`We have set up a team for rural insurance`

Reliance General Insurance, a part of the Reliance Anil Dhirubhai Ambani Group, grew its business through aggressive strategies in 2006-07. It recently launched a health insurance product priced so low that rivals envy it. The company’s president and CEO, K A Somasekharan, tells Falaknaaz Syed in an interview that insurance is a volume game and claims minimisation efforts make it profitable.

You grew phenomenally in 2006-07. What do you attribute the growth to?

In 2006-07, our new business premium income was up 462 per cent to Rs 912 crore. Our focus on creating infrastructure, building a team and market penetration helped.

In 2005-06, we had only 15 offices. By the end of March 2007, we had 97 offices. The number of employees increased from 300 to 1,000 last year. Right now, we are a 2000-people team. We are planning to have 200 operational offices this year.

What are your plans for FY08?

We received the Irda approval last month for setting up 115 operational offices, which we will establish by September this year. After this, I will approach the Irda for setting up more offices. We now plan to move to tier-II and tier-III cities.

We will be penetrating rural areas in a big way. We recently set up a team only for rural insurance in the retail segment. For rural areas, we will be concentrating on popularising cattle insurance, health insurance and personal accident insurance.

In a few months, we will be launching weather insurance. We will this month launch rural insurance products initially in six states – Gujarat, Punjab, Haryana, Kerala, Maharashtra and partially in Uttar Pradesh.

With detariffing, all insurers are now focusing on retail. What is the business mix at present and what are your targets?

Retail, at present, constitutes 55 per cent of our total premium. We plan to grow our retail portfolio to 65 per cent this year. As you are aware, corporate business is shrinking with competition getting tougher. The future for general insurers will be in retail. So we will be concentrating in rural areas.

Reliance General is quoting a low premium of Rs 999 for Rs 1 lakh health insurance cover at a time when public sector insurers are raising rates, including exclusions and capping charges allowed. Would you be able to service and honour a large number of claims?

Insurance is a volume game. We have sold 1.5 lakh policies in the last three months. How many policies have all the companies sold during the same period? Our policy is very easy to get. For people below 45 years, there is no medical formality.

People don’t have to wait for the policy or the TPA cards. Everything is given over the counter. I have collected Rs 35 crore premium by selling health policies. I am sure that by the end of the year, we will collect Rs 300 crore of health insurance premium as there is a heavy demand for this product.

I will create volumes and insurance business is like that. Besides, a majority of the policies sold are for a higher sum insured. By managing false claims, losses are contained and increase in penetration (volumes) ensures profits.

How will Reliance General ensure low claims?

We have a dedicated claims minimisation team to ensure that policies are not sold to people likely to make claims within months. Through TPAs, we have a tie-up with 5,000 hospitals. TPAs bargain and negotiate with hospitals.

Fees and charges for various diseases are fixed. We will soon be introducing a ‘gatekeeper’ concept for large policies. We will engage doctors who would advise the insured on various aspects.

The doctors (gatekeepers) would ensure that the insured are admitted to hospitals where charges are lower and also advise them on tests required and specialists to be consulted. This will eliminate the chances of healthcare providers submitting inflated bills.

You have also been quoting aggressively to bag large corporate accounts. Won’t this impact your profitability?

My growth in corporate business is only 6 per cent, while the overall growth rate is 232 per cent in the last two months. If I am quoting aggressively in getting corporate accounts, then why is my corporate business not growing?

I have lost so many corporate accounts because I could not match rates quoted by other insurers. Since we are growing, people feel we are quoting aggressively.

Also, now we have to give a statement to the Irda every three months. According to our board mandate, the solvency should not be less than 1.8 times against the Irda norm of 1.5 per cent.

How much of your risks do you reinsure?

General Insurance Corporation is our treaty leader with 60 per cent reinsurance support. As you are aware, 15 per cent is the mandatory cession that goes to GIC. You retain 5 per cent and for the remaining 20 per cent, we go for facultative reinsurance. In the retail business, we retain 20 per cent and reinsure 80 per cent.

Source: Business Standard