Best Way To Manage Risk In Insurance Industry Is To Have Right Products: Mahesh Bala, MD & CEO, Kotak General Insurance

How did fiscal ’19 shape up for KGI? Tell us about a few business highlights of the year.

It has been a very satisfying year for us at Kotak General. Our Gross written Premium (GWP) grew at more than 60%, our Loss Ratios have always been amongst the best in class and we will end the year with a loss ratio of less than 69%. Our expense ratios continue to drop as we build scale. Our Combined Ratio (COR) stands at less than 114%, which keeps us on course with our break even plans. We have grown more than 100% in Health Insurance, which contributes close to 25% to our portfolio. Claims settlement is at the centre of our customer proposition and we are glad that we continue to have one of the best settlement ratios in the industry. 

Tell us about how innovations and digitization will influence the GI space in the next 5 years. 

We look at digital as both a vertical to acquire business and a horizontal to provide best customer experience and cost optimization. Close to 20% of our policies are issued digitally. Our approach to underwriting is highly data analytics driven. 

We recently launched a unique campaign #DriveLikeALady, which celebrates women drivers on road. As a part of this proposition, we are offering special discounts to women drivers. Contrary to normal perception, our data analysis shows that women are safe drivers. 

Ease of business for our partners and customers is at the forefront of our digital strategy.

Innovative covers covering a wide range of requirements for retail customer like cyber to cover financial transaction, identity theft, online purchases, episodic covers, IOT and wearables-based covers for health and home etc. will gain prominence. AI, Robotics and Block Chain technologies will redefine insurance value chain especially on underwriting and claims. Insurance companies may use technology to help customers mitigate risks rather than be focussed more on claims handling.

What about your distribution model? We have new age insurers like ACKO cutting out middlemen altogether and taking charge of the entire buying as well as claims experience. What’s your take on such emerging models?

We believe the best way to manage risk in the insurance industry is to have the right Product –Geography – Channel mix. Keeping in mind this approach, we have a well-balanced mix and we work continuously on improving this 3X3 grid. While we try and leverage as much as we can from our parent Kotak Mahindra Group, we are growing our other channels at a much faster pace. 

With respect to models that focus only on direct acquisition vis-à-vis disintermediation, this is a large market and there is a lot of space for experimentation. Retail customer acquisition costs are very high. Hence, we need to see how these models pan out in achieving scale and profitability as they balance between paying commission to agents and direct acquisition costs. 

What factors will influence the growth of the domestic general insurance market going forward? Where do you feel that reforms are needed?

We are still an under developed market both in terms of penetration and insurance density. So, the only way to go is upwards. Some critical success factors include building awareness in a country with an increasingly young population and making products that are simple to understand and purchase. In the short-run, companies need to stop cross subsidization where retail customers are paying a higher price and corporates are getting the benefit. Fraud prevention and loss minimization through industry wide initiatives like collating industry data on enrolments, claims and using block chain, data analytics etc. can also help trap frauds and reduce losses. This will in turn improve profitability and or reduction in price. 

The rate of taxation (GST) on general insurance products is very high, covering risk through insurance will only prevent enhanced productivity of the country and GDP. Therefore, we need to look at general insurance as our risk premium and hence lower the tax. 

What’s your take on the regulator’s recent efforts to standardize health insurance products? Is this a step forward or a regressive move?

It is a welcome move while all the players have a plethora of products and innovations is useful for evolved customers. Having a basic standard product (like the Basic Savings Bank Deposit Account) will certainly help penetrate mass markets as there is always a large segment of customers who will want simple products.

Lastly, do tell us about your business goals for the next fiscal. How do you plan to compete effectively, as a relatively new entrant?

Sustainability, Scale with Profitability are the pillars on which we are building Kotak General. Over the next few years we would like to grow at 3X to 4X the industry growth backed by underwriting prudence and customer service excellence. While the market is extremely competitive, we believe our brand strength, focus on ease of business and claims management we will be able to carve a niche for us.