There is a lot more room for Zuno General Insurance to grow its Motor insurance, which will continue to contribute around 45-48 per cent to the insurer’s gross premium going forward, says MD & CEO Shanai Ghosh. In an interview with businessline, Ghosh says the company is expanding its distribution capacity in retail Health insurance phase by phase given the existing expense of management (EoM) regulations.
Retail vehicle sales, including passenger vehicles and commercial vehicles, were under pressure in the second quarter of this fiscal, despite the onset of festivals. How did Zuno General Insurance’s motor insurance perform? What is the expectation going forward?
Since the growth was not that good, you will find that Motor OD (own damage) and TP (third-party) insurance growth rates will remain a little subdued. So, compared to last year you will see that the growth rates are a little lower this year for the industry. Definitely new vehicle sales do impact the growth rate of the Motor insurance segment because a significant percentage of premium does come from the new vehicle sales. Two-wheelers saw some growth, but commercial vehicles, for instance, were seeing a decline. So we will see an impact here. For September, the market was flat. Still the general insurance industry registered around 10 per cent year-on-year growth in Motor OD during April-September. But for the month of September it was zero, and in fact, for private insurers, it was marginally negative.
Growth for our company of course has been good. We continued to grow faster than the industry. We grew at 33 per cent y-o-y in September in Motor OD and our growth rate for year-to-date was around 53 per cent y-o-y. Motor TP grew around 68 per cent y-o-y for YTD. In overall Motors insurance, our company witnessed a growth of almost 60 per cent y-o-y in H1FY25.
Usually, the second half (H2) of the year is the bigger half for the industry. Retail vehicle sales generally accelerate in the festive season. The past sales also had been higher in the Dussehra and Diwali months. So, typically the motor premium goes up in these months.
We have not so far tapped the entire market. There is a lot more room for us to grow, adding more distribution and location. Apart from that, as we become a little older and people have experienced our sales, platform and claims experience, we continue to build preference with all our partners. And the word of mouth keeps adding as an accelerator for us. So, every year makes it easier and easier for us to add and increase distribution and also to penetrate the existing distribution points more.
Of the company’s gross premium, what percentages come from its Motor and Health insurance segments? Do you expect these percentages will remain the same in the next two-three years?
About 50 per cent would be coming from Motor insurance, while Health insurance contributes around 38 per cent. Our strategy right now continues to focus on Health and Motor because these are two large segments. While we think it’s one segment, there are many, many sub segments which have very different dynamics. If you look at Motor, commercial vehicle versus private vehicle versus two-wheeler is completely different and within commercial vehicles also there are so many options. So, Motor insurance we believe has a lot of room for very segmented play. For us, Motor will continue to be between 45-48 per cent. Health will also be around a similar number, may be, around 40 per cent. And around 15 per cent we can expect to see from some other lines, whereas property insurance, we think, will come at around 10 per cent and 5 per cent through other lines which we are trying to develop.
In Health, how is the company growing group and retail insurance?
We have largely group Health. We have just started building retail Health. So in Health, if you want to acquire experience at scale, retail will take you a while. Because it’s a slow burn. It needs time for building an agency channel. So it’s like a step by step game. And, we believe that if we want to build scale and get some meaningful experience on claims and build and test our network we had to go the group route. So first we started with loan attachment products, which are kind of attached to loans. And then we started group health in a big way both to employer-employee and non-employer-employee segments. And we started retail health at the end.
Now that we have the backbone completely developed and the premium base to support it, we are starting to build our retail Health insurance. Here you first have to build the distribution. Also, for Health, distribution is expensive, because agency in any segment is expensive. You need people to manage it, you need to hire agents. So the fixed cost is quite high. And given the EoM (expense of management) regulations that exist, we don’t have the ability to step it up and say hire 1000 people overnight. That will not work for the EoM glidepath that we have been given. So we have to have a step by step, phase by phase enhancement in distribution capacity in retail Health which is what we are doing.
The EoM regulations will be a challenge for everyone. They actually favour some of the old and scale players, because they have already got to that scale where the EoM has come down. But for smaller players or newer players, which are still in the process of scaling up and investing in something which requires an upfront heavy fixed investment, it is very difficult. At the same time getting into categories that are highly profitable but have high cost of acquisition is also a limitation for newer and smaller players. So, that is going to be a challenge for any new player.
Does Zuno General Insurance need capital support from its promoters?
We do and we have. We are targeting capital infusion of about ₹112 crore this fiscal. Last fiscal it was ₹193 crore.
When do you expect the company to achieve break-even?
In FY27. We planned to break even in FY26, but once the EoM rules came we had to change our product mix a little bit so that it has been moved by one or two quarters.
Published on November 3, 2024
