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Selling Public Sector General Insurers


Summary

Public general insurers - vector graphic having two men one is having umbrella

Of late there seems to be a renewed sense of activity with public sector general insurers (PSIs)—offices are being amalgamated, and closed every other day; new incentive schemes aimed at cajoling employees into Sales & Marketing are the talk of the town. There seems to be a sense of urgency that colors the air. Could this thrust towards selling them work? Will the government be able to pull it off? Are there takers?

Businesses are driven by a profit motive. Anyone interested in buying one of these behemoths would ultimately look at turning them profitable within a reasonable frame of time. On a balance sheet, though, do these Insurers have something that could spark interest in a buyer?

Let’s examine.

I think reach could arguably be one of the most significant assets that PSIs have accumulated over the years. They do have offices in some extremely remote areas across the length and breadth of the country. If one is to go by Sajith Pai’s theory, exponential growth can come only from India 2 & 3. The interested party could, by that logic, buy these PSIs and devote resources to increase footfalls at the bottom of the pyramid. If microfinance could turn out to be a viable business, so can micro insurance.

Buy : 1  Withhold : 0

Insurance is finally coupling with technology to bring products and services to the doorstep. The information available with Insurers is transforming knowledge into customizing products and finding niches. We could soon see integration of data between fitness bands and health insurance, and this in turn would customize health policy premiums, at individual levels.

PSIs have been slow to adapt though; a case in point – Twitter has turned out to be a beautiful medium for working on Customer service, even when a Customer is venting at you publicly, she is of course mad at you, but you still have the opportunity to alleviate her anger, handled appropriately, she will not switch to a different service provider. It is only off late that PSIs Twitter handles are seeing some activity – which again could be government induced; but I think that isn’t something one could hold against them – the realization that sustenance on tax payers money isn’t a long term game seems to have finally dawned.

But the industry in general could learn a lot from the way its sister industry, Banking, dances with Technology.

Buy : 1.5  Withhold : 0.5

Underwriting, the core business. The underwriting losses for the three insurers have been mounting for the last five years. While the government could shoulder part of the blame – welfare schemes like Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri Fasal Bima Yojana do not see any other takers; but choppy implementation, prudent underwriting, marketing the schemes to increase footfall so that losses can be sustained, are the PSIs discretion.

New product filing or old product modifications aren’t as frequent as are warranted. Change initiation and subsequent implementation tend to get lost in bureaucratic loopholes. Business Heads seem to be driven by topline growth, bottom lines be damned. Contrast this to the fact that some of the new age insurers have made profits relying solely on health and motors verticals.

Buy : 1.5  Withhold : 1.5

People – the asset class par excellence. The median age of employees in PSIs hovers around fifty. Most of them joined in an era when a government job meant lifetime security, with little to no work. A handful of them moved out in the early 2000s when India opened up for private participation in Insurance. Nonetheless, if we extrapolate Pareto – 80% of the work is done by 20% of the people; if only he could also help us find a tool to identify these 20%. That said, PSIs are more or less comparable to private insurers, at least on this front.

Buy : 2  Withhold : 2

Service orientation, could be the clincher though. Most of the serving population of the PSIs has grown with a different India.

The Customer today, might not be willing to pay a premium for better service, but she will definitely not tolerate insensitivity, lackadaisical attitude toward her. She might even allow modest premium hike from time to time.

But that remains one domain where PSIs are infamous and not untruthfully so. Walk into most of their offices and you can experience a market that was supply driven, just like good old fifties. This, despite the fact that as of March 2021, four of these PSIs combined, have lost a market share of around 65%.

Buy/ Withhold : I rest my case.

So, say by some miracle, the marketing department is able to increase footfall, is the administration equipped to handle the workload?

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Susheel Agarwal

Namaste. I'm Abhinay Nedunuru, a Fellow of the Insurance Institute of India with a passion to make insurance simple and crisp. I write mostly on insurance and investment. I have a passion for teaching and training in particular to insurance. I'm currently doing my PhD from IIM in Marketing Management.