The insurance industry has witnessed a flurry of regulatory changes since Insurance Regulatory and Development Authority of India (IRDAI) Chairman Debasish Panda took charge in March 2022.
The revamped expenses of management (EoM) and commission structure came into force on April 1, and insurers now have greater freedom in determining commission payouts. While several industry-watchers saw this as watering down of the August 2022 proposals that had prescribed a 20 percent cap on commissions, SBI General Insurance MD and CEO Kishore Kumar Poludasu feels that policyholders will, in fact, benefit from better (that is, lower) premiums due to competition in the space heating up, going forward.
SBI General Insurance is planning to expand its presence across all its existing lines of businesses – health, motor, commercial lines and crop insurance. Though global reinsurers are tightening their prices, barring commercial lines, other portfolios will remain unaffected, he said. He does not foresee any health insurance premium hikes in the near future.
The insurance company recorded growth of 21 percent in health insurance and 26 percent in crop insurance in FY23. Health makes up 21 percent of its portfolio, while motor and commercial lines account for 25 percent and 15 percent respectively. Poludasu says that the firm has grown across home, health, personal accident, commercial lines, and crop insurance segments.
Health insurance buying patterns have changed since COVID-19, with those who were not covered looking to buy policies, and those who had already purchased health insurance looking to enhance their coverage. The average sum assured (SA) in health has gone up by 15-20 percent from pre-COVID days, Poludasu told Moneycontrol’s Preeti Kulkarni in an exclusive interview. Edited excerpts:
It’s been over a month since IRDAI’s expenses of management rules came into force. What impact have you seen so far?
With the introduction of expenses of management norms from April 1, 2023, only a company-level cap has been prescribed. Insurers are free to fix product-wise, intermediary-wise commission rates… the competition will get heated. In the long term, the customer will benefit through better pricing of insurance products. The regulations will ultimately lead to better customer satisfaction and customer service.
Also read: Higher insurance agent commissions to continue, but IRDAI asks insurers to adhere to EoM caps
But given that there are no specific caps, will commissions actually come down over a period of time?
It should come down in the medium term. Initially, there may be some volatility, but once all the insurance players understand the dynamics, overall, the pricing has to come down.
The regulator is also looking at how best the products can be offered at competitive rates to the customer so that their vision of ‘Insurance for All’ by 2047 gets fulfilled, going forward. They announced a number of initiatives last year, starting from product licencing policy (use-and-file), EoM rules, allowing open architecture, and so on.
How will Bima Sugam help policyholders?
One of IRDAI’s objectives is to ensure that every Indian is insured. So, how do we achieve that? By giving suitable insurance policies to them with the help of insurance companies and intermediaries. Towards this end, the regulator has proposed to introduce Bima Sugam, an online marketing portal. This should help customers pick their preferred product at preferred pricing.
For the rural population, Bima Vistaar is a product which is in the works. It's a parametric product, a combination of life and non-life products -- a mixed bouquet of products will be available, and every customer can pick and adopt whatever combination they want.
The expectation is that (these will come through) this financial year.
Then, there is Bima Satark to detect frauds. How will this help insurers? Will Insurance Information Bureau (IIB) data be used?
Yes, IIB data and also data sharing among insurance companies. This will help us identify fraudulent activities. Over and above this, having an in-house TPA also helps us (SBI General) cross-check various red flags. We are using data analytics extensively to identify (fraud).
How has the health insurance demand pattern changed since COVID-19?
We have seen a lot of positives in terms of people going for higher coverage, and people buying top-ups wherever they have already bought the policies. Those who had not thought of taking a health policy are also coming on board now.
How has the average sum insured size gone up for SBI General?
There is an increase of around 15-20 percent. Last year, we segregated the entire health portfolio into a separate strategic business unit, and there is a special focus on developments in the space.
Did you have to make any long-term changes to your underwriting policy post-COVID?
We have been conservative in underwriting policies. I think sufficient capacity is already built up. There is no major change (since COVID-19).
While issuing health insurance policies, do you ask questions about the applicant’s COVID-19 history?
In our proposal form, there is no specific question related to the history of COVID.
Did you have to resort to any premium increase?
Not really. The premiums are in balance with the facilities offered. Customers are getting better value for their money.
Do you foresee any premium hikes this financial year? Will you have to refile any products?
Not immediately.
What we've seen so far is that standalone health insurance companies and smaller companies are taking the lead in launching value-added health insurance products. What is SBI General's plan?
We are looking forward to improving the product bouquet in the health segment. For instance, one area where most insurers did not have products was disability insurance. So, SBI General has actually brought out a product for disabled persons.
We have also launched a digital health product (Health Edge, available for purchase through online channels) to target a younger audience.
Our aim is to make more variants of health products so that customers get a better opportunity to pick the right product (as per their) requirement.
Globally, reinsurers have increased their rates. Has this impacted India?
Last year, because of climate risks, globally, reinsurers tightened their pricing, which in some cases went up by 40 percent. But that is in contrast to the Indian scenario.
When you see the losses recorded globally and losses in India, there is a lot of gap. India is on the positive side. Indian insurers were able to convince them…premiums went up only marginally.
Will the increase in global reinsurance rates lead to a hike in insurance premiums across motor, health, property and other commercial lines?
By and large, retail businesses like motor and health are retained by insurance companies themselves, and accordingly, there will not be any significant impact of reinsurance markets on these lines of business. However, for commercial lines of business such as fire and engineering, we expect to see some increase in premiums due to the hardening of global reinsurance rates.
What are your targets in terms of market share and premium growth?
In terms of market share, we are at 4.21 percent, which is an improvement over the 4.15 percent of last year. In FY23, we grew (in terms of premium) by around 18 percent, while the industry growth was 16.4 percent. The trend will continue. We will be better than the industry. Industry growth will be in the 16-20-percent band in FY24.
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