Ergo Insurance, a part of the Munich Re Group, has taken a unique approach to tap the Indian market. The group has three distinct partnerships in India for life, non-life and health, where it has partnered the Hero group, HDFC and Apollo Hospitals, respectively. The Ergo group was formed, following consolidation of various insurance companies active in life, health, property and casualty pensions and legal expenses insurance. The companies were consolidated under Munich Re. The Ergo group is now headed by CEO Torsten Oletzky. At 42, Mr Oletzky is among the youngest heads of an insurance multinational. In an interview with ET, Mr Oletzky speaks of group’s ambition to be among top five in India. But at the same time, he says that he will be uncomfortable with scaling up overnight and recruiting one lakh agents in the first year. Why have you tied up with different partners for life, non-life and health? Won’t this lead to brand confusion?
DKV is a specialist in health. So, we have approached a specialist organisation — Apollo. But we do not use the Ergo brand in the Apollo DKV venture. The HDFC joint venture gives us the opportunity to engage in a business which is already established and by bringing in the Ergo experience, we can exploit a lot of growth opportunities in non-life. We also use the Ergo brand in the life venture with Hero. Both HDFC and Hero are excellent brands in the Indian market and they combine well with the Ergo brand. The Ergo brand stands for very solid business, high quality distribution and high quality processes and we have looked for partners with the same set of values and business policies. We look for partners who we believe will fit with our management values, because we want to stay together for a long-time. It is not so important which industry they come from.
What feedback have you got from the government on the increase in foreign direct investment in insurance?
We just had a short meeting with the government where we discussed the issue and there was no definite news. But I had the impression that sooner or later this would happen. We have made our business plans with our partners based on the current situation and we will follow the business plans. If there is any change, we will be happy, but our business plans are not dependent on it.
Are there any plans to get into the asset management business in India as well?
We have bundled our asset management activity with Munich Re in a company called MEAG (Munich Ergo Asset Management Group) and we are doing most of our global asset management through this company. MEAG also works for external clients, but its main focus is to perform the asset management function for the insurance operations of Ergo and Munich Re. So, if our insurance business needs the services of an asset management company for the purpose of unit-linked or other situations, it can be provided by MEAG. While the asset management services are not exclusive to group companies, it is not a primary focus of business development.
Many European insurance companies are cutting costs by outsourcing jobs to India. Do you plan to do the same?
Insurance companies are cutting cost, because customers want a good price for their products. We are definitely as strict as our competitors in managing costs. But we have not come to the point where we feel that outsourcing to India will improve our cost in the core European business. Our business is very language-dependent and since our main operations are currently not based in English-speaking markets, we are predominantly operating in German, Polish and Turkish language, among others. So, it is not as easy for us to outsource as it is for companies in the UK.
When do you expect Indian operations to break even?
The ‘problem’ with break-even from an accounting profit point is that it gets delayed when the growth is strong. At the same time, while you are not breaking even in accounting terms, you are building up organisation value in terms of embedded value and making economic profit. As long as we grow, our embedded value in our life business, we can live with a situation where accounting profits take longer to be achieved. Obviously, we want to become a ‘top five’ player over time. But I would rather go a bit slower on topline growth and have high quality in our distribution, organisation and processes which is sustainable so that customers keep coming back.
What are the growth drivers that will help Ergo achieve its five-year growth target?
We come out of a strong German business where we have a 7-8% market share. We will be able to grow our German portfolio in line with the German market, but the German market is relatively mature and is only growing at around 2%. When you look at the rest of Europe, there are some market with higher growth rates in Central and Eastern Europe. This is an important market for us as well. We have a strong presence in Poland. We also have a strong presence in the Baltics and we are entering other CEE countries through bancassurance with Unicredito — one of the leading banks in Europe. We are in Greece and Turkey. But India and China are probably the regions which will see, by far, the highest growth in the next decade. If you obviously want to take part in this growth, you will have to be there.
Multinationals such as AIG, Allianz and Axa have been promoting their brand globally. Would Ergo be doing the same?
We have a slightly different home market situation than Allianz and Axa. We were founded 10 years ago, out of four companies with very distinctive and different strengths and brands. We have a speciality health organisation with DKV. We have a speciality legal protection insurance with DAS and we have two strong multi-line brands with Victoria and Hamburg Mannheimer. Since these are well-known brands to German customers, we decided not to give up these brands for our German customers. Whenever we go to international markets, we try to use the Ergo brand in situations where we are on our own, or with partners. We have leveraged the Ergo brand in Poland. We have it in Turkey. We have it in the Baltics, Italy, Russia and Korea. And we use it in India as well. So, while the Ergo brand is getting stronger, we do, however, not have plans for pushing for one single global brand for Ergo.
Source: The Economic Times
Source: The Economic Times
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