“SIMPLE” should be the keyword for “RETAIL”
9^th September 2009

Mr. Kedia spoke to Harsh Roongta and Bienu Vaghela of ApnaPaisa in a free-wheeling interview in IFFCO Tower, Gurgaon on various facets of insurance industry and his vision for the safe and secured (read insured) life of Indian farmers.

 

“Online media has a big scope in India due to presence of huge younger population which is quite computer savvy, who in turn will become decision makers in few years. Hence the Online media has an important role to play in the development of insurance sector. As it is a growing field and web-sites like Apnapaisa.com can play a very pro-active role in dissemination of insurance awareness. We feel that this is the “medium of the future”, says Mr. Kedia.
 

Speaking on the current state of insurance sector, he said, “There are three important aspects of insurance - Channel, Product and Trust. Today the most important issue is of penetration of general insurance which is only .5% of GDP. This is too low as compared to developed countries. Hence there is a scope of development to the tune of 30-40%. We have to be focused in identifying the area of development. If we talk of Metros, insurance awareness still exists up to certain extent but it really needs to increase in tier II and tier III cities and villages which are home to big Indian populace. So insurance needs to develop in these areas.”

 

Q & A Session:

What are the challenges faced by insurance industry today to steer the pace of development?

 

As you know agents have been main channel of development in general insurance in India since decades but their concentration is in cities only. In village there are hardly any insurance agents so there is a problem of reach.

 

On studying the insurance products, we find that in India, insurance products have been designed to the requirements of HNIs (High Networth Individuals) and the same have been downsized for the use of masses. This is not the correct approach as requirement of the masses is completely different than those of HNIs. This is posing a big challenge.

 

Another big bottleneck is the lack of trust in insurance philosophy by the people in India particularly for people who are selling and servicing these policies. Many products are quite complicated and confusing, in Metros people are quite educated, so their understanding is better but not in other places specially villages. To address this, insurance industry should keep the product very simple.

 

But honestly speaking the trust factor between insurance agencies, insurance agents and customers is completely missing which needs to be build on priority.

 

How IFFCO TOKIO has addressed these challenges particularly for strengthening their reach in rural markets?

As a company, we have been known for our unique rural market centric initiatives. In 2001, we launched a specially designed personal accident policy linked with the purchase of fertiliser, named “Sankat Haran”. In 2005, we have launched “Barish Bima Yojana”, an index based product that provides cover for anticipated deficiency in crop yield due to deficient/ excess rainfall. Recent initiatives include “Jan Kalyan Bima” covering fire, burglary, personal accident and critical illness and “Kisan Suvidha Bima Yojana” cover risks against fire. Besides this, we have also launched an innovative cooperative model to enhance the reach of insurance in rural areas by way of Bima Kendras, where we pick up the person from village itself, train him and give him the ownership along with a small office which is either in IFFCO office or in the cooperative. There we have cost advantage, besides the advantage of infrastructure support. This has addressed the problem of reach to a great extent in rural areas. Today we have 200 Bima Kendras in India.

IFFCO TOKIO is targeting 18% growth this fiscal. What strategy has been put in place to achieve this with respect to Marketing, Distribution and Product innovation?

IFFCO-Tokio Insurance Services Limited (ITIS) is a wholly-owned subsidiary and a retail marketing arm of IFFCO Tokio. ITIS developed two distinct distribution models to gain access to the retail market. One is the ‘Lateral Spread Model’ through which the company targets small- and medium-sized towns. Since the entire operation is ITIS-managed, it is a low-cost model where fixed costs are kept to a minimum and the sales forces have very attractive performance based incentives.

 

Besides, we have invested a lot in training our intermediaries, along with a reward and recognition scheme to motivate them. In terms of distribution, our focus is on driving the agency force aggressively. Moreover, there is a special emphasis on the Tier II & III towns. As regards product innovation, the focus is on motor, health and Micro insurance. In the health sector we have come out with a unique family health floater policy (Swasthya Kavach) and in motor insurance we are likely to come out with a number of value - added products in addition to the recently launched On-Road Protector. Micro insurance is a blue ocean area and we intend to leverage our promoter’s strength - cooperatives.

Furthermore, we are working out pilot projects using technology like RFID (Radio Frequency Identification Device) and NDVI (Normalised Differential Vegetative Index) to increase insurance penetration in rural areas.

 

How important are the retail product lines for IFFCO TOKIO? What is the current share of retail product lines in the overall premium of the company? Are retail products profitable for IFFCO Tokio?

 

Our focus is on retail and our current share of retail is about 70% of the total portfolio. Fortunately it has proved to be profitable for us. Let me add that Insurance market is divided into three segments – Commercial (Property, fire engineering) – 20%, Motor insurance – 50% of the market, Out of balance 30%, 20% is the health component i.e. Rs. 6700 crore and 10% is mass insurance. This way Indian industry needs to develop this 10% which should become 50%. Then only insurance industry will be able to achieve this level.

 

Given the IFFCO pedigree, the organization has done remarkable work for the rural markets. What are your latest initiatives?

 

Recent initiatives include “Jan Kalyan Bima” covering fire, burglary, personal accident and critical illness and “Kisan Suvidha Bima Yojana” cover risks against fire. Besides this, we have also launched an innovative cooperative model to enhance the reach of insurance in rural areas. We have a number of Micro Insurance products like Janata Bima Yojana, Jan Swasthya, Jan Suraksha, Mahila Suraksha. Janata Bima Yojana is 100 rupee product covering a couple against fire, burglary of household contents and five critical illness for a sum insured of Rs 10,000 each. The basic objective is to reach the rural masses keeping in mind the BPL population.