Planning to make it big in an already competitive business is like sailing in troubled sea - your ship should be strong, your crew should be excellent and you have to have a damn good idea about the path. The most important factor, undoubtedly, is the knowledge of the path. When one contemplates to achieve high performance in any industry; it is the challenges in the path that should get priority attention. The distinguished panel at the Accenture-Economic Times High Performance Insurance Series highlighted the challenges that lie ahead of the Indian insurance industry as its moves into the next orbit of growth.

In many industries opening of the sector to private participation has weakened the market position of the incumbent, making it easier for the new entrants to grow and prosper. However, in Indian insurance sector, the incumbent continues to dominate even 10 years after the opening-up of the sector. This puts the onus on the private sector players to differentiate themselves in terms of product innovation and customer servicing, so that they could grab a bigger share of the Indian insurance pie.

As insurance is a 'push' rather than a 'pull' product, it is a big challenge for the companies to make their products meaningful to prospective customers. As a first step, companies should simplify and de-jargonise insurance products and design the benefits so as to suit the specific needs of policyholders, suggested the panel. A higher degree of transparency on policy terms will ensure that the customer understands the product and its benefits, minimising fears of being cheated. It is therefore important for the industry to invest not just in expansion and distribution but also in client servicing and processing, the panel pointed out.

In general insurance, for instance, many customers are discouraged from buying insurance due to the anticipated complexity involved in settlement of claims. Insurance companies do assert that the competition in the industry is forcing them to speed up their claim processes, but the fact remains that a lot more needs to be done to make general insurance a hassle-free experience for the customers, noted the panel.

While it is easy to make tall claims about the need to make investments and infuse capital to meet the challenges, one cannot ignore the fact that profitability is the major concern of this industry today. Given aggressive expansion plans of the private players and the need to beat the competition, the period to break-even in life-insurance business has risen from what was estimated at 9-10 years to about 13-15 years now, the panel pointed out. The industry, which is already reeling under the pressure of high upfront cost of a nationwide expansion, is now also facing the problem of dwindling volumes as policy lapses are increasing every year. In a price-sensitive market like India, growing competition has plummeted the premium rates to making it imperative for the insurance companies to work on razor-thin expenses ratios.

Source: Economictimes.indiatimes.com, March 31, 2010.