What is the potential of non-life insurance business in India and the state of preparedness of the General Insurance Corporation (GIC) on the eve of opening of the insurance sector? Will it now reposition itself as a re-insurer, and diversify its investment into high risk areas like financing mergers and acquisitions and venture capital financing? In an interview with Paramvir Singh of The Financial Express, GIC chairman, D. Sengupta, and the corporation’s managing director, BD Bannerjee comment on new business:

What is your stand on autonomy for GIC? Will there be job cuts?

BDB: Autonomy has been recommended by the Malhotra Committee and I would not like to comment on it right now. GIC is seeking a two-year transition period be granted to the existing companies to restructure, consolidate and set up systems, infrastructure and distribution network. On the issue of job cuts, GIC has repeatedly assured its labour unions that no such thing will happen. We will look at relocating our staff after imparting them sufficient training.

How is GIC positioned to face the competition?

DS: With the opening up of the insurance sector there will be a marked increase in competition, a dramatic reorientation of the existing forces, and consolidation and unit cost reduction at a later stage. However, to start with most players will try to build on their existing synergies and expertise to capture the market-share. GIC will have the first mover’s advantage in terms of market penetration, distribution network, expertise, range of products and brand equity. GIC’s focus has witnessed a marked shift towards identifying the customer demand and we are now gearing up our infrastructure, particularly computerisation of our operations. We will offer service quality at par with the best in the country.

What would be GIC’s success mantra?

DS: GIC is strongly pitching for domestic and Asian re-insurance business and will soon become the first national re-insurer for the country having a substantial global presence. Conditional to the passing of insurance bill and the decision on the possible structure for GIC and its four subsidiaries once the insurance sector is opened up, GIC will have a greatly enhanced focus on re-insurance and infrastructure insurance.

The government is expected to come out with the details on re-insurance business (specifically on the foreign exchange exposure on account of overseas re-insurance). Currently the Reserve Bank of India caps the foreign exchange exposure on account of inward acceptance (overseas re-insurance) based on the solvency margin of the insurance company.

Last year the inward acceptances (foreign exchange earnings on account of re-insurance done overseas) was just Rs 200 crores and GIC is targeting a Rs 1000 crore inward acceptances business by the year 2002.

How is GIC revamping the three principal aspects of Insurance business — distribution network, investment policies and product development?

BDB: There is a pressing need to revamp the distribution network and include corporate players and banks. The near future will see strategic tie-ups between insurance companies and banks and corporates, particularly consumer goods manufacturers. GIC also plans to tie-up with such institutional and corporate agencies for distribution of its insurance policies.

However, one gray area for GIC is its ‘investment strategy’. GIC will definitely look at diversifying its investment portfolio, but this too will have to wai the government decision on mandatory investments, which in turn should be applicable to all players to ensure a level playing field. The future of insurance in India will entail a focus on micro-level details and all new product design will have to take care of the long term business strategy, exploit latent untapped potential and explore new opportunuties.

There is a strong possibility of premium coming under pressure on account of increased competition. This will force companies to customise their products, offer options to the consumers and make their products more attractive. GIC is looking at developing a core team of well-trained ‘career agents.’

DS: On the product development front, as a first step GIC has pruned its list of more than 150 products to around 50, including some new products linked to risk inspection and savings. However, it will not be immediately possible to give customers an option to structure products according to their paying capacities etc. In all these areas GIC should be looking at the point of sale push of the products. There are tremendous opportunities in retail, health, personal insurance and financial sector, which need to be exploited. Innovation in product design, identifying customer requirements, better appreciation of risks and sharper distribution strategies will hold the key to success in future.

Finally is GIC ready to face competition, both from within and outside the country, and how can it make the best use of the existing potential?

DS: GIC’s experience, expertise and spread will definitely give it a head start over all new entrants. But there is an urgent need to revamp the distribution network and include corporate players. GIC is also strengthening its manpower, providing it with necessary skills to develop expertise in all areas related to risk assessment, product design, distribution and investment. Training and management will be quintessential for this service industry.