The insurance sector isn't seeing a slugfest yet. And private firms aren't reaching out to customers very effectively.

By Shilpa Nayak & T.R. Vivek

Shikha Sharma, managing director, ICICI Prudential Life, exudes an air of quiet confidence. She's just finished with a press conference where her company has launched a pension product (the first off the block) and she's upbeat about both the insurance market and ICICI Prudential's future.

Nearly 1,300 kilometres away at his 16th floor office in the posh DLF Square building in Gurgaon, five-foot something Anuroop 'Tony' Singh, chief executive officer and managing director of Max New York Life (MNYL) is walking tall. ''We're the biggest,'' he asserts.

They've both got reason to be happy. Figures sourced from the Insurance Regulatory and Development Authority (IRDA) show that till June 30, ICICI Prudential had sold the largest number of policies. MNYL comes second, though a distant one (See: Slicing The Insurance Pie). However, Birla Sun Life beats it in terms of total business

It's early days yet and the picture could well change. After all, many firms made their entry only around March, the peak selling season for insurance. April, May, June are the dull months and the real action is expected between August and January.

If there are no bloodied noses yet, it's also because India is so underinsured that there's more than enough room for everyone. Premium as share of gross domestic product is a laughable 1.04 per cent in the case of life and 0.6 per cent in the case of non-life against 3.85 and 4.64 respectively in the US. Says Ravi Trivedy, head of financial services strategy, PriceWaterhouse Coopers, says: ''It's like wondering where to plant the first sapling in the Thar desert. You don't have to fight for space.''

Still, companies may well find that battling each other is easier than changing consumer attitudes. India has a savings rate of 22 per cent, but less than 5 per cent of it is spent on insurance. Says Singh: ''We have to do concept selling right now.''

So why isn't the insurance market seeing some aggressive in-your-face marketing of the kind that private players foraying into a public sector monopoly usually employ? Partly because the IRDA keeps a close watch on the content of advertisements. Says IRDA chairman N. Rangachary: "We'll step in when anyone steps out of line."

Reaching Out

Sure, there have been advertisements in the press, television and billboards. Tata AIG, ICICI-Prudential Life, Royal Sundaram Alliance (RSA) and Birla Sun Life have call centres with toll-free numbers, a route iffco-Tokio General Insurance is also planning to take. ICICI-Prudential claims that around 5,000 people dial in to its call centre each month on an average, and half of them end up taking a policy. Tata AIG and ICICI-Prudential also have an arrangement with rediff.com by which one can e-mail a request for a visit by company agents.

In a special campaign, Tata AIG sent out direct mailers about a personal accident insurance plan (It has used the HSBC database for addresses). Those calling in are told the they won't have to go through any verification because, a pleasant voice informs them, ''we have approached you and not the other way around.'' Premiums can be paid by credit card or the company can even arrange a free courier pick up. The pleasant voice also makes a follow up call.

But firms don't seem to be building on this initial contact very efficiently.

When a BT correspondent e-mailed requests to Tata AIG and ICICI-Prudential through rediff.com, all he got, within the next 36 hours, was automatically generated replies. The agents didn't show up till the time of going to press!

Take also what happened when another staffer, posing as a potential customer, called MNYL asking about its insurance products. The company promised to send an agent to his house in a day or two. No one has visited him till the time of going to press (ten days after making the first phone call) despite a second phone call four days after the first.

And when a correspondent called the telephone number on Tata AIG's direct mailer and asked for details on life insurance products, he was told that's handled by a different unit. His address was noted and he was promised it would be passed on to the life insurance unit. No one had visited him even after a week. So much for Raj Raman, Senior Vice-President, Tata AIG insisting: ''There would be a common face for the customer who will not need to interact with different people for life and non life.''

Rues Ashvin Parekh, Partner, Arthur Andersen: ''Everyone is working on the push market, not the pull market.'' Indeed, neither ICICI-Prudential nor HDFC Standard Life seem to be using their parent company's client base to solicit custom. PWC's Trivedy expects firms to take a year to get their act together.

For now, private insurers seem to be concentrating on designing attractive products. All of them are investing heavily in research, studying life expectancy and health statistics across age groups, income levels, professions, and regions on their own instead of just relying on data with the public sector insurers. Products are designed with a technical team of actuaries (which studies such patterns) and a product development team (which interacts closely with customers and helps identify their needs) working closely together.

But cut through the marketing hype and the insurance jargon and all products look the same. Almost everyone has similar riders and flexibility features bundled on to base products. Admits Stuart Purdy, chief executive officer-designate, Dabur DGU: ''It is difficult to differentiate on product alone.''

Playing Along

Companies aren't working too hard to change attitudes. In India, life insurance products are bought more as investments rather than for risk protection, and the insurers are preferring to strike a fine balance between the two. Says Parekh: ''The private players have accepted all the imperfections of the market as given and are working around it.'' MNYL, however, claims it is focusing more on risk protection (''We don't want to be in the investment business, we want to be in the life insurance business,'' says Singh) and that 95 per cent of the policies sold till now are pure life products. Dabur CGU, for its part, has decided to wait and watch. ''Some have tried to stimulate the protection market; we'll see whether they're successful or not,'' says Purdy.

Where private insurers can really make a difference is in the retail general insurance segment, given the poor quality of service provided by the public sector companies. Says Trivedy: ''There's tremendous scope for tapping the dissatisfied customer, whether it is small business or the retail customer.'' But high-quality service won't be the sole focus of private general insurance companies. Says Anthony Jacob, deputy managing director of RSA: ''There's a huge potential for personal lines products since there is hardly any penetration in this area.'' Indeed, right now, car insurance forms the bulk of retail non-life business, only because it is mandatory. That's why RSA, Tata AIG and IFFCO-Tokio are offering the entire gamut of personal products, from house to travel to health insurance. Again, there's not much scope for innovation here.

The key, then, will lie in distribution, with agents providing the cutting edge to operations. That's a bit different from other countries where , though agents have a strong role, independent brokers and banks are equally important. Says Purdy: ''The role of an agent here is unique.''

That's why companies have been on an agent-recruiting spree, with Tata AIG already having 3,000 agents in its bag, followed by ICICI-Prudential with 2,000 and MNYL with 1,400. Not everybody is sure this feet-on-the-street approach will work. Warns Trivedy: ''With average premiums at $12 (a little over Rs 500) a year, this approach may result in transaction costs being more than the premium.'' ICICI-Prudential, for one, doesn't agree. ''Our transaction costs are much lower than the premium we charge,'' insists Saugata Gupta, chief of marketing.

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