Q. The financial global turmoil had some impact on most sectors in India. According to you, how badly was the Indian Insurance industry impacted and which are your key business areas that have witnessed a slowdown?

A. The Indian insurance industry has been badly affected by the intense price competition among players since the free pricing, rather than the global financial turmoil. The industry is accepting more risk at a lesser price. In other words the premium charged is not commensurate with the risk profile. This has dragged the growth rate. So though the sum insured in major lines have gone up the premium has drastically shrunk which explains the sluggish growth.

Property line of business was the most affected which witnessed indiscriminate pricing and reached a new low with prices being slashed to over 80% over the erstwhile tariff-based premiums. Motor insurance also was affected due to the falling prices.

Q. Insurance in India is a big opportunity especially with the large population and untapped potential. What according to you are going to be the key growth areas in the near future? Any measures taken by you to ensure vast growth in these segments? Also, what about your efforts in rural India?

A. Insurance penetration in India is still low especially for the non life insurance, with a penetration of 0.60 % as on 2007. Insurance in India offers unlimited growth opportunities as in any other sector.

However in order to capitalise on the growth opportunities, the industry has to grapple with some challenges like –

1. Wide reach to tap the customer base and cost of reaching them at the lowest cost
2. Lesser manpower with right skill set pushes up the management expenses
3. Customers have become discerning and competitive environment landscape

Amidst these challenges the pressure is on companies to do business at a manageable cost.

The major growth drivers would be the retail lines of business such as health, and motor insurance. Additionally new markets and segments would need to be tapped in the rural areas. Bajaj Allianz has over the years developed a pan India presence through its offices and distribution channels to effectively tap all the segments.

Bajaj Allianz General Insurance has enhanced its presence in rural areas by way of wide network of offices and tie-ups with bancassurance partners like regional, rural and co-operative banks.;

Q. In the early years insurance companies face huge cost over runs. How is your company placed with regards to this aspect? What are the other challenges faced by the insurance industry?

A. Expense Management is an issue with all the insurance companies. It has nothing to do with a company being in start-up or well set stage. Most of the companies have completed over 5 years. Bajaj Allianz is focusing on a prudent cost management structure.

The current financial year would be a challenging for the industry due to the shrinkage in premium value and enormous pressure on margins. The pressure on profitability would continue as long as the intense pricing war continues. We hope that some semblance of normalcy is restored at the earliest and price reflects the risk profile.

Q. Higher business growth requires high level of solvency margin and capital infusion on a regular basis is necessary. What are the ways considered by you to inject additional capital? Are there alternatives that you suggest the industry should move towards?

A. The way the market is behaving it seems that hardly anyone would need capital for growth and expansion but one may need capital to offset the poor loss ratio to be profitable. If you see, in the last year, ROE for private insurers were less than 2 1/2 %, whereas for PSU insurers were less than 10%.

Bajaj Allianz was one of the companies that did not require any capital addition in the last financial year 08-09 and Insurance penetration in India is very low especially for non life insurance, with a penetration of 0.60% as on 2007. Insurance in India offers unlimited growth opportunities as in any other sector. The major growth drivers would be the retail lines of business such as health, and motor insurance. Additionally new markets and segments would need to be tapped in the rural areas. In order to capitalise on the growth opportunities, the players needs to greatly enhance their reach and distribution at a manageable cost. has the best capital efficiency in the industry, if one considers the GWP to capital ratio.

As of now Bajaj Allianz seems to be in a strong position in terms of capital efficiency and solvency margin and was the only private insurer to have the highest profit after taxes with Rs.95 crores.

Q. In recent times, the private sector has proved vital in facilitating the sectors growth. What are the measures taken by you to exhibit strong growth amidst the fierce competition?

A. The focus for Bajaj Allianz is and always would remain to achieve balance with growth and profitability. We do not however see growth opportunity in the current market environment.

Q. W hat is your product USP/ strategy that sets apart your company from the rest?

A. The main USP is the wide network of offices, wide products portfolio, services to our customers, transparency in our operations like sharing claims related statistics, annual report, etc.

Q. Growth in the Insurance Industry is largely dependant on product innovation backed by a strong distribution network. How well is your company equipped with this kind of work force/ infrastructure? Do you see some major hiring in the near future (6 months)? What are your expansion plans in terms of number of branches?

A. Going forward growth would come only if the pricing war unleashed ceases. Currently Bajaj Allianz has presence in over 250 major towns and cities in the country with a substantial distribution network in the form of agents and corporate agents.

Bajaj Allianz also has the widest product portfolio in health, travel insurance. We have also tried to offer health insurance product that can be available off-the -shelf by a sub-brand – Bajaj Allianz InstaInsure. Product innovation is a continuous process and we will launch products that are need-based so as to give a wide choice to our customers.

Q. How well has your company tapped the bancassurance channel of distribution? Are there are other new avenues (like online retail of insurance) that you would like to tap in order to enhance your marketing and distribution network?

A. Bajaj Allianz General Insurance has bancassurance relationship with over 100 banks of various hues and culture ranging from public sector banks, foreign banks, private sector banks to the regional and rural development banks. Almost all partners can issue policies from their own location and also get instant MIS. For some of the banks we have developed customised and co-branded products also. This bears a testimony to our status of being the first choice for any banks intending to retail insurance products.

Q. T he government under the IRDA has played a crucial role in the development of the insurance sector over the past decade. However, what according to you should be the predominant change made by the government with respect to its laws in order to provide further impetus to the growth of the insurance industry in India? What medium or long-term issues in the sector do you want that the regulator to address?

A. Some of the issues that IRDA needs to address are as below –

• Follow-up to raise the FDI limit in the sector to have better access to capital for increasing distribution and penetration
• Stress on better and uniform disclosure norms in terms of profitability, claims settlement statistics, etc. in the interest of customers, shareholders and other stakeholders for better benchmarking

Q. W hat are your future plans? How do you perceive the Insurance industry to shape up in the next two years?

A. The slowdown and the pricing war would continue to be the spoilsport for the growth of the industry. We hope that this will be a transient phase of indiscriminate pricing and hope that the normalcy would be restored at the earliest.