya Bima Yojna in West Bengal along with Punjab and Karnataka followed by the rest of the country.

The company has also initiated, in Kolkata, recently, a system of claim settlement through the Central Office. “This is to bring down the turnaround time from 25 days to not more than 10-12 days,” Mr Ramasaamy said.

In a pilot project in Kolkata, NIC’s officers have started door-to-door campaigns for the first time in the country to understand financial needs of potential customers. While implementation of the Core Insurance System will be complete by December 2009, the eastern region is expected to be covered on a pilot basis by June, he said.

NIC has a target of raising its net profit to Rs 300 crore in 2008-09 from Rs. 172 crore last year.

Bancassurance

In a competitive business scenario, alternative modes of distributing policies have gained importance. Taking a cue from the private players, Life Insurance Corporation - the country’s largest insurer - is also focusing on bancassurance and other alternative channels for business growth. Bancassurance is a mode of delivery or selling of insurance products through the banks. LIC’s eastern zone sold 19,595 policies through banks till October this year, growing at a substantial rate of 125 per cent over last year. Number of policies (NOP) sold by the zone through bancassurance and other channels is expected to grow to at least 5 per cent of the total business in 2008-09 up from 2.1 per cent in 2007-08, according to an LIC official.

Alternative channels account for 30-50 per cent of different private insurers’ total business.

While bancassurance business is yet to pick up in the eastern zone for National Insurance Company, it is planning to tie up with a couple of automobile companies for selling auto insurance policies, Mr Ramasaamy said. The company, currently, has similar tie-ups with Maruti and Hero Honda. NIC has also identified some offices in the region, which would solely concentrate on raising business through banks, he added.

Micro Insurance

Providing low premium insurance policies for rural and urban poor is mainly a social service to insurers and LIC is the pioneer in this regard in the region. LIC’s eastern zone had sold 1,41,523 Jeevan Madhur policies till October this fiscal, thus, becoming a leader in the country, followed by the southern zone. It has also topped the country as on October 31, in terms of achievement of a total target of 4,94,000 policies.

An official at LIC cited the presence of large proactive NGO and SHG network for the success of its micro-insurance business. The two of country’s best performing corporate agents in terms of NOP - Uttar Dinjpur Group for Human Resource Development (Raniganj) and JMM KKUS (Kharagpur) - are also from the eastern zone, he pointed out.

Among private players, Max New York Life is planning to launch a micro insurance product – similar to Max Vijay, an innovative flexible low premium paying policy through top-up method targeted at the urban poor, an official said.

Small markets doing well

Mr John Meyne, Regional Head Aviva Life Insurance said, apart from large cities, the small markets in the eastern and north-eastern region are contributing considerably to the insurer’s business. “Places such as Asansol, Durgapur, Siliguri, Bhagalpur, Balasore, Cuttack, Rourkela and Dhanbad, Assam are doing very well for the eastern region,” he said, adding that nearly 40 per cent of the zone’s business comes from smaller towns and villages.

Mr Rishi Srivastava, Senior Vice-President and Head, Rural Business of ICICI Prudential, said out of its 91 branches in the region, 33 are located in villages and micro-districts. Rural business contributes 7-8 per cent of its business in terms of value, he added.

Impact of financial crisis

The impact of overall financial crisis on the motor insurance industry may be felt in another three months if banks reduce their vehicle finance portfolio and auto sales are on the decline, Mr Ramasaamy said. The engineering insurance portfolio may also be affected to some extent during the period as companies are postponing projects, he added. Mr Meyne said Aviva is yet to see an impact in sales of unit-linked policies, which still account for 80-90 per cent of business. Nearly 40 per cent of annual business of life insurance companies comes during the January-March period, which may be less this year, an industry expert said. Health insurance is now a loss-making portfolio for the industry, Mr Ramasaamy said, adding that NIC is in discussions with hospitals and is also trying to rope in other general insurers to raise voice for standardisation of hospital services. NIC expects a reduction in claim ratio in medical insurance to 90 per cent this fiscal from 100.6 per cent last year.