Growth from smaller cities faster than metros: Liberty Insurance's Asthana

CEO and Wholetime Director of Liberty General Insurance Roopam Asthana
Roopam Asthana, CEO and Wholetime Director of Liberty General Insurance tells Advait Rao Palepu that the widespread changes in motor insurance regulations can lead to an increase in mis-selling as there are downsides to having too many product variations. Liberty General plans to expand to tier-2 and tier-3 towns with 100 new branches, to attract the next generation of wealthy Indians over the next 10 years. Edited Excerpts:

Liberty General Insurance has been focused on specific product areas for the past few years, while the health insurance book is still growing. Will you be participating in the Ayushman Bharat scheme and Crop Insurance programme? What is the strategy for growth going forward?

The Ayushman Bharat scheme as well as the Crop insurance programme have to be run on a large scale and require diversity in terms of population and region to be able to make commercial sense. They will also require additional capital. We are still a relatively young company that is growing very fast and a little away from our break-even. So, we are still investing in our business and hopefully, we will grow large enough soon so that we reach a point where we can participate in the Ayushman Bharat scheme as well as the Crop insurance programme. There is a real need for health insurance which is what is fundamentally driving the growth of this line of business. With Ayushman Bharat, the benchmark or floor for sum-assured is now pretty much set at Rs 500,000 - which is good for small businesses as well as retail customers. Around 70 per cent of our business today is motor insurance and we are working on building our health insurance book over the next couple of years. We are also planning to put up 100 new branches in the next 12 months which is going to be a big exercise for us. Clearly, growth today from smaller towns and cities is faster than in metros and we are increasing our presence there.

What are the biggest challenges for General Insurance players?

I think the last couple of months have been very difficult in terms of regulation. Everybody seems to have a view on our business. The kind of changes, the frequency of changes and the time they are giving companies to adjust to those changes is unreal. One of my biggest challenges is managing these fast-changing regulations because it’s not just about compliance but that it impacts the entire ecosystem including our organisation from the front-end to the back-end – we have to ensure that the customer does not get impacted negatively and no mis-selling happens because of these rapid changes. The second challenge is that the general insurance industry has a brand issue. There is no top of the mind brand recognition that is there. In e-commerce you have Amazon, in life insurance there is LIC, in banks there is SBI, so there is a huge opportunity for general insurance companies to fill that space. The other challenge is the perceived lack of trust as customers believe that their claims will not be paid while the actual experience is very contrary. The industry is working with the General Insurance Council to build a campaign about the need for general insurance products and trust.

Recent changes have been brought to the motor insurance products. How has Liberty General Insurance fared in meeting these new product standards?

The first change was the introduction of a compulsory three year (new private cars) and five year (new two-wheelers) Third-Party (TP) motor policy, and then there was the ruling on the compulsory personal accident cover which was increased to Rs 1.5 million from Rs 100,000-200,000. So, these two combined have had a big impact. Prior to these two regulatory changes, we had a very simple set of products. People would buy a one-year TP and one-year Own-Damage (OD) cover, which would be renewed every year. These were largely the main variants of motor insurance that was available, but now the number of variants is overwhelming. For us, the challenge is to manage all of this, whereas from a customer point of view even though they have more choice today and from the outside, it seems transparent but actually, it becomes more difficult for customers to buy the policy that is right for them.

What challenges do you foresee in terms of these new product guidelines on Motor insurance?

I see that mis-selling will begin to increase as it will get more complicated from now. All of a sudden the amount of complexity in the market has increased. Today a customer may buy a 5-year OD cover because the agent convinced them to buy it, but only later in the policy term will they realise that they may not have required an OD cover for such a long period. I foresee that the frequency of claims will increase while the size of each claim may reduce and this may lead to some malpractices at the garages as well. This change in consumer psychology on claims and the impact of it on claim cost and premiums will be known only after a while. Therefore, we can’t build it into our price accurately right now, although, we will have to lock the price for 5 years today. Once the consumers’ psychology changes then the historical data is of little use.

Given that your company is still a young player how do you view the changes in the distribution model with digital sales picking up at the cost of the agency model?

The Direct-to-Customer (D2C) online model is a very interesting possibility. Today, online D2C is a sleeping giant and there is a latent demand for this, it has not really exploded. What is happening now on the regulatory front will give a good impetus to online D2C because today the consumer, who is slightly more educated, has a lot of choices which not every agent and dealer would want to or can offer. The question at this point is why haven’t more people gone online? This is because most customers have always believed they would get a better-priced deal from an agent. Now that there are so many companies and variants of products, the customer can decide the price point at which they want to buy a policy and search online for the same. So, the dependence on the agent to recommend the best product will reduce, which will drive sales online. We are coming out with an online campaign by December to try and build the Liberty General Insurance brand online as a preferred brand.

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