General Insurance International Trends

GENERAL INSURANCE PREMIA MARKET TO STABILISE IN 2-3 YEARS; CONSUMERS GIVE A THUMBS DOWN
TO BROKERS, REVEALS NATION-WIDE FICCI SURVEY

NEW DELHI, January 3, 2007. As the general insurance market gears itself up to the new detariffied, free-pricing regime that took effect from January 1, consumers, in a nation-wide survey conducted by FICCI, expect premium rates to nosedive, with almost 80% of the respondents giving two-three years for the market to stabilise; a big majority (92%) preferring to deal with insurance companies directly and 60% opting for companies for expert advice, rather than insurance brokers.
The FICCI survey reveals that brokers as intermediaries are still not wholly acceptable for the corporate or individual clients in India. This fact has been noted by the Insurance Regulatory Authority of India which is framing new guidelines for brokers. Unhealthy competition in the market has also affected the professional image of brokers. Post-free pricing, markets would need expert advisory services which can be provided by the brokers, however, 60 percent of respondents would like to deal with the insurance company directly rather than dealing with the brokers and only 40 % would prefer to deal with brokers for expert advice post- free pricing.
There is a special discount given by the insurance company to brokers on the business procured by them. When the consumers decide to deal directly with the insurance company rather than the broker, 52 % of the respondents were in the favour of not continuing the special discount. More than the discount, there are other factors which are considered important by the consumers.
The Survey findings show that on an average more than 92 % was quite aware of the incoming free pricing regime and 51.3 % had awareness on the products that would move under the free pricing regime.
Since the opening up of the insurance sector several private players including foreign players have entered Insurance business in India. In totality, India has about 16 players in life and 15 in general insurance sector. To a question on whether need to have more competition in terms of number of insurers, 88 % answered in negative. They felt that there were adequate number of insurers operating in the market. Only 12 % felt the need for more competition in this sector
The following are the major highlights the FICCI Survey:
• 92% of the respondents are aware of the move towards free pricing regime
• 60 % of the respondents felt detariffication related to ‘change in insurance costs’
• 44 % of the respondents indicated that that detariffication meant ‘change in scope of cover’.
• ‘Regulatory control coming down’ was associated with detariffication by 40% of the respondents, while 24% and 4% of the respondents associated detariffication with ‘change in insurer’s attitude’ and ‘improved claim settlement’
• 8% of the respondents were of the view that premium rates, post-free pricing, would go very low
• 52% felt that the prices would go low
• 24% held that rates would be marginally less than at present
• 84% of respondents felt that the sudden fluctuation that may happen in the premium post-free pricing would be a temporary phenomenon
• 79%felt that insurance companies should be allowed to change terms and conditions post-free pricing.
• 72% stated that the choice of an insurer would depend on a combination of factors such as pricing, level of coverage, service levels, risk management techniques and ability of insurance companies to understand the need of the consumers
• 96% of the respondents were of the view that detariffication would open new vistas for long awaited customization of the insurance products.
NOTE: Detailed Survey findings attached