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Shyam G. Menon
Rukmani Vishwanath

MUMBAI, Jan. 23

IF `private' meant a penchant for being elite, then that is not the dominant flavour of the sales portfolio of the nine-month old Tata AIG General Insurance Company Ltd, which has sold about 50,000 policies so far.

"We will not have more than 200-300 big-ticket policies. The rest are all small ones. You may find other insurance companies focussing on the corporate sector, but for us, the retail sector is as important as the corporate. If you want to be a big insurer, you have got to be big in all aspects,'' said Mr Dalip Verma, Managing Director, Tata AIG General Insurance Company.

And the emphasis on the retail segment does not necessarily imply higher overheads. "My cost for issuing a policy is always the same because I have centralised it in one place,'' he said.

Tata AIG's primary aim is to be the largest private insurer in the country, and later, 10-15 years down the road, corner about 10-15 per cent of the market.

It has two separate companies overseeing general and life insurance businesses. "In the first three years, the general insurance company will look bigger than the life venture. But when customer acquisition reaches a certain level, the life company becomes the bigger business because every year you add 50,000 policy holders, who will be paying premiums for the next 25 years. In our case, we have to renew the relationship,'' he said.

The general insurance company's break-even schedule remains the same — it is expected to break even by the fourth year of operations. Currently, its authorised share capital is Rs 250 crore while the paid-up capital is Rs 125 crore. "According to our business plan, we should have a capital of Rs 250 crore by the fifth year," Mr Verma said.

The scheduled capital infusion over the said time-frame was not reflective of any constraints on the investment side. For the rural markets, the company plans to tie up with NGOs, besides designing an affordable product. But a rural foray does not mean an interest in farm insurance. Rather, it may be centred around personal products. "Farming, crop insurance, etc, even in places like America, don't work without government partnership,'' he pointed out.

Specifically designed products are not new to Tata AIG, which had earlier introduced an insurance package for the IT sector. "We have been receiving a lot of responses. But it takes time to finalise as sometimes you have to do an audit — we do what is called an ethical hack. These are big-ticket policies, one policy may be about Rs 20-40 lakh. I won't say we have many, you can count them on your fingers,'' Mr Verma said.

Notwithstanding Tata AIG's tie-ups with HSBC, IDBI Bank and J&K Bank, the real punch in retail lies with the large PSU banks and their huge networks. "We have spoken to them without success,'' he said, rationalising, "If we had a big PSU bank to cater to, I don't think we would have the bandwidth to do that. My business would then fall flat on its face. So I would like to do that in a phased manner.''

`Reinsuring locally may be double-edged sword'

ASKED about sectoral regulations, Mr Dalip Verma, said, "There is a lot of insistence to reinsure locally and retain the premium in India. That's fine as long as there are not too many claims. But if there are a huge number of claims and all the premiums are in India, then all the losses will also remain in India.''

"Reinsurance is not an outflow of foreign exchange but a transfer of balance. If you go back 10 years on reinsurance, then India has received more money inwards than was paid out. Yet, we have this mental block that we should retain the premiums in India.''

"That is why if you look at the motor sector, we have a 200 per cent loss ratio and we are not able to share it with anyone internationally because traditionally we have kept motor in-house.

Today, the portfolio has become so bad that no one will touch it,'' he said

"That is very dangerous, especially in a country where there are not many large capitalised insurance companies. It is a double-edged sword,'' he added.

`Tata AIG Life going rural'

Tata AIG Life Insurance Company Ltd will shortly foray into the rural market. "We will be launching in early February. Everything is in the pipeline and we are working with an excellent NGO,'' Mr George Oommen, Managing Director, said.

According to him, the life insurance venture has done well. "We have done policies that are substantially high, catering to policies which vary from Rs 1 lakh to Rs 4 lakh and Rs 1 crore. We know that the best policies we will do will be on the endowment side,'' he said.

However, the current phase may be encapsulated as one of exploring the market, with only subsequent analyses deciding whether it is sensible to focus on segments.

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