Dr Amarnath Ananthanarayanan, CEO and MD, Bharti AXA General Insurance, says that hospital frauds are more prevalent than policyholder frauds; and car thefts, not accidents, are the biggest predicament confronting companies that offer motor insurance
Dr Ananthanarayanan wants to move his company from being a mere product player to providing more tailor-made innovative solutions, while keeping an eye on the uninsured segment in India. The company has reached Rs500 crore in gross premium underwritten in its second full year of operations. It has focussed on growing aggressively at 152% (09-10), and it now aims to double its health and personal accident insurance businesses. Currently, motor insurance is 70% of Bharti AXA's portfolio .
Moneylife (ML): Many insurers have started enforcing 24-hour intimation to Third Party Administrators (TPAs) or insurers whenever hospitalisation is required. What is Bharti AXA's stand on this?
Amarnath Ananthanarayanan (AA): We take a 180-degree view on this. In situations like the floods in Andhra Pradesh, we called our customers. For health insurance, after we get a call from the policyholder or his family, we have dedicated tele-callers who keep in touch to proactively help customers with paperwork, cashless (reimbursements) and so on. It (the intimation) need not be within 24 hours, as the (specific) circumstances of a customer are also taken into account. The time limit varies for different policies. Even though a policyholder may commit a fraud, there are more cases of fraud from hospitals, especially smaller ones. We remove these errant hospitals from our panel. For example, a hospital can treat a customer by giving him water instead of saline. We have service-level agreements, monitoring mechanisms with hospitals and offer cashless facilities at 3,600 plus hospitals in India, including major hospitals in metros. Customer service should not be impacted.
ML: PSU insurers have got Jaslok Hospital on their Preferred Provider Network (PPN) after negotiating the rates. Will you also be reworking rates with hospitals?
AA: I cannot comment on a specific company. Apart from the rates, the (quality of) service given to a customer is important. What is the value-add for the customer? If the customer is not happy, it does not help. It is about the insurer and hospital rate negotiation. How does a customer benefit from it? We believe in maintaining a service differentiator for customers. The renegotiation of rates is an ongoing process.
ML: How has been your experience with TPAs? Have they been able to negotiate rates with hospitals?
AA: We have increased our TPA count from 8 to 11. It is about their sphere of influence in a place or hospital. Sometimes, a customer going in for group insurance wants certain TPAs. It is all about the customer. The TPA concept is not bad. If we think about them as being an extended arm of the company to provider service to customers, as has been promised, then it is just like outsourcing. The insurer and hospital conflict is global. If one goes only by the insurance policy, the prices will be higher.
ML: TPAs are supposed to bring down prices-look at the example of the Health Maintenance Organization (HMO) in the West. What are your comments on this?
AA: India is an immature market which will take five years to stabilise. It is an ongoing process that depends on purchasing power, volumes of business and so on. The relation has to be managed so that either party is not affected.
ML: How much business does your group health segment provide? What has been Bharti AXA's experience with claims ratio?
AA: Group health is 80% of our health insurance business. We have AXA Business Services, Bharti AXA Life and so on. We are not in the rate game and are selective in choosing our groups. We have not underwritten for Bharti Airtel. We are not running for business. If the deal is good and the pricing is right, we will go for the business. Going ahead, we want to focus on retail insurance. The loss ratio is lower in retail. Overall, claims ratio for health and motor insurance is around 73%. The motor insurance claims ratio is coming down.
ML: How much is your expected growth in the health portfolio, and what are the trends that you are witnessing in premium and service levels?
AA: We expect to grow 100% in the health portfolio. Our group insurance premium can go up by 20% to 30%, but individual health premium is not expected to rise. In general, the health insurance industry will see an increase in deductibles, co-payments to keep up with rising health care expenses.
ML: How do you price motor insurance? We checked out the rate offered by Bharti AXA for a Honda City; it was very low compared to your competitors.
AA: We have sold over 4 lakh policies last year. We have data to understand trends using complex algorithms run on an SAS platform. The pricing is based on car make, model, year, place, and so on. We cannot share the trends from the data. If there are good customers for the parameters we analyse, the rates go down and vice-versa. The challenge is more from car thefts rather than accidents. The northern region of India is more loss-prone. Security features in the car will help to reduce premium.
ML: We have come across a case where a Bharti AXA agent was giving a maximum discount of 40%, while the dealer was offering a 50% discount. Your comments...
AA: We have approval for 50%(discount) from the Insurance Regulatory and Development Authority (IRDA). But there are internal channel conflicts that we have to manage. There is market dynamics at play. If I were to dictate price, then the entire flexibility of price versus volume goes away. There are different products, different add-ons and hence different pricing. There can be differential rates from agents due to competition. The intermediaries are also interested in how much more money they can make. They can offer lower rates with more volumes or target a higher rate with lower volumes. This is standard market practice in a de-tariffed environment.
ML: What are the new products in the pipeline; how many are waiting for IRDA approval?
AA: The insurance industry has the scope to come out with lifestyle protection products (home, car EMI payment), OPD (outpatient) products, personal accident insurance for the youth, global student insurance, travel insurance, and so on.
We have innovative products for motor insurance, like an invoice price cover that protects the invoice price of a car. We plan to come out with 'residual value insurance' to protect the resale price of a car; a 'pay as you go' cover to lower the insurance based on the actual usage of a car. Retirement is another segment of interest. We have not done actuarial calculation, but one product could be payment of premium during the working period of the life of an insured person for him to avail medical benefits after retirement till death. People have company insurance that will not last after retirement. This product can pay before retirement with high deductibles, but the real benefits kick in after retirement.
ML: Any plans for the Rashtriya Swasthya Bima Yojna (RSBY) schemes and how do you see their profitability? Are there any other schemes planned for the underserved segment in India?
AA: RSBY is winning the bid. It is profitable in some states. The first few years are good, but the final few years can be a strain. We want to focus on the underserved customers; not just the middle and upper classes. Micro-insurance is important for protection against a debt trap. There is a need for educating the people on its importance. We are looking at products like children's education fund to compensate children's education on death/permanent disability of insured. (Schemes like) the girl child's marriage fund, ration allowance and livestock allowance are on similar lines.
ML: How can the government's forthcoming budget help insurance customers?
AA: Reduction in service tax will help. Healthcare costs are rising rapidly and hence subsidised hospital infrastructure will eventually help to lower medical costs.
ML: Please explain to us your company's technology initiatives for improving customer service.
AA: We have launched 'eMotor' to provide instant policy issuance at dealers, intermediaries and branches. A payment gateway is being set up for issuing health insurance policies over the phone. The next level will be Internet transactions to buy/renew insurance policies and application of mobile technology, among others.
ML: Have you taken up any bancassurance initiatives?
AA: We have tied up with a few cooperative banks. We have also tied up with the Karnataka State Cooperative Society Ltd (KSICL) to offer customised insurance solutions to rural Karnataka. We have not tied up with any big bank.
ML: How do you see your overall growth in the coming years?
AA: We had focussed on growing aggressively at 152% (09-10), but we have lowered our target to 60%. The top-line has not been a concern for us as revenues have been more than anticipated. We had to curtail our growth plans to 160 cities instead of 200. We want to move from being a product player to providing innovative solutions and get our portfolio right. We will target higher growth next year.
Activists say Lokpal will have only advisory role; curbs independence of vigilance authorities; provides for punishment of complainant if complaint is found to be ‘frivolous’
Union law minister Veerappa Moily has said that corruption will be rooted out within one year. The Lokpal Bill, the minister says, will be the weapon against corruption. But, how would this be possible when the proposed legislation is already being criticised as being full of flaws? On 30th January, activists and civil society organisations will organise rallies in New Delhi and other major cities, to demand amendments to the draft legislation.
The minister was addressing the National Conference on Judicial Reforms in Mumbai on Saturday. While the minister talked about how the new law would be used to fight corruption, the applause from the audience in response to his statement was weak. It's obvious that the government will find it hard to convince people about its intentions, following the numerous scams that have been revealed recently and the absence of effective measures to deal with them. But now activists say that the Lokpal Bill is itself a source of trouble.
"Indian citizens often complain that the anti-corruption bureaux in India are ineffective. But trust me, if the Lokpal Bill is passed, whatever little chance we have for these vigilance bodies will also disappear," said Arvind Kejriwal, renowned social activist who is campaigning for transparency in governance.
The government's Lokpal Bill lays down the foundation of a vigilance commission called the Lokpal, which is in reality, imperfect and toothless. (Read the draft of the proposed Lokpal legislation on indiaagainstcorruption.org.) According to the draft legislation, the Lokpal cannot take any suo moto action, and instead of acting as a disciplinary authority it will serve only as an advisory body. Also, the Bill does not have police powers, so the authority cannot file an FIR. It can only forward its report to the competent authority.
The common man cannot approach the Lokpal directly. They will have to address their complaints to the Speaker of the House, who will forward this to the Lokpal if he deems fit.
Moreover, the Lokpal can only deal with members of Parliament and ministers. Its authority does not extend to government officials. The commission will comprise three retired judges, who will be selected by members of Parliament and ministers, including the prime minister, all of them people whom it might have to investigate when there are complaints. Defence deals are outside its purview. However, the most astonishing part is that while the Lokpal is powerless to punish a corrupt MLA, it can impose severe punishment on the complainant if the complaint turns out to be 'frivolous'!
"The Bill, if it comes into force, will do away with whatever independence our vigilance authorities have," Mr Kejriwal said. "It completely insulates one agency from another, and the investigation has to be exclusive. Without cooperation between agencies, investigations will definitely go down under. This is the government's attempt to become as invincible as possible."
Isn't it evident that the government is being defensive? When there has been a strong demand to bring to justice the culprits who have perpetrated monumental scams, the government appears to be trying to shield them. Constituting another vigilance agency is deceptive.
Mr Kejriwal said, "We don't want any more vigilance bodies, all of them will go the same way. What we need is an independent constitutional authority that can act fearlessly and take action against those in power. Otherwise Mr Moily's tall claims will fall flat."
The northernmost country in Africa has been appreciated for its remarkable economic progress. But, clearly, it isn’t working for all Tunisians, as unemployment has become a major concern
In 1997, the so-called Asian Tiger countries experienced a cataclysmic meltdown known as the Asian financial crisis. What is interesting about the crisis is that it was such a surprise. Most of the countries, including Korea, Taiwan, Hong Kong, Thailand and Indonesia, had during the early part of the 1990s, been growing at an exceptionally rapid rate. Everything in their economies seemed poised for unending growth. But it did not turn out that way. The same might be said for Tunisia.
Tunisia like the Asian Tigers, has been seen as a relatively stable country with a rapidly developing economy. According to the World Bank's country report, "Tunisia has made remarkable progress on equitable growth, fighting poverty and achieving social indicators". The now-deposed leader, Zine el-Abidine Ben Ali, has been praised by numerous world leaders including Ban Ki-Moon, the United Nations secretary-general, the president of France, Nicholas Sarkozy, and the former president of France, Jacques Chirac, who called Tunisia an economic miracle.
It wasn't just world leaders. Many among the ever-expanding universe of international indexes gave Tunisia high marks. For example, in entrepreneur Mo Ibrahim's African Governance Index, Tunisia ranked 8th along with South Africa, Ghana and Botswana. According to the World Economic Forum's Global Competitive Index, which measures the level of a country's burdensome regulations and weak institutions, which inhibit job-creation and private-sector activity, Tunisia was one of the few countries in the region to come close to the average. Although according to The Economist, Tunisia ranked only 144th in its Democracy Index, below China at 136, it was at least ostensibly less corrupt. It ranked at 59th in Transparency International Corruption Index, above Italy at 67 and China and 78.
It was not just the indexes that believed in Tunisia. Tunisia's stock exchange, though very small, has been one of the Middle East's best-performing markets over the past decade. Like many other emerging markets, Tunisia recovered rapidly from the financial crisis and reached a new high just a few months ago, in October. Its investments were considered so attractive that it became a destination for a 'Frontier Fund' run by Morgan Stanley, with money from pension funds, including the Royal County of Berkshire in the United Kingdom.
A study by the Boston Consulting Group concluded that Tunisia was one of a new group of fast-growing economies with the catchy title, "African Lions". These countries, which also included Algeria, Botswana, Egypt, Libya, Mauritius, Morocco and South Africa, were supposed to be the new BRICs, because their growth rates were equal to China, Russia and India, and their per capita GDP at $10,000 was already higher than the BRIC average.
Tunisia also has a fairly high rate of literacy at over 74% and it ranks 18th in the world for expenditure on education. It is also computer literate. Nearly 4 million of its 10.5 million people use the internet with 1.8 million accounts on Facebook alone.
So where did Tunisia go wrong? Was it its oppressive dictatorship? Not exactly. There are other oppressive dictatorships in the world that do quite well. But there is one problem with non-representative forms of government: corruption.
All authoritarian governments everywhere, by definition, are not limited by any legal restraints. This allows elites to become rent seekers often through state-owned companies and monopolies. Without legal limits, the percentage of the GDP that they take for themselves will constantly increase. This was certainly true of Tunisia where president Ben Ali's wife's family dominated the economy. Tunisia's first lady, Leila Trabelsi, and her relatives, seem to have a finger in every pie. Her brother, Belhassen Trabelsi, had interests in banking, car dealerships, telecom and publishing.
Like most developing countries, Tunisia is a relationship-based system. So it is hardly surprising, according to the United States envoy, that "seemingly half" of the Tunisian business community could claim a connection with Ben Ali through marriage. Even a traditionally wealthy family like the Mabrouks, felt it wise to have the scion marry one of Ben Ali's daughters.
The main impact of an economy of corruption is on investment, the investments necessary to create jobs. For Tunisia and many other emerging and frontier markets, this is a major if not the issue. The unemployment rate in Tunisia is officially 13%, but it is probably twice this for younger people. Even university graduates face an unemployment rate of over 15%. This is not unusual for these markets where unemployment rates among younger workers can rise as high as 40%. According to the IMF, the Middle East needs to grow 2% faster every year to avoid its present chronic and high unemployment.
The Asian Crises gave birth to a new phrase in economics,' Crony Capitalism'. This is really a term for a relationship-based system, a system where capital is allocated according to relationships and not efficiently through the market. For investors, the best analysis is the one most ignored, and that is whether the market in any given country actually works.
(The writer is president of Emerging Market Strategies and can be contacted at [email protected] or [email protected])