In the past couple of years, the insurance industry has undergone several changes, majorly due to the Covid 19 pandemic. Even though things seem to be going back to normal, the insurance industry and you should be prepared for what the future might bring.
To gain more insight in this regard, we had the opportunity to have a conversation with Gaurav Chaudhary. With his help, we will navigate through the potential ground map of the insurance industry and discuss the various approaches for the industry to scale up in these changing times.
Gaurav Chaudhary is currently the Chief Business Officer and Execute Director at Salasar Services. With an experience of more than 18 years, we believe that he is the perfect expert to further educate us.
This is part of our latest series – #PeopleOfInsurance.
Here, we’ll be sharing insights, opinions and stories from people from the insurance industry. Whether they have years of experience in this space or have just joined the industry.
Let’s get started.
Firstly, congratulations on taking up the role as the CXO of Salasar services four months back, how has it been?
It’s been good, it is a new role for me and it is a very different role from what I was doing earlier. Frankly, I feel like I fit in very well, so far so good, I have big plans and so does the firm, and so do the promoters. Right now we are just chalking out the growth plans and trying to fit the blocks in terms of how we want to scale up. So, a lot is happening and it has been a lot of fun.
Can you tell us a little bit about your aim with the role and what you plan on doing for the next 5-10 years?
The broad agenda is to scale up but to reach our desired destination, we need to work on a lot of building blocks. To name a few on an immediate basis, we are focusing on sectors that are underserved like the SME sector, the rural sector, etc.
The insurance penetration of India as compared to other developing nations is way behind even when compared to peer countries like Thailand, Malaysia, etc.
One reason for this is the concentration of insurance buying among large corporations Vs that of the common man on the street or village. We intend on focusing on it because we believe that this space holds tremendous opportunity and demands focus because the bottom of the pyramid is where the gold mine lies.
This is applicable both in terms of the insurance industry scaling up and at the same time playing an important role in the distribution of insurance as a concept, especially for the people who need it the most.
Another element is corporate insurance and reinsurance, which of course is our bread and butter. We want to focus on corporate and the reinsurance space. This is something that we are doing and we are doing it well.
This holds a lot of scope for growth as we have a very specific and accurate proposition of being a hardcore transactional broker. Ultimately, what we should not shy away from is the focus and intent to close the actual transaction.
What kind of challenges were faced in the past two years? And what kind of challenges will you be facing as a reinsurer going forward?
For the past 24-36 months, the insurance industry has endured some major losses in the face of natural catastrophes or simply by way of huge claims. That being said, the insurance and reinsurance market in general, holds immense depth. They have dealt with the losses fairly well.
However, there have been cases where we have seen rate rises, to a point where it is becoming painful for the end customer to purchase insurance. Partly, the reason is the past softening of the insurance market for a very long time, that softening of the market has created a situation where people began to expect a year on year reduction in rates without feeling the need for improving the quality of their risk. It showcases a clear mismatch between what the buyer wants to pay and what the seller wants to charge in the market. Sandwiched between them are brokers like us.
Despite this, signs of recovery are evident with the inception of markets that are willing to acknowledge the pain of the buyers in the past years. This is visible in the market’s effort to balance its stand and lower its expectations in terms of rate appraisal.
Another reality is the emergence of predatory players in the market on such occasions, herein, one beholds the supply side charging more when they know they can charge more. Nevertheless, we can lately see this element streamlining with a new wave of discipline surging in the industry in regards to pricing. This discipline has helped insurers make some very large profits and I think it is now about time to look at pricing in a new way so that the end buyer must be able to afford insurance.
Are there any aspects beyond pricing that need to be managed?
Although pricing continues to be the headline aspect, coverage also holds critical prominence. However, coverage has been shrinking. India is yet to achieve its plateau in the context of infrastructure, specifically for high profile projects like tunnelling, road projects, bridges etc., making it necessary to catch up with the world. We are doing well, but there is a lot that needs to be done in terms of infrastructure development.
The insurers and reinsurers are becoming even more stringent with the coverage that they are offering, in terms of what they used to offer. This statement is not in reflection, solely, on the history of coverage but more so in terms of what the client needs. I have seen situations where the pricing is through the roof and the coverage is not even up to half of what a customer needs.
In the recent past, we have experienced live examples of this phenomenon. For instance, the supplements on capping on a hydro-project with respect to tunnelling are to such an extent that it doesn’t even warrant justification for buying insurance.
Such coverage discrepancy only satisfies the audit tick mark accompanied with financial dissuasion to re-construct if there was to be a claim.
This can be overcome by insurers stepping up to support the economy and not acting restrictive with regard to the coverage offered.
Another aspect is the niche and knowledgeable specialist brokers who should be able to consult clients and navigate them into a suitable product.
What are the challenges that you will be facing in the coming future?
Every day is a challenge, which is a good thing because if there are challenges, there are problems to solve. This means there is an opportunity to pursue.
For us, as a firm, I think the topmost challenge faced by a firm is that of quality talent. Insurance is an industry that has been unloved by many professionals. It has changed a lot but there are a lot more opportunities in the industry. Quality talent on a sustained basis in the next 10-20 years holds the ability to define how the insurance industry unfolds and develops. Talent alone has the power to reshape the graph of the insurance world.
Other challenges include the routine effort to discipline the pricing and curb the price wars which spoil customer expectations by the sudden fluctuations in price. Such challenges are likely to continue and will require management.
Additionally, working on the mindset of the industry and methods to deal with the non-believers through coaching and encouragement to think beyond the nine dots is a challenge that requires immediate attention.
The daily demand for solutions cannot be met unless the insurance professionals are willing to move beyond the comfort zone of tariff wordings. However, the very presence of these challenges is crucial to the industry because unless there are challenges, there can be no solutions, and only solutions necessitate the existence of solution providers.
What are the trends in the industry that people should look out for in the coming years?
One apparent trend is digitalization. The insurance industry has miles to achieve, both on the distribution side as well as the service side, especially when compared to other service sectors like banking, telecom, hospitality, etc. We celebrate advances in the form of fintech insurance companies but despite these efforts, the actual core offering is yet not fully digitalized. This will help penetrate insurance at a grass-root level.
Moving to reinsurance, it is a no-brainer that a country like India will eventually see products that are insurance-linked securities which mimic the bond market to essentially provide coverage for natural catastrophes. To take reference, we have Mexico, a developing nation, which has been battling losses by accessing the bond market for insurance-linked securities.
Apart from these, there exist other trends but they are mostly a function of routine happenings.
Thank you, Gaurav for joining us to discuss the possibilities of the insurance industry. Congratulations once again on your new position and we hope you bring growth to the industry. We hope to see you on People of insurance again.