Cholamandalam MS General Insurance Company, a joint venture between Chennai-based Murugappa Group and Japan’s Mitsui Sumitomo Insurance Company, has just completed its 15th year of operations. With a wide range of insurance products, the company has been recording impressive growth across categories. SS Gopalarathnam, Managing Director of the company, spoke to BusinessLine about the trends in the general insurance industry and the company’s growth plans. Excerpts:
What have been the key contributors to the strong growth in premium income in the first half?
We have grown 46 per cent in the first half of this fiscal. The government’s crop insurance programme has been a big driver of growth for general insurers. We expect the PMFBY (Pradhan Mantri Fasal Bima Yojana) premium to cross ₹30,000 crore this fiscal, against ₹21,000 crore in 2016-17 and ₹6,000 crore in 2015-16.
We saw 180 per cent growth in the crop insurance segment. We did only ₹143 crore last year. But during H1 of this fiscal we have done about ₹402 crore and hope to end the year with about ₹ 580 crore.
Excluding crops, we have grown by 30 per cent against the industry growth of 16 per cent. Motor growth was around 25 per cent (at ₹253 crore), which is slightly lower than the overall growth rate. In the fire business, growth was around 64 per cent (at ₹65 crore), largely driven by the businesses brought through bancassurance tie-ups.
Retail health has grown by about 46 per cent (₹34 crore). Personal accident grew 73 per cent (₹38 crore). For this full fiscal, we will cross ₹4,200 crore in gross premium (₹3,133 crore last year).
What are the emerging distribution models in the health insurance segment?
Health insurance is a highly under-penetrated segment in our country. Only 30 per cent of the population is covered under some kind of health policy. In a country like India, multiple distribution models will be there to reach out to customers.
As of now, banks play a vital role as they are now active sellers of health insurance. Secondly, agents, particularly of life insurance, are also a very important part. So, these two are now the major distribution channels for improving the health insurance penetration.
Going forward, digital channels will emerge and that will essentially focus on people who don’t have the time to pick the right policy and the ones who don’t have the wherewithal to go to a network of agents or banks to get health cover.
The share of digital channels is very small now. In a ₹1,31,000 crore (2016-17) general insurance industry, the share of digital channels is under ₹1,000 crore. To reach a share of at least 5 per cent in the overall pie, it may take five to seven years.
In digital, there are three possible models. Web aggregators (like policybazaar) and websites of companies where a section of people may log into, do some research and buy a policy. Mobile-based distribution may emerge in future.
Also, there could be a model where e-commerce sites such as Flipkart or Amazon, through tie-ups with companies, may list health covers along with other product categories.
Was there any rationalisation in your motor portfolio?
We continuously look at rationalising geographies and vehicle classes that give continuous losses. For example, in heavy commercial vehicles, we have reduced exposure due to very high claims ratios.
In categories such as 40-tonne trucks, even own damage claims are very high. It is not viable as of now. Quality and reliability of vehicles are improving, particularly the heavy trucks. But if such vehicles meet with an accident, the claims costs are very high.
The market is not mature enough to fix appropriate price (premium) for this. We have also exited some geographies, where accident rates are high.
How strong is your distribution? What are your expansion plans?
We have tie-ups with eight banks, three NBFCs, three housing finance companies and 12 auto OEMs. We have a 30,000-strong feet-on-street force. We are present in the government’s crop insurance programme in States such as West Bengal, Bihar, Telangana and Orissa, among others. In 2018-19, we will be involved in some southern districts of Tamil Nadu.
Our web channels are doing well and we are also expanding the mobile channels. In the next one year, we are looking at forging a couple of more bancassurance tie-ups and adding 10,000 more agents/POSP (point-of-sale persons) across 8-10 States.
What will be the implications of a surge in IPOs in the insurance sector?
I see them as a set of companies where the shareholder wants to disinvest in favour of the retail investor, mop up the premium and then take it to their parent organisations. This is the current trend.
In this process, some companies also want to bring capital into the company to facilitate their solvency and growth. In this exercise, major players are government-owned companies — four PSUs. Since government has a disinvestment target to meet, they divest stake in those PSUs.
Secondly, if you see the recent issues, IPOs are very high-priced. So, there is nothing left for the retail investors on the table. At this price, it will mean a very low dividend yield and limited opportunities for future capital appreciation. Hence, retail investors’ participation in these IPOs is very limited.
They have to price it lower to attract more retail investors, who actually stay invested in a company, unlike some corporate investors. From a macro-economic point of view, it’s good for the country as saving habits will also improve.