Ushering in the roaring 20s

We always look forward to a New Year with a lot of hope and aspirations. The year 2020 has also begun on a hopeful note.

IRDAI has announced the 33 proposals that have been approved for the regulatory sandbox project. Almost all of the successful ones relate to the health and motor portfolios, which constitute the major part of the Indian non-life GWP every year. I am hopeful that all of these proposals will shape out well and mark a new beginning in the Indian insurance industry.

All of us need to appreciate that as we step into the third decade of our new liberalised avatar, we mature further, and maturity should bring with it good corporate behaviour. The market is showing perceptible signs of hardening and holding on to rates is the call of the hour. I am hopeful, 2020 will make all of us more circumspect and better corporate citizens.

We in India have always lived with the best of times and the worst of times. Natural disasters are nothing new for us and the insurance industry has never been found wanting in such circumstances. We have always been among the first to provide relief and succour to the affected. However, at times, commercial considerations overtake. In such situations it would be good to recall the recent decision of The Business Roundtable, an influential group which represents the chief executives of 181 of America’s largest companies.

The Roundtable amended its two decade-old declaration that “corporations exist principally to serve their shareholders”. Its new declaration reads, “While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders” – customers, employees, suppliers, communities and – last in the list – shareholders.

Hence, as risk takers of the society, we the insurers need to give-up the doctrine of “shareholder first” and amend our views on how we need to run our companies. I am sure if we can keep our customers satisfied and happy, our shareholders too would be happy. We in India have ample latent potential for all of us to survive and sustain profitably.

We also need to acknowledge what is happening in Australia, Philippines, Thailand and many other countries, also including some parts of our own. If these events continue unabated, we would be the first to be out of business. While we have no means to stop or change the moods and moves of nature, we do have the means to ensure that their impact on us is minimised.

Subsequent to liberalisation, while the spirit of competition was welcomed, in our quest for top line and bottom line we perhaps forgot that loss prevention and loss minimisation are important aspects of loss control in insurance. Steps for loss prevention and loss mitigation not only help the insured and the insurer but also help mitigate economic losses in a larger context.

I am happy to note that the regulator has taken the initiative in this regard and has called for synergising the activities of the various stakeholders involved in these activities for the benefit of all concerned. I hope the industry will support all efforts in this direction.

At this stage it would be pertinent to note that the biggest losses that we now face are from the known unknown - the cyber risks. While the potential losses from cyber-crimes are really mind boggling, it would be good to recall that almost 60-70% of the cyber incidents can be avoided if the man behind the machine is more skilled and careful. So, while we do underwrite cyber-risks, it would be better if we develop a comprehensive strategy to make all our customers more aware about how this scourge can be avoided. Then I am sure we would have won half the battle.

There is a lot of hope ahead and a lot to be gained, we only need to change our perspective a little and look at the glass half full rather than half empty. To conclude, I would like to quote the industry’s doyen Dhirubhai Ambani, “For those who dare to dream, there is a whole world to win.” Let us dream and work for a successful and sustainable Indian insurance industry in the new decade.

I sincerely appreciate the efforts of Asia Insurance Review to have created the India Rendezvous platform for the Indian insurance industry to come together and ponder over the issues that can make or mar our future. I hope and wish we make the best use of it. Lots of good luck to all of us.

Happy IR2020.

Mr Devesh Srivastava
chairman-cum-managing director
General Insurance Corporation of India

A promising future for the Indian market

SCOR CEO of reinsurance Michel Blanc talks about the opportunities and expectations from the Indian market in 2020.

SCOR has been active in the Indian market for many years and sees significant growth opportunities in this fast-growing market.

On the Indian market

SCOR has a longstanding commitment to the Indian market which dates back a few decades. India is one of the fastest-growing large economies and is an important market for us. We see a promising future.

It offers significant growth opportunities and the regulatory environment is moving in the right direction. There is an increased focus on bridging the protection gap and the government plays a driving role by setting up sponsored schemes such as the PMFBY and Ayushman Bharat, introducing pooling or subsidies in the initial stages until the system becomes self-sustaining. It is a significant step in the right direction to foster insurance penetration which is still quite low at ~1%.

The opportunity for (re)insurers to cover the uninsured is immense as long as pricing is set at a reasonable minimum level so that insurance solutions are sustainable.
Innovation through the sandbox is already in motion and more regulatory changes such as changes in FDI limits, RBC, IFRS17 are anticipated which should expand the market with demand for new products and services.

Expectations from Indian market renewals in 2020

The last five years have been difficult with successive Nat CAT events and large risk losses. With the increase in frequency of CAT events as well as man-made losses, corrective action was taken and we saw an increase in primary market terms for commercial property in 2019.

This renewal comes on the back of some positive changes in the primary market which should create enough manoeuvre margins for (re)insurers to play a role in reducing the protection gap, finance increasing exposure and enable economic growth.

‘Be local’ to tackle increasing protectionism

A good response to increasing protectionism is to ‘be local’ and SCOR operates with a network of 35 offices in five continents, giving priority to proximity to markets and clients and integration in local economies. As a result of our investment in the local economy, we expect to be on a level playing field with domestic reinsurer(s) and be able to access business as a priority compared to offshore reinsurance markets.

Reinsurance’s critical role during Nat CAT events

Climate change and extreme weather events and their increased frequency are a reality. Political and social unrest are a reflection of the times we live in. (Re)insurance plays a role in dealing with adverse financial losses caused by such events and in enabling economic growth.

The (re)insurance industry is committed to this as a social obligation and portfolio sustainability is important for all stakeholders. That is why we need adequate coverage and pricing for these risks. There are signs of primary market terms improving across some geographies including India to make the industry sustainable over the long-term.

A new decade of hope and positive sentiments

The Indian insurance market is among the fastest growing in the world and continues to attract investors. We spoke to some industry leaders about what they think the market trends, opportunities and challenges will be in 2020.

By Jimmy John

Allianz Global Corporate & Specialty India CEO, CB Murali

The Indian market has rapidly and consistently grown ever since the monopoly insurance market was dismantled in 2001 with the arrival of new private and foreign-invested insurers. The Insurance Regulatory and Development Authority of India has enabled reforms involving product distribution and pricing areas. While risk quality and catastrophe accumulation continue to impact underwriting results, the opening of the reinsurance market has brought global expertise and capacity to the market and will help India’s long-standing desire to be a global reinsurance hub.

J B Boda group chairman, Atul Boda

India is already experiencing huge economic growth with radical changes and commitment from the government to make it the preferred destination for domestic and international investors. Opportunities abound, as insurance becomes an integral part of the development process. The recent revision in premium rates will boost premium inflow. However, with this increase, there is possibility that clients may opt for selected covers. In reinsurance, India continues to be the preferred destination for aspiring traditional reinsurers in the non-marine and marine class and the growing agriculture and health portfolios.

AXA XL India Reinsurance Branch CEO, Joseph Augustine

Indian general insurers started the year 2019-20 with positive sentiments and an optimistic note with the hardening of base property rates influenced by restricted treaty capacities, indicating a view to the reinsurers that the market is turning with sustained hard market rates. For reinsurers, margin rises are likely to come from improved economics on proportional treaties. Foreign reinsurance branches operating in the country have seen significant growth of their books.

Lloyd's India CEO, Shankar Garigiparthy

Market sentiment towards the end of 2019 seems to be on a better footing for the year ahead than the year gone by. The government is taking active steps to revive the growth process with various schemes backing the industries requiring essential support. We believe the reinsurance sector is also set to evolve and prosper as the market conditions grow to be all the more dynamic. We are also expecting to see an increasing trend in the use of technology and data, which will continue to play a pivotal role in risk-management strategies.

Anand Rathi Insurance Brokers whole time director and principal officer, Supriya Rathi

The continued push by the government through various schemes to insure the uninsured is creating greater penetration and hence overall industry growth. The regulator’s initiative to standardise health insurance policies would make products simpler and more customer centric. Rating and accreditation of hospitals, when implemented, would go a long way in controlling/managing medical costs which would boost health insurance sector growth.

ICICI Lombard general insurance chief - underwriting, reinsurance and claims, Sanjay Datta

The non-life insurance sector in India is witnessing rapid change. Recent amendments to the motor vehicles act helped increase motor insurance penetration. The regulator has been progressive too and the exposure draft on the revamped OD structure is forward-looking. The recent changes in health product standardisation will aid category penetration. The hardening of rates for property is a long-term positive. We are also seeing a shift towards tech such as AI in underwriting. This will act as a catalyst for the sector.

Markel India CEO, Deepika Mathur

The insurance market in India is making all the right moves. We are making positive strides in product development, pricing strategy and market penetration. On the regulatory side, we are seeing positive changes that attract more FDI and onshore reinsurance businesses. This vibrant growing environment will allow us to partner with more like-minded insurers as we welcome greater opportunities.