27/10/2015
Motor insurance premiums have fallen 40-60% post-deregulation’
Updated: October 15, 2015 23:38 IST | Aarati Krishnan
    

KG KRISHNAMOORTHY RAO, MD and CEO, Future Generali India Insurance
Deregulation and competition have seen general insurance premiums fall sharply and customers need to take advantage of this, says KG Krishnamoorthy Rao, MD and CEO of Future Generali India Insurance. Excerpts from an interview:
The general insurance business in India is dominated by motor insurance, which is heavily regulated. So, what are the prospects for players like you?
Motor insurance is the largest segment of general insurance in all developing countries, not just India. In Asia, most nations have 50-60 per cent of their business originating from the vehicle business. As income levels improve with economic development, the first thing people buy is a vehicle. Thus, motor insurance is the first segment to grow. The second leg of growth comes from health insurance. It is similar in India. However, the industry is growing at a reasonable pace. Last year, general insurance premiums expanded 9 per cent and in 2015 we expect a growth of 15 per cent or so. We would also focus on these two growing segments — motor and health.
The upcoming Road Safety Bill seems to have many provisions that affect motor insurers. How will it impact you?
The Bill is likely to have a positive impact. For one, a major challenge for the industry today is that it is subject to unlimited liability on road accidents. This makes it hard to estimate or price motor cover. The Bill proposes a ceiling on the liability in case of accidents.
Two, today there is no time limit for filing an accident claim. Someone could file a claim even 20 years after an accident. A three-year limit is being suggested. Three, there is currently no jurisdictional restriction either. If someone is injured in an accident in Chennai and the vehicle owner is based in Kochi, a person can file a claim out of a third State. Now, there is a proposal to fix jurisdiction.
There is also an initiative to provide immediate assistance to accident victims. The idea is that if immediate medical care is given, lives can be saved and injuries reduced. The insurance company can get immediate information about the accident. Today, we get to know only when a claim is filed. These changes may lead to quicker settlement of claims for customers. But when the Bill will be passed is anybody’s guess.
In life insurance, pricing is based on mortality tables and premiums have come down sharply in recent years. Can that be expected in general insurance also?
That is already happening. Take motor insurance. Third-party liability covers are regulated. But on own liability, premiums have fallen sharply. If you bought a car in 2007, you would have paid about 3.5 per cent of the value of the car as premium. For a car worth ₹5 lakh, that’s about ₹17,500. Today, the cover for the same car would cost about ₹6,000.
Premiums for motor insurance (own liability) have fallen 40-60 per cent. In the case of property insurance, premiums have fallen even more; I would say they have fallen 80 per cent. The price war that has ravaged general insurance has gone mostly unnoticed. When corporates take insurance, the rates are heavily negotiated.
Property insurance has unfortunately not caught on with individuals or households. This is despite the incidence of natural disasters rising.
So, it can be safely concluded that the fall in general insurance premium is much more than that in the life insurance industry. Further, if the overall health of the insured public improves through increased awareness about wellness and other health safety measures and the pe*******on of health insurance increases, then health insurance premiums also can come down. Better driving habits, and strict enforcement of road safety rules can result in reduced number of accidents and thus can reduce motor insurance premium as well.
Health insurance is a felt need. But on cashless policies there were issues between insurers and the hospitals, and so on. Have they been sorted out?
The problem with the healthcare industry in India is that it is unregulated. From a customer’s point of view, there are no common standards on the procedures or charges across hospitals. This makes it difficult for a customer to know if the charges are right. We have requested the regulator and the Centre to come out with some kind of standardisation in healthcare. A proposal to grade hospitals and come out with benchmark charges for different procedures is being examined.
Plus, today, healthcare inflation is at 15 per cent every year. Therefore, the health insurance cover that one holds also has to increase at that rate. But that is not practical as we cannot change our premium every year. That means some consumers are subsidising others. That will stop only if the charges are standardised.
The problem that many people have with health insurance is that claims are often turned down. Or insurers don’t accept policies for higher risk individuals, like senior citizens. What is your comment on this?
That is a wrong impression. Across the industry, the actual rejection of claims is minuscule. In health insurance, the problem in many cases is pre-existing diseases not being disclosed at the time of taking the policy. Or the buyer has not understood some clauses like the ones on co-payment or sub-limits for expenses.
This could be due to lack of understanding or even selling of wrong policies. The other problem is that motor and health are two areas where the industry has seen a lot of frauds. On the policies for senior citizens, they will usually be accepted with some exclusions in case of some pre-existing illnesses.
Usually there is a medical test and if the person suffers from a condition that may be an exclusion. You should note that health covers, once accepted by an insurer, are eligible for life-long renewal. Therefore, the insurer does pay close attention to the risks. That’s why it is important for a person to start thinking of health insurance from an early age.
Why has portability of health policies not taken off?
According to the regulations, once a policy is ported, the agent does not get remunerated for it. Therefore, customers do not usually get advised to port a policy. We have requested the regulator to change this situation.
