V Suryanarayanan (VS), Managing Director, Chola MS General Insurance shares about the major transformation and important game changers that would shape the insurance industry.
IE: Major changes through these years.
VS: The general insurance sector has experienced significant changes over the last 5 years in multiple dimensions such as regulatory changes, premium volumes, line of business mix, business from distribution channels, new players in the industry, consolidation, players listed on exchanges etc.
With a vision of Insurance for all by 2047, the regulator has proceeded to liberalise the sector with several substantive changes in product approvals, management of expenses, open architecture in banks, Tier II capital etc.
More changes are on the anvil over the next few months by way of introduction of Bima Sugam, extended use of IIB data by insurers for analytical and problem-solving purposes, inter-operable health claims exchange, use of account aggregators for effective product offerings, upselling and cross-selling. The regulator is also poised to introduce risk based solvency regime where capital requirements of insurers would get linked to their respective risk profiles.
There has been a paradigm shift in terms of product offerings with the introduction of byte-sized covers, range of add-on covers, covers for electric vehicles, wellness related product offerings and policyholders today have the variety of both insurers and products to make their choices. Policyholders now have digital platforms that help them in price discovery and in making informed choices.
On the financial results side, the combined ratio of most players and that of the industry has turned adverse with enhanced dependence on investment income for overall profitability.
IE: Milestones that transformed the sector.
VS: Strong competition among multi-line and standard health insurers has provided customers with multiple options to evaluate, discover on pricing, servicing levels and make informed choices.
Strong regulatory framework has helped the industry withstand and survive multiple catastrophic events (major floods, earthquakes, Tsunami and more recently the pandemic). Insurance industry is one that did not go to government for any support during the pandemic.
The industry has been a major contribtor in capital formation for the country, from its growing investment corpus into key sectors such as housing and infrastructure.
Yet another impact is the massive employment opportunity – both direct and indirect to agents, point of sale persons, other distribution channels and in areas such as crop insurance.
IE: What will be a game changer in the years ahead?
VS: With economic growth and change in demographics, the retail portion will grow substantially. The industry is poised for strong growth and given the inherent nature of annual policy structure, the customer gets the option of evaluating insurers on service levels. Looking at it differently, an annual structure leads to inefficiencies in the industry with insurers on the treadmill spending efforts, time and cost on retention which can be spent differently for market penetration and growth.
Technology will be a big differentiator in terms of gathering insights on customer behaviour, expectations and providing comfortable navigating journeys that are easy for customers to operate. Reduction of waste and frauds will become seamless and technology will help insurers to price the products optimally, operate with high efficiency and effectiveness which also has a bearing on the ultimate pricing of products.
A humane, compassionate approach aided by technology can take the industry forward significantly.
IE: How does India compare with global peers and how are we equipped to ride the growth wave?
VS: The Indian non-life sector has been growing well. India, as a country, has the benefit of 4Ds – Demography, Digital stack, De-carbonisation and De-globalisation.
The favourable demographic situation will sustain for well over two decades as the younger population is aspirational, well-informed and digital friendly. India is surging ahead with its digital stack which can only get better. With a stiff de-carbonisation objective, the onus on non-fossil dependent energy and thrust on electric vehicles, green hydrogen powered vehicles will increase. Strong domestic consumption is poised to push further credit growth, infrastructure spend, growth in housing, etc – all of which augurs well for insurance growth.
We have traditionally measured insurance penetration in relation to GDP. But this measure does not consider the pricing effect – as prices become cheaper, the ratio appears static. A better way would be to measure in relation to the underlying such as measuring the population covered by health insurance to total population, motor vehicles insured (by category) to total vehicles on road, etc. This would insulate the price effect and present a more accurate picture on penetration.
Domestic reinsurance capacity must be strengthened to reduce and moderate the impact of global losses reflecting on its pricing. The global general insurance industry continues to evolve in terms of structure, product offerings and India has the advantage of leap-frogging to do a catch-up quickly.
IE: Your current operations and plans ahead.
VS: In Q1, Chola MS grew at over 30 per cent as against industry (multi-line players) growth of 16.5 per cent. We seek to grow at about 1.5x of industry growth. Chola MS has won a cluster in crop insurance in Maharashtra which would mark our re-entry. Return on Equity has improved to about 12 per cent (annualised) as on Q1 and we operate with an investment corpus exceeding Rs.15,000 crore.
Chola MS has a strong presence in bancassurance across government owned banks, private banks, small finance banks and rural banks. It operates on most major automobile OEM insurance programmes and has an agent / POSP network of 50,000+. Over the years, we have grown consistently to expand physical presence in 26 states with over 600+ touch points, serving over 34 million customers. Chola MS would strengthen all its distribution channels and embrace new lines of business to meet market expectation.
The company has set an aspiring goal of strengthening its digital offerings and is embarking on a journey of transformation by investing on data analytics which would profoundly change the way we engage with our customers and partners.
