Liberty Videocon General Insurance, a joint venture between Videocon Industries and the US-based Liberty Mutual Insurance Group, is the newest (27th) entrant to the general insurance segment in India. In his first interview after becoming chief of the company, Roopam Asthana, director and chief executive officer, tells M Saraswathy they would like to move with caution for now. Edited excerpts:
As the newest entrant, do you think this is the most opportune moment to get into the general insurance space?
There have been certain positive trends. Removal of the third-party pool was a big one. It is great for us, since we were never part of the pool and are now part of the declined pool. Also, we are starting to see a hardening of rates in areas like fire and health. Underwriting losses are also stabilising, if you take out the motor pool losses.
Other green shoot developments include the new bancassurance guidelines and changes in the Motor Vehicles Act, placing a cap on the maximum liability. This Act will lead to predictability, which is what the promoters are asking for. If you take these trends in a package, the market is very attractive for a new entrant. This is probably a better time to enter the market than the past.
But arenâ€™t there too many players in the space?
If you look at segments like mutual funds and banking, the number of participants are in three digits. In the non-life business, there are only 27 players. If you take out the Export Credit Guarantee Corporation of India, Agriculture Insurance Company and specialised players, we are only about 20-odd. Given the low penetration, there is scope for more to come in. The only area of competition is in getting fresh recruits and this is an area where there is a big challenge.
Will a commercial line of business be the focus, or would you be coming out with an exotic product portfolio?
Here, we are taking a contrarian and conservative view. We would like to have a good balance between the personal lines and commercial lines. Unlike our predecessors, who made a big foray into motor and are now talking of commercial. We believe we need to get that from Day One. Development of technical expertise does not happen overnight.
Our first formal soft launch, on January 1, will be of products in the commercial lines. Thereafter, there would be motor and other products. The business we are trying to do is not very large. So, the balance is not difficult to achieve. Since we are a start-up, we can decide how to have the portfolio mapped out.
Further, since penetration is so low, only standard products sell in this market. Once we are in the market for a few years and get feedback from the market and intermediaries, we would look at other products. We are kids in this segment and do not have the market knowledge to evolve and develop such innovative products.
What is the paid-up capital available with the company? Would you be looking for FDI (foreign direct investment) for more?
We have Rs 350 crore of paid-up capital, probably one of the highest for any startup. Many companies have achieved this much only after eight-nine years of operation. It gives a clear and sound message to the market, that we are here for keeps.
We already have adequate capital. There is an agreement between the two partners, that the foreign partner would increase its stake as (the) FDI (legal cap) goes up. For us, the FDI limit increase does not mean additional capital coming in, unlike others who are waiting for it so that capital can come in.
So, would it be an aggressive pace of growth from January?
Our message to the team is, let us learn from the mistakes of others. Other general insurers are now looking at managing expenses and variabilisation of costs. We would like to build these changes into the system and avoid mid-course corrections. We do not want to do things in a hurry.
After the soft launch on January 1, another set of product launches would happen at the end of January. A third set of products will come in March, catering to the April renewals. We will keep rolling. Our full suite of products will get launched only over 18 months. We are in the business for the long term and not to outpace our competitors in the short term.
The fact is that though Liberty Mutual and Videocon are known, Liberty Videocon as a brand needs to be experienced and known in India. But the roll-outs would be very slow.
Since bancassurance is crucial, have you tied up with banks?
Our present focus is on getting ready to open the doors as far as business is concerned and ensuring we get approvals for all the products we have filed with the Insurance Regulatory and Development Authority ( IRDA).
Notwithstanding that, we do have a section that we have started for bancassurance. Preliminary discussions have started with banks, as we believe that it is a key channel.
Since the company is new, would advertising be a big area of focus?
I would break it into marketing and distribution. If marketing is meant to be big-money advertising, that would not be a focus, as we do not think that will build the brand.
We will be working closely with distributors, both on the commercial and retail side. We would develop an agency force; work with corporate agents, car dealers for the same. This includes technology, training, rewards and recognition, where significant investments are being made.
Has hiring been completed?
We have hired 100 employees till date. Agents would be hired soon. The first batch of induction training has been completed and the second batch will be done soon. Next week onwards, formal teams will be in place in office.
Apart from the training centres at the office, we will also look at satellite training locations across India, to develop capabilities across the country.
What about setting up offices across India?
We would start off with Delhi, Mumbai and Bangalore. Though we have the approval of IRDA to set up offices across the country, we would like start slow and do it well. The Delhi and Bangalore offices would be up and running in the next few days.
We have set very modest targets and the plans will be approved in the next board meeting in January.