100% FDI in insurance will lead to better pricing outcomes for customers: Anup Rau, MD & CEO, Future Generali India Insurance

Anup Rau MD & CEO Future Generali India Insurance

The government’s move to open up the insurance sector completely for foreign investors will promote healthy competition and ultimately lead to better pricing strategy, Anup Rau, MD & CEO, Future Generali India Insurance Company, told Moneycontrol in an exclusive interview.

While he did not share much on how the Central Bank of India's plan of taking over Future Group’s stake in the company would pan out, Rau remained optimistic that with Generali’s support, the general insurer’s journey to scaling up was intact.

Aiming to double the company’s business in the next five years, Rau said there may be a requirement for capital along the way, but that won’t be a constraint. He also delved into how the possible introduction of composite licence could alter the dynamics of the operations. Edited excerpts:

The approval for Central Bank of India to take over Future Group’s stake came through in October last year. Has that changed anything for the company yet?

We continue to be Future Generali India Insurance and the DNA of the organisation remains the same with Generali holding the majority stake. I will not be able to comment further on this as it is a shareholder matter.

You are one of the few insurance companies where a foreign player holds a 74 percent stake. How has this helped?

Having foreign promoter as a majority stakeholder has several advantages. It helps ensure patient capital as Generali has a two-century history. Added to that, their expertise adds a new dimension to the business. Having Generali as a majority partner has helped us consolidate our position and emerge among the top 10 players in India. Our company is independently run and fully managed by the Board. So whatever direction comes to us is directly through the Board, which includes representatives from Generali. Their direction, especially around long-term focus, and passion for building technical expertise and investing in human capital, has built a robust and fairly bullet-proof organisation.

How have they been able to adapt to India?

Generali’s expertise, particularly in the domain of underwriting, claims, and risk management, combined with a deep passion for customer delight, has led to us building a very credible brand with our channel partners and customers. Thanks to Generali, we have developed skills on the commercial side – when it comes to underwriting large risks such as fire, perils and marine. The advantage of having operations in about 37 countries helps us predict what the future will look like for India. It also helps that our claim settlement ratio has been the best in class for many years.

Most importantly, there is a lot of emphasis on putting in place good governance practices.

What’s your growth target for the next five years?

The general insurance industry in India is expected to grow at 14-16 percent over the next few years. We hope to grow faster than the industry. Our business premium is around Rs 5,450 crore for CY2024. At the current run rate, we should be able to double our business in the next five years. We are a well-diversified company both in terms of distribution and our product lines. Our market share for the first nine months of this financial year is about 3.1 percent on an ex-crop basis.

We might need capital along the way to sustain the growth momentum and I believe that will not be a constraint for us.

Considering that Generali is a common shareholder in life and general insurance businesses, have there been talks about what next if composite licence becomes a reality?

The proposal to allow composite licence will enable insurers to offer both life and P&C insurance products. Once it is permitted, it is for the respective promoters of various insurance companies to see how they would like to take it forward. It’s also for companies to see what works best for them. It will certainly be a welcome move.

Now that 100 percent FDI in insurance has become a reality, do you envisage increased competition from foreign players over time?

The number of players servicing the Indian market currently is comparable to much smaller emerging markets such as Malaysia and South Africa. Developed markets have much broader and deeper insurance markets – the United States has over 5,000 insurers, the United Kingdom around 400, and Singapore over 200. The government’s move to hike the FDI limit to 100 percent from the current 74 percent will be instrumental in attracting fresh capital from overseas insurers. It will help intensify healthy competition among players in the coming years, which will lead to better pricing outcomes for customers. This will be a big game-changer for the Indian insurance industry.

What about profit margins?

The general insurance business in India is not driven by underwriting profits but is more of an AUM (asset under management) driven business. In fact, the general insurance industry doesn't make underwriting profit in India. Between 2011 and 2021 India's population has grown by 10 percent but the number of policies has tripled in the same period. That means penetration has gone up but the premium is still 1 percent of GDP. It's like the telecom sector. Revenues have not gone up but the user base and penetration have improved.

As far as some shareholders are concerned, they see profit as fungible—whether it’s from underwriting or AUM, what matters is the return on equity. But the point to be noted is that even with no underwriting profits, the return on equity can still be decent.

Is listing at some point on your cards?

Listing is a shareholder decision. There is currently no active discussion happening regarding a listing. Also, there is no regulation around it right now.