Underwriting profitability is the key to service and sustainability: Bajaj Allianz CEO

At a time when the general insurance industry has been struggling with undercutting of premium rates and low profitability due to losses from third party motor pool, Bajaj Allianz General Insurance reported a 63 per cent jump in profitability in 2013-14 at ₹101 crore.

Tapan Singhel, Managing Director and CEO of Bajaj Allianz General Insurance, who’s been with the company since its inception, said in an interview with Business Line that the industry has to move beyond traditional insurance products and offer more low-ticket and fast-moving offerings. Excerpts:

During the last fiscal, the general insurance industry saw profitability improve despite the slowdown in growth. What are the reasons for this?

The year was challenging, especially from the growth perspective. In the first half of last fiscal, the industry saw growth of around 18 per cent, while in the last quarter it dipped to below 10 per cent.

There was a rapid slide in growth, and if you look at our profitability towards the second half of the year, pricing became an issue. So, my expectation is that in the new fiscal profitability may not be as good as in FY14, because companies have been trying to retain their turf, which affects pricing.

Price, I have maintained, is very important for the industry to serve customers well. If we end up in a scenario where we are not making money, the sufferer is the customer because the overall service will come down.

Our underwriting profitability without the third party motor pool would be around 95.3 per cent. I want the discipline of underwriting profit to be there in the company because this is the culture that you set. We will underwrite business that we understand.

The combination has to be top-line and bottom-line. If you look at the smaller insurance companies, most of them have burnt their fingers.

The regulator has raised concerns over high discounts in group health insurance premiums.

Group health should move from a pure insurance contract to a health management contract where insurers can charge a fee. As insurance companies we offer discounts and have relationships with hospitals, we can keep costs low and have expertise in managing frauds, so we are better equipped with managing the portfolio.

Currently, insurers under-quote and pick up business with losses. Today, if an insurance company quotes ₹90 and the claim is ₹100, then the CFO is happy. So, we need to have a re-look at the model.

Are you looking at expansion?

We are moving to tier-2 and tier-3 cities because general insurance is under-represented there. If you look at the economic spend, the rural spends are higher since wealth is moving there and new assets are being created. It is not about brick and mortar offices. Now it is about technology and on the spot servicing at customers’ doorsteps. Opening brick and mortar offices means you are investing too much in infrastructure, and then you need to start looking at cost and return. So, we are looking at expanding business through virtual offices, service centres.

What innovation are you looking at in terms of product delivery and claims?

Currently, products have a very short shelf-life. What maybe relevant today may not be so six months later, so we need to have simple fast-moving products with need-based covers for very short durations and low ticket sizes. I think slowly it will shift to offerings rather than just the price.

We are focusing on using technology and servicing customers at their doorsteps — for issuing policy and claims.

We want to make a complete offering rather than just process claims.

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