Royal Sundaram targets Rs.120 crore premium

If you are under the impression that competition in the general insurance industry will usher in more products with wider coverage at cheaper rates, then you are wrong. At least this is what is evident from the first offerings from a private general insurance player, the Chennai-based Royal Sundaram Alliance Insurance Company.

The announcement of product offerings from the 26:74 joint venture between the UK-based Royal & SunAlliance Insurance Group and the Chennai-based TVS group, has got limited options on offer with much higher rates compared to the public sector insurers.

To start with, the first policy on offer- the Rural Personal Accident Insurance policy for the rural and social sector-is priced steeply and that too without any attractive features.

The comprehensive rural personal accident cover is quite restricted in scope as compared to what is on offer by public sector insurers. The cover is priced at Re.1 per Rs. 1,000 of sum insured as compared to Re. 0.90 per Rs.1,000 of sum insured charged by the government insurers. For this rate the cover is only for death/permanent total disablement/permanent partial disablement.

That apart, the four public sector companies also offer a far more attractive cover called ‘temporary total disablement' cover. Under this wherein for a small extra premium the policyholder is given 1 per cent of the sum insured subject to a maximum of Rs. 5,000/- per week, as compensation when he/she is bed ridden due to accident. This cover is open to all kinds of people.

Further if one wishes to extend the personal accident policy to cover medical expenses incurred after an accident then the charge is Re. 0.25 per Rs.1,000 of sum insured. On the other hand the existing public sector insurance companies charge, for the same facility, 20 per cent extra on the basic premium, which works out cheaper.

For example, if a person takes a policy with medical expense extension for Rs. 1 lakh then the premium charged by nationalised insurers is Rs.108 as against Rs.125 charged by Royal Sundaram. Further to be eligible to claim medical expenses, a Royal Sundaram policyholder has to get admitted into a hospital whereas hospitalisation is not compulsory for public sector insurance company policyholders.

Again, unlike the state-owned insurers, Royal Sundaram does not offer any amount towards funeral expenses of the insured or education expenses towards children of the bereaved. It seems state-owned insurance companies are more compassionate towards their customers!

The only area where Royal Sundaram is cheap is the basic ‘death only’ cover where it charges Re. 0.36 per Rs.1,000 as compared to the Re. 0.40 per Rs.1000/- charged by the government companies. However, even here the Royal Sundaram policy has a catch. The minimum premium for individuals is Rs.50. All this in the name of rural and social sector insurance!

When it comes to premium rates, the first private sector general insurer does not differentiate between the rural and urban. These policies are now being marketed by Citibank and American Express to their savings bank account holders.

Be that as it may, Royal Sundaram is targeting Rs.120 crore premium income for the first year and 50 per cent growth during subsequent years. According to Mr. Antony Jacob, deputy managing director, Royal Sundaram, "Our plan is to have two-thirds commercial business and one-third personal line."

Forty per cent of the commercial premium is expected from the fire portfolio and the balance from other business lines like burglary, transit, engineering insurance etc. The company will be breaking even (as per plans) at the end of the fifth year.

When queried about the motor portfolio, Mr. Micky Brigg, managing director says, "The company has filed details of the policy with the Tariff Advisory Committee of the Insurance Regulatory and Development Authority (IRDA) for approval." He further remarks, "Initially we will be focussing on private vehicles like cars/two wheelers." In order to minimise its outflow against claims in this segment, the company is planning to empanel select service stations.

Speaking about other products on the anvil Mr. Brigg says that ‘Hospital Cash’ is another product that will be launched. This will entitle the insured to a fixed pre-determined amount if admitted into hospital. The company is yet to negotiate with third party claims administrators’, as the regulations are not in place.

Mr. Brigg, who was born in India, says that nearly 90 per cent of the risk underwritten will be reinsured within India. The balance will be reinsured with ten foreign reinsurers of which Royal & SunAlliance Insurance Group is one. Adds Mr. Jacob, "We will be reinsuring risks which are above Rs.1 crore."

On the distribution side, the company will be using corporate and individual agents and also the branch network of Sundaram Finance. The company will also have its own marketing team to take care of the corporate sector. It also has its own team of risk engineers to advise corporates on loss minimisation efforts.

What about customer service in the area of claims settlement? As you know insurers sell just a promise. A promise to compensate the policyholder when a contingent event happens. Says Mr. Robert V. Mendelsohn, group chief executive, Royal & Sun Alliance Insurance Group, "Claims will be settled much faster than the existing insurers."

Not giving out Royal & SunAlliances’ claims settlement ratio - the number of claims lodged with the company v/s the number of claims settled - he says, "all claims that are within the purview of the policy will be settled." According to him only 3 per cent of the claims lodged are being rejected on the grounds of fraud or forgery.

It will be interesting to note that the claims settlement ratio of foreign insurers is averaging around 40 per cent whereas the Indian public sector companies have a creditable record of 80 per cent, despite charging lower premium!