Then, the private players are also seen as much faster in claim servicing.

ICICI
Lombard claims to settle 91 per cent of the motor claims in one month while
the industry average is 58 per cent. The private sector also took the lead in
decentralisation of the claim processing function by using a hub-and-spoke
model. "The claim management burden in the private companies shifted to
multiple hubs a decade ago. Whereas the state-owned companies have started
this decentralisation exercise only a few years ago," says Arunachalam. There
has been a lack of empowerment in the state-owned companies, says the CEO
of a private insurer. Customers demanding superior service are shifting to the
private sector, says the CEO of another private sector company.

'In the past few years, risk selection has become a key success factor in the industry,' says Bhargav
Dasgupta, MD and CEO, ICICI Lombard General Insurance.

Many wonder why state-owned companies are not playing to their strengths.
They have a strong brand FINANCE Insurance equity and balance sheets to
write bigger deals. New India Insurance was actually the first insurance
company, set up in 1919. LIC came much later in 1956. Kedia of Marsh says
there are always a set of customers who wants to deal with government
companies because of a trust factor. The state-owned players with a huge
network of 7,869 offices (private companies together have 2,000 offices)
should have expanded their geographical coverage. The four companies,
headquartered in four different regions, should have worked in tandem to
spread out and not to encroach on each other's territory. Today, the four
companies are actually mirror images of each other in terms of product
offering and are also competing with each other.

Interestingly, while the private players have gained market share, the general
insurance penetration as a percentage of GDP is still very low at 0.78 per cent
as compared with life insurance at 3.17 per cent. "The industry grew by 10 per
cent last year when economic growth was not much. Today, retail-oriented
businesses like health and motor are doing well. Once industrial projects take
off, the traditional corporate segment will also pick up," believes Srinivasan of
New India Assurance.

Many question state-owned companies' aggression in the group health

business, which appears to be a lossmaking proposition. In the past few years,
the four general insurers have gained a very big market share in the corporate
health business. "The private sector has consciously vacated the space. There
is a danger of state-owned players piling up losses," says a consultant.

While the government has acted swiftly in the banking space to kick-start
reforms, many say the stateowned general insurance companies also needed
attention. McKinsey in its latest report has projected the general insurance
industry to grow from $13 billion (Rs 78,000 crore ) in premium size annually
to $80 billion (Rs 4,80,000 crore) by 2025. The private sector is expected to
corner a major share of this business.

Srinivasan, whose company is the largest in terms of market share, says they
have the financial strength in the market. "Our assets base is Rs 62,000
crore.We have an international 'A' credit rating . We have infrastructure of
offices in India as well as abroad with 2,200 people. We have people who
know insurance," says Srinivasan.
But as the competition heats up the top slot, Kedia of Marsh says chasing the
topline is dangerous for a risk-based business. "The general insurance
business is not a business where your margins are guaranteed. What is
important is the quality of business one is underwriting," says Kedia. And that
is where private insurers have to prove that their story is sustainable and
profitable as they attain market leadership.

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