The business of our industry is likely to double in the next four years: Atul Sahai, CMD, New India Assurance

Atul Sahai, Chairman cum Managing Director (CMD), New India Assurance Co Ltd, talks about growth expectation in the new decade (2021-2030), insurance industry outlook, challenges, budget expectations and price increase among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: Since we are at the start of a new decade. So, what is your outlook on the next 10 years for the industry and what kind of CAGR growth do you expect for the industry? 

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A: As far as demand is concerned, then I think that it will happen and are expecting positive results for the December quarter. When it comes to CAGR, generally, the CAGR has remained at 17-18% for years but last year, it reduced to 2%, which was a matter of concern. But New India being New India has disapproved all the averages and predictions and gave a very good growth and profits. Going forward, I expect not only for us but also for the colleagues of the rest of the industry that the old CAGR of 17-18% will be restored and way forward will be opened. I am very positive about it. In the coming time, I think, in the next 4 years, the business of our industry will double. Also, our company has proved that you can get opportunities in the adversity because we saw an opportunity in the adversity and grew in it, defying all the laws of the general insurance industry. It is a great source of inspiration for us and going further, we will continue to grow in this way. When it comes to the challenge of the corona, the biggest hope is that there is a piece of good news that a vaccine is coming in the market. Secondly, we get rid of this corona as soon as possible, which means we will continue to grow. I was referring to an opportunity in adversity, then the kind of atmosphere that was created by corona has possibly completed our mission of digitization by a year or two. We all were moving towards digitization at our own pace but corona has increased its pace. Apart from this, it has also increased awareness about health insurance, which will benefit the entire industry because everyone knows that insurance is necessary, especially health insurance. So, it has benefitted in a way. Going forward, I am confident that we will grow at the same time, other companies will also progress.

Q: What kind of growth do you see in this quarter? Also, how will you summarize the quarter-on-quarter improvement and do you see any further challenges or you think that is all behind you now? 

A: Challenges will always be there. As long as we remain in a target-oriented organization, them every three months, we will overcome one set of challenges after which another set of challenges will come in the way. You have also talked about the numbers, then being a listed company, we will not be able to provide an indication about it but in the last six to seven quarters, we have seen that our results have improved quarter-on-quarter and I expect that the trend will continue this time also and, we will continue to provide services in the same way. Besides, profit is a big reason but we have a target to complete the unfinished works in the coming time like we had a campaign of claim digitization in which we wanted to settle a claim amount to a certain amount in an automated manner. Today, we can solve around 99.3% of the grievances and want to finish the remaining 0.7%. After this, we also have to increase our penetration and have a lot of expectation on the front. So, all the pending/ incomplete work that we have, especially the return on equity that is related to it. You would have seen that our company's return on equity, which used to be minimal has suddenly moved to double-digit and we will increase it further in the coming time. So, these things are the targets of the company and even the union budget is about to come and we have great expectations from this budget. So, let's see what uncovers.

Q: What expectations do you have from the budget for the insurance sector? 

A: When the overall economy improves then naturally the insurance industry will also improve. There is a saying for insurance that insurance is bought with a squarable money, so when the economy will improve then we will also improve. So, we expect that the government - and it is also saying it - that it invests more and more money in the infrastructure sector. When maximum money is invested in the infrastructure sector than our property insurance will also go up, which means we will progress. We also have something in the wish list that the government should reduce GST on health insurance, especially for the senior citizens. GST on health insurance is 18% today. The rates on health insurance should be brought down for senior citizens because going by their age, the cost of the insurance is very high and 18% more adds to it and I expect that it is brought down and I feel the government is looking on it. So, there are two expectations and they are it should concentrate more on general infrastructure and concession on GST, especially on the health insurance of senior citizens.

Q: How were the COVID claims and what impact did it had on your business till date and what is your outlook on it?

A: As said at the start that we will get rid of this COVID soon, especially when the vaccine is coming and the government has also announced the ambitious plans that it will be provided to the entire population. So, I believe that we will rid of it. As far as COVID's impact on our business is concerned then yes it had an impact on us. But we are a big company, that's why this Rs 1000 crore COVID claims is not a threat to our balance sheet. However, this is a medium to indicate to every organization and they should know that most of the companies, mainly the small companies have will sustain the COVID claims because COVID has pushed a very important segment of the health policy of planned surgeries, like cataract removal or knee replacement. So, this COVID pandemic has postponed the planned surgeries, which means it has offset the COVID claims but we all have to keep it in mind that the planned surgeries have not evaporated but they have just backtracked and will come again in the coming time. So, when we go for pricing and it is advice especially to some of the adventurous companies which are working with us to keep it in the mind because, in the coming time, it would raise the question on your sustenance. And, many of the major companies including ours are aware of this and this is why we are walking cautiously. But our health insurance business is increasing continuously. To summarize, COVID claims have not impacted our balance sheet and we are trying to do our best because this is a time of calamity and the government companies are more responsible to go ahead and provide every help to their customers but few are left. I received 4-6 complaints daily, where the customer with pain says that it has not happened with him. But they should understand that we are dealing with a lakh to one and a half claims, maybe there can be some faults in 100-200 cases and we trying to rectify that too. 

Q: Tell us about the kind of growth that you have seen in the general insurance, like motor vehicle insurance and what prospects of growth are visible? There are reports that there has been good demand from tier 1 and tier 2 cities for both health as well as motor insurance. Have you experienced this?

A: Yes, I agree with you. Maybe, more than 250 products are available for being sold in the general insurance industry but it is dominated by three lines of business, namely health, motor and property. So, our growth and major plans usually revolve around these three things. As per my understanding, I am seeing a trend where the demand for personal mobility has gained pace. 

So, when there is an increase in demand for personal mobility, it will lead to an increase in the sales of the vehicles and this will increase the number of insurances. You were also asking about the budget and I hoped that the government should invest in infrastructure and there are indications in the direction. So, when money is invested in the infrastructure and there will be a price correction, which means the property will also move in a profitable manner. I sincerely expect that these three segments will grow at a very fast pace. And these three segments will be the base for return of CAGR to 17-18%, as I said at the start. 

Q: Have the premiums changed for any of the segments and what is your outlook on the front?

A: When we talk about the public sector then some ethical questions are also associated with the business. So, our company felt that this has not stopped since March and when we as a society we are running with a big disease then a profit-oriented premium should be increased immediately but we did not raise it. But few companies have increased by up to 5%. To make any insurance model sustainable, it is necessary to keep the pricing light. So, if it is necessary to increase the premium a bit for that lighting price then it should be increased, otherwise, the insurance companies will not be able to survive. In simple words, the basic fundamental of the insurance company is that we collect Rs 10 from 100 people with an understanding that 20 people will have a claim and this amount will be invested in it. So, when the cost for the claim goes up then naturally, we will have to collect Rs 1-2 more from every customer. So, the principle of insurance will be applicable in future as well. But as far as New India Assurance is concerned then we will not increase the price. In the case of property insurance, our reinsurers have increased the prices and have done it good because the existing was not sustainable. In the old model, we were seeing that major reassurance companies were going into loss and for their sustenance, it was required to increase the prices and they have increased the price in the property, which was good. But, after the increase in the property, it has not increased again. In the case of health as far as New India Assurance is concerned then we will not increase its prices until the pandemic is here. Going forward, we will see the demand for our sustenance and will react accordingly.